FDIC ANNOUNCES STEPS TO HELP REBUILD AREAS AFFECTED BY CALIFORNIA EARTHQUAKE
FOR IMMEDIATE RELEASE
The Federal Deposit Insurance Corporation announced today a
series of steps intended to facilitate the process of rebuilding
the area damaged by the recent earthquake in Southern California.
The FDIC said it is encouraging the state-chartered banks it
supervises to work constructively with borrowers who are
experiencing difficulties due to conditions beyond their control.
The FDIC guidelines suggest that extending repayment terms,
restructuring existing loans or easing terms for new loans, if done
in a manner consistent with sound banking practices, can both
contribute to the health of the community and serve the long-term
interests of the lending institution.
Other aspects of the FDIC announcement today provide specific
regulatory relief. One is a temporary waiver of certain real
estate appraisal regulations for the areas affected by the
earthquake. Another is temporary relief from certain capital
requirements if an already adequately capitalized bank finds its
asset levels increasing due solely to deposits of insurance
proceeds or government assistance funds.
The FDIC's guidelines are attached and will be sent to state
nonmember banks and FDIC examiners in the next few days.
SUPERVISORY PRACTICES REGARDING DEPOSITORY INSTITUTIONS AND
BORROWERS AFFECTED BY THE EARTHQUAKE IN SOUTHERN CALIFORNIA
The Federal Deposit Insurance Corporation recognizes the serious
impact of the January 17, l994, earthquake on the operations of
financial institutions in Southern California and will provide
regulatory assistance to institutions subject to its supervision.
These initiatives are being taken to provide regulatory relief and
facilitate recovery. The FDIC encourages depository institutions
in the affected disaster area to meet the financial service needs
of their communities.
Lending. Bankers should work constructively with borrowers in
communities affected by the recent earthquake in Southern
California. The FDIC realizes that the effects of such natural
disasters on local businesses and individuals are often transitory,
and that prudent efforts to adjust or alter terms on existing loans
in areas affected by the earthquake should not be subject to
examiner criticism. The FDIC in supervising institutions impacted
by the disaster will take into consideration the unusual
circumstances they face. The FDIC recognizes that efforts to work
with borrowers in communities under stress can be consistent with
safe and sound banking practices as well as in public interest.
Loan Documentation. The FDIC reminds lenders of its program on
documentation of loans to small and medium-sized businesses and
farms. If an institution has adequate capital and is rated 1 or 2,
it may designate a basket of loans that examiners will evaluate
solely on the basis of performance and will be exempt from
criticism for documentation. The program also extends to certain
3-rated institutions. Bankers may discuss the details of this
policy with FDIC's San Francisco Regional Office.
Waiver of Real Estate Appraisal Regulations. The Depository
Institutions Disaster Relief Act of 1992 (DIDRA) provides the FDIC
and the other federal financial regulatory agencies with the authority to grant certain regulatory relief to financial
institutions affected by major disasters. Pursuant to section 2 of
DIDRA, the FDIC will issue within a few days a waiver of its real
estate appraisal regulations for real estate related transactions
involving property affected by the earthquake.
Capital Requirements. Under section 4 of DIDRA, financial
institutions may seek relief from regulations governing leverage
capital requirements if they are experiencing a temporary increase
of assets due to the influx of insurance proceeds or government
assistance funds. A financial institution may contact the FDIC's
San Francisco Regional Office concerning the program.
Reporting Requirements. FDIC-supervised institutions affected by
the earthquake should notify the San Francisco Regional Office if
they expect a delay in filing their year-end Reports of Income and
Condition (Call Reports) or other reports. The FDIC will take into
consideration any causes beyond the control of a reporting institution in considering how long a delay in filing can be
Publishing Requirements. The FDIC understands that the earthquake
may affect compliance with publishing and other requirements for
branch closings, relocations and temporary facilities under various
laws and regulations. Banks that have earthquake-related
difficulties complying with any publishing or other requirements
should contact the FDIC San Francisco Regional Office.
Consumer Laws. As regards consumer loans, Regulation Z provides
consumers an option to waive or modify the three-day rescission
period when a "bona fide personal financial emergency" exists. To
exercise this option, the consumer must provide the lender with a
statement describing the emergency in accordance with the
For guidance on these and related matters, please contact J. George
Doerr, Assistant Regional Director, or Kent Wiser, Review Examiner,
at the San Francisco Regional Office of the FDIC's Division of
Supervision, both at (415) 546-0160.