Fed Eases Capital Requirements for Community Banks

A new Federal Reserve Board rule, now in effect, expands the availability of “small bank holding company” status. Small bank holding companies are exempt from the requirement to maintain consolidated regulatory capital ratios, which allows them to use traditional debt and other nonequity funding to finance growth or provide liquidity to shareholders (subject to certain limits). Regulatory capital ratios continue to apply at the subsidiary bank level.

The Fed increased the asset threshold of its “Small Bank Holding Company Policy Statement” from $500 million to $1 billion and expanded the policy statement to include certain savings and loan holding companies with consolidated assets of less than $1 billion. As before, small bank holding companies must meet qualitative requirements, including restrictions on nonbanking activities, off-balance-sheet activities and publicly registered securities.

What community banks do to manage risk

According to Bank Director’s 2015 Risk Practices Survey, 27% of banks with less than $1 billion in assets handle risk governance through a separate risk committee of the board, while 30% use a combined audit-risk committee, 21% use an audit committee, and 21% manage risk through the entire board.

Smaller banks also are following the lead of the largest banks by hiring chief risk officers or others officially designated with responsibility for overseeing the bank’s risk management program. Among banks with less than $1 billion in assets, 71% have designated such an officer. Also, 75% of these banks have completed a formal enterprise risk assessment, 57% have prepared a “risk appetite statement,” and 44% have a full-time information security officer. For more information, go to http://www.bankdirector.com/index.php/issues/risk/2015-risk-practices-survey-cyberanxiety-for-bank-boards.

Should you post privacy notices online?

A new rule finalized by the Consumer Financial Protection Bureau allows banks to publish privacy notices on their websites rather than mail paper copies to customers once a year. But before you take advantage of this cost-saving opportunity, be sure you understand the rule’s conditions. Among other things, your bank mustn’t share nonpublic personal information in ways that would trigger customers’ opt-out rights. And you must use the model privacy notice developed by federal banking regulators in 2009, without modification.

A bank that posts privacy notices online also must inform customers, at least annually, that privacy notices are available on its website and that it will mail paper copies upon request. Your bank can satisfy this requirement by including a “clear and conspicuous” statement on other regular consumer communications, such as account statements.

© 2015