Academic journal article ABA Banking Journal

Buying from RTC? Beware of Pitfalls

Academic journal article ABA Banking Journal

Buying from RTC? Beware of Pitfalls

Article excerpt

Buying from RTC? Beware of pitfalls

In many banking circles acquiring thrifts or pieces of them from the Resolution Trust Corp. is seen as one of the few bargains left in the financial services business. But careless buyers could find themselves paying for compliance problems down the road.

Due diligence efforts must look at more than the credit side, advised Charles D. Lewis, vice-president and compliance officer at United Missouri Bancshares, Kansas City. Including compliance officers in the due diligence team may be more important than inclusion of credit officers, Lewis told bankers at ABA's National Compliance Conference earlier this year.

That's because consumer loans that are sound from a credit standpoint may be rife with compliance violations that can range from technical mistakes to expensive substantive violations.

Unfortunately, Lewis said, it's typical for interested bank bidders to have only two days to evaluate an institution. Lewis has evaluated a number of troubled institutions for potential acquisition by his organization and outlined three major areas compliance officers should concentrate on (the advice applies equally to bank acquisitions).

First is Regulation Z, the truth-in-lending rules. As soon as the team arrives at the thrift, compliance officers should pull a sample of consumer loan files and review them for accuracy. …

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