Magazine article American Banker

OTS Takes Fetters off Glendale, Declaring Its Capital Adequate

Magazine article American Banker

OTS Takes Fetters off Glendale, Declaring Its Capital Adequate

Article excerpt

WASHINGTON - Glendale Federal Bank escaped the clutches of regulators Thursday when the Office of Thrift Supervision lifted its requirement that the California thrift attain certain capital levels by 1995.

The decision to lift the prompt-corrective-action order imposed in June was seen as a significant victory for the money-losing Glendale, the nation's fifth-largest thrift. Under the order, the thrift had to raise its core capital to 5% of assets and its risk-based capital to 10% by 1995.

It now holds core capital of 4.91% and risk-based capital of 9.86% - well above the 4.5% and 9% ratios the OTS required the thrift to meet by the end of this month.

Last Hurdle Cleared

"This removes the last difficult hurdle that we had in being able to focus on returning the bank to profitability," said Stephen J. Trafton, Glendale's chairman and chief executive officer.

The OTS decision means Glendale can avoid further radical capital-raising steps - including the sale of profitable branches - that could hurt its future earnings stream.

Glendale, which has $17.9 billion of assets, escaped seizure by the government earlier this summer when it raised $451 million through a reorganization and rights offering. The deal was completed on Sept. 17, Mr. Trafton's 47th birthday.

|Adequately Capitalized'

The large capital infusion, which Glendale accomplished in spite of widespread skepticism from industry observers, raised the thrift to the OTS level of "adequately capitalized."

The regulator refused to say why it decided to rescind the capital requirements so soon, noting its official policy of not commenting on specific institutions. …

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