FDIC Limits Scope of New Disclosure Rule; Agency Approves Guidelines for Repurchase Agreements
Easton, Nina, American Banker
WASHINGTON -- In a significant retreat from an earlier proposal, the Federal Deposit Insurance Corp. Monday decided to disclose the details of final enforcement actions it takes against state nonmember banks.
A more sweeping rule proposed in February would have given the FDIC authority to disclose, charges against banks, even before they had the opportunity to prove their innocence.
At its public meeting, the FDIC also approved guidelines for banks that lend their securities, or those of their customers, under so-called repurchase agreements. The Federal Reserve Board adopted similar guidelines during a closed meeting on Monday. In recent years, financial institutions have suffered serious losses as a result of lending their securities to government securities firms that later collapsed.
The FDIC's proposed disclosure policy prompted sharp criticism from banks and their trade group representatives in Washington, D.C., but brought support from consumer groups and a few bankers. The modifications to the original proposal are an attempt by the agency to respond to the concerns voiced by bankers.
Despite those changes, top banking officials opposed adoption of the final rule. The agency received more than 700 comments on the proposal, most of them opposing any disclosure of enforcement actions.
However, FDIC Chairman William M. Isaac said he was skeptical about the argument that early disclosure of charges could harm banks or people who were ultimately cleared of any wrongdoing, and he said the FDIC "reserves the option to expand the policy" in the future.
The rule will not go into effect until Jan. 1. 1986, to "give problem banks and bankers a chance to straighten out their affairs," said FDIC director Irvine H. Sprague. Roughly 400 banks are now under formal enforcement orders.
The FDIC is the first federal agency to formally adopt such a rule. The Office of the Comptroller of the Currency also plans to implement a disclosure policy. However under that policy banks will be forced to disclose the enforcement information themselves.
The Federal Reserve Board has been reluctant to disclose enforcement actions, and the Federal Home Loan Bank Board strenuously opposes any disclosure.
At the FDIC meeting, Mr. Isaac said that "public confidence in the banking system is enhanced when there is fair and meaningful disclosure. …