[Federal Register Volume 59, Number 124 (Wednesday, June 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15757]


[[Page Unknown]]

[Federal Register: June 29, 1994]


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DEPARTMENT OF THE TREASURY

 

Depository Institutions Disaster Relief Act Study

AGENCY: Department of the Treasury.

ACTION: Request for comments.

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SUMMARY: The Secretary of the Treasury (Secretary), in consultation 
with the federal bank regulatory agencies, is conducting a study of the 
effectiveness of the federal banking agencies' response to recent 
disasters, as directed by section 5 of the Depository Institutions 
Disaster Relief Act (DIDRA) of 1993, Pub. L. No. 103-76. Pursuant to 
DIDRA, the study group intends to complete the study by February 12, 
1995, and will submit to Congress a final report containing a detailed 
statement of findings, conclusions, and, as appropriate, 
recommendations for administrative or legislative action.
    In recognition of the need to consult the private sector and gather 
information needed for the study, this notice invites all interested 
parties to present their views on the topics discussed below and on any 
other issues relating to the study that they may wish to bring to the 
attention of the study group. The study group strongly encourages all 
interested parties to submit comments for the record.

DATES: Comments must be received by August 29, 1994.

ADDRESSES: Interested parties are requested to submit written data, 
views, or arguments regarding any or all of the topics discussed below 
or otherwise relevant to the study. A public file containing all the 
public comments will be maintained at the Department of the Treasury.
    Comments should be sent via mail or facsimile to: Depository 
Institutions Disaster Relief Act Study, Department of the Treasury, 
Room 3025, 1500 Pennsylvania Avenue, NW., Washington, DC 20220. 
Facsimile number (202) 622-0256.

FOR FURTHER INFORMATION CONTACT:For further information, please 
contact: Gordon Eastburn, Director of the Office of Financial 
Institutions Policy, at 202-622-2730; F. Bruce Cohen, Financial 
Analyst, at 202-622-2157; or John B. Lewis, Financial Analyst, at 202-
622-0715.

SUPPLEMENTARY INFORMATION: On August 12, 1993, the President signed 
into law the Depository Institutions Disaster Relief Act of 1993 
(DIDRA), Pub. L. No. 103-76. Section 5 of DIDRA directed the Secretary 
of the Treasury to conduct a study evaluating the effectiveness of the 
Depository Institutions Disaster Relief Act of 1992 (Pub. L. No. 102-
485) and DIDRA 1993 in facilitating recovery from disasters consistent 
with the safety and soundness of depository institutions. The Secretary 
is directed to consult with the Comptroller of the Currency (OCC), the 
Office of Thrift Supervision (OTS), the Federal Reserve Board (FRB), 
and the Federal Deposit Insurance Corporation (FDIC).

Need for Depository Institutions Disaster Relief Act Study

    In the last three years, many regions of the United States have 
suffered various types of disasters, from hurricanes in Hawaii, 
Florida, and Louisiana to flooding in the Midwest to earthquakes and 
civil unrest in California. Such disasters not only disrupt the 
financial system, but also strain its ability to cope with borrowers 
who may fall behind on loan payments because of income fluctuations; 
home and business owners who seek to combine, en masse, insurance 
proceeds and borrowed funds in order to rebuild; and the need of all 
parties to obtain faster access to cash despite rules concerning the 
availability of deposited funds.
    The federal government has sought to alleviate such problems 
through regulation and the enactment of two laws that streamline the 
financial transactions process. We are now conducting a study to 
determine whether these legislative and administrative actions have in 
fact helped. In addition, we request comments on whether additional 
administrative or legislative actions would be beneficial. Disasters 
cannot be prevented, but we can learn how best to cope with them.

Depository Institutions Disaster Relief Act of 1992

    As a result of disasters in 1991 and 1992, namely, Hurricanes 
Andrew and Iniki and civil unrest in Los Angeles, Congress passed the 
Depository Institutions Disaster Relief Act of 1992. The Act was 
designed to facilitate recovery from the disasters by providing greater 
flexibility for depository institutions and their customers. The Act 
allowed the agencies to grant temporary waivers of certain regulations 
for institutions located in disaster areas if the waiver would 
facilitate recovery from the disaster and was consistent with safety 
and soundness. The major provisions of the Act are delineated below.
     The agencies received permanent authority to make 
exceptions to certain appraisal requirements in disaster areas 
consistent with safe and sound banking practices. The waivers would 
expire within three years after the date of declaration. This allowed 
borrowers to rebuild their homes or businesses with borrowed funds 
without incurring the delay and expense of such requirements as 
obtaining an appraisal.
     The agencies received temporary authority to make certain 
exceptions to the Truth in Lending and the Expedited Funds Availability 
Acts. Exceptions would expire one year after the date of a disaster 
declaration.
     The agencies received authority to accommodate 
extraordinary asset growth at financial institutions resulting from the 
deposit of governmental assistance and insurance proceeds after a 
disaster. Specifically, regulators could permit certain qualified 
institutions to subtract governmental assistance and insurance proceeds 
from their asset base when calculating their leverage ratio. The 
allowances would last for up to 18 months after the date of enactment.
    The Act also expanded the community development authority of 
national banks and state member banks to invest up to ten percent--
rather than five percent--of their capital to promote the welfare of 
low- and moderate-income communities. The Act also encouraged 
depository institutions in disaster areas to meet community credit 
needs.

Depository Institutions Disaster Relief Act of 1993

    As a result of flooding in the Midwest during the spring and summer 
of 1993, the Congress passed the Depository Institutions Disaster 
Relief Act of 1993. Like DIDRA of 1992, the Act was designed to 
facilitate recovery from the disaster by providing greater flexibility 
for depository institutions and their customers. Under DIDRA of 1992, 
the agencies maintained authority to waive real estate appraisal 
regulations for real estate-related transactions affected by the 
disaster. However, because the waivers concerning the Truth in Lending 
Act, Expedited Funds Availability Act, asset growth, and the notice 
provisions of the Administrative Procedures Act were temporary, they 
were reenacted in DIDRA 1993.
     Under section 2 of DIDRA of 1993 exceptions may be granted 
from the Truth in Lending Act and the Expedited Funds Availability Act.
     Under section 3 of DIDRA of 1993, financial institutions 
may seek until April 1, 1995, 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.

Other Regulatory Actions

    In addition to the statutory measures provided for under the two 
laws discussed, above, the federal bank regulatory agencies have 
exercised preexisting authority in assisting financial activity in 
disaster areas.
    Office of the Comptroller of the Currency: The OCC encouraged 
national banks in disaster areas to work with borrowers by extending 
terms of repayment or restructuring borrowers' debt obligations and to 
ease credit-extension terms for new loans with certain borrowers, 
consistent with prudent banking practices. Moreover, the OCC stated 
that it would take into account the unusual circumstances in dealing 
with any increases in the level of delinquent and nonperforming loans 
caused by the Floods.
    Office of Thrift Supervision: The OTS encouraged savings 
associations operating in the affected areas to: work with sound 
borrowers to restructure or increase their loans if necessary to 
finance reconstruction or repair activities; consider temporarily 
waiving charges for late payments and early withdrawal penalties on 
deposits; reach out to local communities, governments, and community 
organizations to assess local credit needs and determine what 
assistance might facilitate disaster recovery; take advantage of 
disaster relief programs available in the community; and, if necessary, 
request a temporary waiver of the Qualified Thrift Lender Test to 
enable the thrift to provide credit to small businesses in affected 
areas.
    Federal Reserve Board: The FRB adopted a supervisory statement that 
encouraged regulated financial institutions to work constructively with 
borrowers who are experiencing difficulties due to conditions beyond 
their control. The Federal Reserve stated that it would consider the 
unusual circumstances the institutions in disaster areas face in 
determining any supervisory action. Further, the Federal Reserve would 
consider granting an extension for filing reports to institutions 
encountering difficulty in meeting reporting requirements and would 
give positive consideration in its Community Reinvestment Act (CRA) 
compliance assessment to a bank's efforts to provide loans to low- and 
moderate-income borrowers affected by the disaster. The Federal Reserve 
also approved temporary relief from Regulation Z (which implements the 
Truth in Lending Act) regarding consumer waivers of the right to cancel 
certain home-secured loans so that borrowers could more readily gain 
access to loan funds.
    Federal Deposit Insurance Corporation: The FDIC undertook a number 
of administrative actions including: notifying banks that they would 
not be criticized for prudent efforts to restructure or extend terms 
for borrowers; extending its ``low documentation loan program'' to 
affected areas; giving positive consideration in its CRA compliance 
assessment to a bank's efforts to provide loans to low- and moderate-
income borrowers affected by the disaster; and notifying its banks that 
it would consider any causes beyond the control of a reporting 
institution in considering how long a delay in filing reports would be 
acceptable.

Questions for Respondents

Bank Customers

    (1) Did your depository institution offer special services to 
borrowers and depositors to facilitate disaster recovery

Yes ________ No________
Please explain.

    (2) If so, did you find them beneficial?

Depository Institutions

    (3) Please identify your institution's primary federal financial 
regulator:

OCC________ OTS________ FRB________ FDIC________
Other ________ Please identify ________

    (4) Did you use the Depository Institutions Disaster Relief Acts 
(DIDRA) of 1992 and 1993 provisions relating to:

Yes ________ No________ real estate appraisals ________ (number of 
times, if known);

Yes ________ No________ Truth-in-Lending Act ________ (number of times, 
if known);

Yes ________ No________ Expedited Funds Availability Act ________ 
(number of times, if known);

Yes ________ No________ leverage capital ratio requirements?

    (5) Did you utilize the administrative actions taken by the 
regulators relating to:

Yes ________ No________ restructuring debt for borrowers ________ 
(number of times, if known);

Yes ________ No________ delaying filing reports ________ (number of 
times, if known);

Yes ________ No________ waiving charges for late payments or early 
withdrawal ________ (number of times, if known);

    (6) Should any of the DIDRA provisions be made permanent? If so, 
why? Please identify any specific problems you believe would arise 
without those provisions.

All Interested Parties

    (7) Are you located in an area that has been designated a 
``disaster area'' by the President in the last five years?

Yes ________ No________ Year ________ Disaster ________

    (8) If so, did you encounter any financial transaction problems in 
the disaster?
    (9) What other legislative and/or administrative actions should be 
taken in future disaster areas to facilitate financial transactions?

    Dated: June 15, 1994.
Richard S. Carnell,
Assistant Secretary (Financial Institutions), Department of the 
Treasury.

[FR Doc. 94-15757 Filed 6-28-94; 8:45 am]
BILLING CODE 4810-25-M