Page 4
The Banker’s Advocate
State Bank Department
New office
Interest reserves, appraisal
established
updates cited as concerns
by Fed in
EDITOR’S NOTE:
Little Rock
The Federal Reserve
Bank of St. Louis re-
The Federal Reserve
cently shared a presen-
Bank of St. Louis is estab-
tation on regulatory
lishing a new satellite
concerns and issues
banking supervision office
with the Arkansas State
in Little Rock.
Bank Department. Sev-
The new office will rep-
eral points of that pres-
resent a physical expan-
entation are summa-
sion within the Fed’s ex-
rized below, with
isting branch facility lo-
sources of additional
cated in the Stephens
information provided.
Building in downtown
Institutions are re-
Little Rock, the Reserve
plenishing interest re-
Bank announced June 22.
serves on real estate
The office has been
construction and devel-
established, but staff will
opment loans due to
continue to be added.
lack of performance
Seven examiners will be
and/or longer-than-
2008 issue of the FDIC monitoring program
housed in the office by
projected absorption
publication, Supervisory should include criteria for
the end of this year, with
time frames.
Insights, available at: determining when to ob-
http://www.fdic.gov/regulations/
plans to add three more in
This generally is consid-
examinations/supervisory/insights/
tain a new appraisal or
2010.
ered an unsound lending
sisum08/article01_Primer.html
evaluation in accordance
The Reserve Bank cur-
practice that can increase In general, interest capi-
with the Agencies’ real
rently directly supervises
the exposure of a lender talized into a construction
estate lending standards,”
26 state member banks
to credit losses. loan balance through the
the proposed guidelines
and 108 bank holding
The establishment of an use of an interest reserve
state. These criteria may
companies that have
interest reserve for the should not be recognized
be based on “changes in
headquarters in Arkansas.
period from origination of as income if its collectibil-
market conditions or dete-
The Reserve Bank
a project to anticipated ity is not reasonably as-
rioration in the credit
strongly believes closer
sellout or lease-up is com- sured.
since origination.”
proximity to these organi-
mon. Beyond this period, Loan policies have
A new appraisal or
zations will facilitate a
cash flow from the bor- not clearly articulated
evaluation should be ob-
better understanding of
rower and guarantor(s) requirements for obtain-
tained if the one currently
their needs, improve ser-
should service the debt, ing new appraisals on
used to estimate value is
vice to them and promote
including accrued interest. existing loans to assess
no longer valid. Excep-
better supervisory deci-
“A project that is not credit risk.
tions to this regulatory
sions based on a thorough
completed in a timely A working group con-
expectation should be
knowledge of the region.
manner or falters once tinues to evaluate more
rare.
In addition, the local
completed may appear to than 400 comments re-
The proposed guide-
examination staff will be
perform if the interest ceived in response to the
lines are discussed in a
better able to respond to
reserve keeps the troubled issuance in November
“Notice with Request for
requests from supervised
loan current,” according 2008 of proposed revi-
Comment” published in
institutions for advisory
to “A Primer on the Use sions to interagency ap-
the Federal Register on
of Interest Reserves,” praisal guidelines.
November 19, 2008. A
See OFFICE, Page 5
published in the Summer “A prudent portfolio
See ISSUES, Page 5
June 30, 2009
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