IBBEA Flashcards
What does IBBEA allow banks to do?
Branch across state lines
What does IBBEA prohibit banks from doing?
Establishing or acquiring a branch(s) outside of its home state, primarily for the purpose of deposit production.
What was the purpose of IBBEA?
To ensure that interstate branches would not take deposits from a community without the bank reasonably helping to meet the credit needs of the community.
What is a covered interstate branch? (2)
- Any branch of a national bank, a State member bank, or a State nonmember bank, and any Federal branch of a foreign bank, or any uninsured or insured branch of a foreign bank licensed by a State, that:
(i) is established or acquired outside the bank’s home State pursuant to IBBEA; or
(ii) could not have been established or acquired outside of the bank’s home State but for the establishment or acquisition of a branch described in (i) and - any bank or branch of a bank controlled by an out-of-State bank holding company.
What is a home state? (3)
- For State banks, home State means the State that chartered the bank.
- With respect to a national bank, home State means the State in which the main office of the bank is located.
- With respect to a bank holding company (or foreign bank), home State means the State in which the total deposits of all banking subsidiaries of such company are the largest on the later of:
(i) July 1, 1966; or
(ii) the date on which the company (or foreign bank) becomes a holding company under the Bank Holding Company Act.
What is a host state?
means a State in which a covered interstate branch is established or acquired.
What is the host state LTD ratio?
is the ratio of total loans in the host State to total deposits from the host State for all banks that have that State as their home State.
What is an out of state bank holding company?
means, with respect to any State, a bank holding company whose home State is another State.
What is the statewide LTD?
relates to an individual bank and is the ratio of the bank’s loans to its deposits in a particular State where it has one or more covered interstate branches.
At what time does a covered bank become subject to IBBEA, specifically in reference to section 109 including the two step test?
Beginning no earlier than one year after a covered interstate branch is acquired or established, the agency will determine whether a bank is complying with the provisions of section 109.
Section 109 provides a two-step test for determining compliance with the prohibition against interstate deposit production offices.
What is the two step test?
What is done for each step?
A test to determine compliance with the prohibition against interstate deposit production offices including:
- LTD screen: measure the lending and deposit activity of covered interstate branches. Compare the bank’s statewide LTD ratio to the host state LTD ratio. If the statewide LTD ratio is at least 1/2 of the relevant host state LTD ratio then the bank passes and no further review is required.
- Credit needs determination: This step is conducted if the bank fails the first LTD test, or the test cannot be conducted. This step requires review of bank activities (lending activity and CRA performance) to determine if the bank is reasonably helping to meet the credit needs of the community in the host state. (the CRA rating should not be all that is taken into account, but banks with a SAT rating will receive a favorable determination for this test).
Wholesale and limited purpose banks should be evaluated under the second test based on the appropriate CRA performance provided in the regulation.
Where can you find the host state LTD ratio?
Host State ratios are prepared, and made public, by the agencies annually. For the most recent ratios, see OCC bulletins, FDIC Financial Institution Letters, or FRB Press Releases.
Before a bank can be sanctioned under section 109, the FDIC is required to demonstrate what?
That the bank failed to comply with the LTD ratio screen and failed to reasonably help meet the credit needs of the community in the host state.
True or false:
The bank must fail both the LTD ratio screen and the credit needs determination to be in noncompliance with section 109.
True
the FDIC has an obligation to apply the LTD ratio screen before seeking sanctions, regardless of the regulatory burden imposed.
This means if a bank receives an adverse credit needs rating, the fdic must conduct the LTD screen even if the data is unavailable. examiners would need to obtain the necessary data before sanctions could be imposed.
What sanctions can be imposed if a bank fails the two step test?
What should be done before sanctions are imposed?
If a bank fails both steps of the section 109 evaluation, the statute outlines sanctions that the appropriate agency can impose. The sanctions are:
(i) ordering the closing of the interstate branch in the host State; and
(ii) prohibiting the bank from opening a new branch in the host State.
Sanctions, however, may not be warranted if a bank provides reasonable assurances to the satisfaction of the appropriate agency that it has an acceptable plan that will reasonably help to meet the credit needs of the communities served, or to be served. An examiner should consult with the RO before discussing possible sanctions with any bank. Also, before sanctions are imposed, the agencies stated in the preamble to the final 1997 regulation that they intend to consult with State banking authorities.
