Background
A bank
formally appealed the OCC's denial of an application to
relocate a particular branch to another location within the same
city. Management's
primary basis for the appeal was that they believed the relocation
was favorable from an economic and Community Reinvestment Act
(CRA) perspective.
Management also believed that the bank had received
inequitable treatment from the supervisory office.
Discussion
The OCC is
required by law and regulation to take into account the bank's
record of performance under the CRA when evaluating relocation (and
other) applications. At
the time of the relocation application, the bank's CRA record of
performance was rated "needs to improve."
Conclusion
The denial was
appropriate in light of the bank's CRA record of performance at the
time of the decision. However, during the
processing of the appeal, the bank informed the ombudsman that
it had made an investment of $1.6 million in mortgage-backed
securities through a particular public acceptance corporation.
In light of
the recent qualified investment, and with an understanding of the
economic benefit to the bank, the ombudsman opined that the OCC
should approve the relocation with a "pre-consummation"
requirement. Bank
management was allowed to proceed with the lease negotiations;
however, the branch could not relocate until a new relocation
application was filed and approved, the supervisory office performed
a CRA examination, and the bank received at least a "satisfactory"
rating in its record of performance under the CRA. This decision was subject to
the bank not encountering any severe financial, operational, or
other difficulties before the new application was approved.
After careful
consideration of all the facts and circumstances, the ombudsman
found no evidence that the bank received inequitable treatment from
the supervisory office.
Appeal of a Denial of a
FIRREA Section 914 Notice - (Fourth Quarter 1999)
Background
The ombudsman
received an appeal of a denial of a Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (FIRREA) Section 914
notice of a bank's proposal to have an individual serve as a
director for a troubled institution. The disapproval was based on
the individual's involvement in a complex financial transaction
while serving as an executive officer of another bank. The denial letter stated the
lack of judgment displayed in the transaction reflected
negatively on the individual's competence, character, and
integrity. The
appellate submission stated that the events that provided the basis
for the OCC's denial should be viewed in a different perspective and
the transaction serves as evidence of both the integrity and
competence of the individual asking to serve.
Discussion and Conclusion
The statute,
12 USC 1831i (e), "Standard for Disapproval,"
states:
The appropriate federal banking agency
shall issue a notice of disapproval with respect to the notice
submitted pursuant to subsection (a) if the competence,
experience, character, or integrity of the individual with
respect to whom such a notice is submitted indicates that it
would not be in the best interests of the depositors of the
depository institution or the best interest of the public to permit
the individual to be employed by, or associated with, the
depository institution or depository institution holding
company.
In this case the
ombudsman considered all aspects of the case including interviews
with the board of directors of the institution where the
transaction occurred, the person's experience in troubled
institutions, and an interview of the individual asking to serve as
a director. The
information obtained in the ombudsman's review did not eliminate the
concern caused by the transaction. In addition, the decision to
disapprove the individual was not inconsistent with the provisions
of 12 USC 1831i (e). Therefore, the ombudsman did
not reverse the prior disapproval of the proposal to appoint the
individual to the board of directors for the troubled
institution.
Addendum: Given
the personal nature of section 914 requests, specific details of the
referenced financial transaction are not disclosed to maintain
confidentiality
