Banking and Finance Law Daily Wrap Up, TOP STORY—Fed Discusses Supervisory Relief After Disasters and Emergencies, (Apr 1, 2013)

By Richard A. Roth, J.D.

The Federal Reserve Board has issued a Supervision and Regulation Letter highlighting what financial institutions can do to help customers, and what the Fed can do to help institutions, in the case of a major disaster or emergency. The Fed said that it was reaffirming its existing policy of using the regulatory flexibility it has under current laws and regulations to help financial institutions recover from natural disasters or other emergencies. Assistance may be available for institutions in areas that are affected in a way that interferes with normal banking services even if there is no declared emergency (SR 13-6; CA 13-3).

Fed options. The SR Letter noted that disasters may result in an increase in delinquent or nonperforming loans. Examiners will keep this in mind when looking at an affected institution’s financial condition and considering possible supervisory responses.

In appropriate circumstances, real estate appraisal regulations can be waived, the Fed pointed out. Institutions should consult with their Federal Reserve Banks about this possibility. Disaster recovery activities are eligible for positive consideration in financial institutions’ Community Reinvestment Act examinations, the Fed noted. Moreover, the use of temporary facilities without a formal application will be permitted.

The Fed said it is willing to reschedule on-site examinations if doing so will reduce interference with recovery efforts. If an institution is prevented by a disaster from filing timely and accurate required reports, it should contact its FRBank. An institution that takes "reasonable and prudent steps" will not be subjected to supervisory action, the SR Letter said.

Assistance to customers. The guidance listed a series of steps financial institutions can consider taking to help customers. These can include waiving automated teller machine fees and increasing daily cash withdrawal limits; waiving overdraft fees, late fees or early withdrawal penalties; easing check cashing restrictions; and easing credit terms and increasing credit limits. Of course, any actions must be consistent with safe and sound banking practices.

Know-your-customer. Customer identification program requirements cannot be disregarded, the SR Letter said; however, there is some flexibility in how they are applied. Financial institutions are encouraged to consider allowing new customers to use acceptable non-documentary identification methods. Also, the current regulations do not require that a new customer’s identity be verified before an account can be opened, it was pointed out. Verification can take place within a reasonable time after account opening.

Banks must continue to file required Suspicious Activity Reports, the Fed added.

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