Expansion of Banking: What happens when First National Bank is no longer First?
Ask any community banker and she will tell you that bank name disputes are on the rise. The Third Federal Circuit Court of Appeals attributes the rise of bank name disputes to “an outgrowth of aggressive and expansionist banking flowing from the Congressional liberalization… of national banking laws.” Citizens Financial Group, Inc., v. Citizens Nat’l Bank, 383 F.3d 110, 112 (3rd Cir. 2004). This case is one of many examples of disputes arising between two financial institutions, in similar geographic regions, operating under identical or a confusingly similar name (e.g., Citizens National Bank of Evans City and Citizens Financial Group, Inc.).
Today we are accustomed to large banks having developed into multinational corporations, such as JP Morgan Chase or Wells Fargo, but this growth occurred in most cases only in the late twentieth century. But the banking industry began with banks being purely local entities, the sole bank within a town or a smaller city as opposed to multi-branch banks within the same metropolis or state. For many banking organizations, this is still true. Within these towns, the use of names like First National Bank or Columbus City Bank were distinctive enough because that was the only show in town and everyone knew where they were banking. It was unlikely that another First National Bank two towns over would confuse or mislead consumers. The National Bank Act fostered the practice of bank names being rather undistinctive …
In-house bank lawyers got a vote of confidence last week. The context was a comment submitted to the Office of the Comptroller of the Currency regarding proposed enforceable guidelines on the risk management practices for the nation’s largest banks. Last January, the OCC proposed the guidelines and asked for comments. Previously, risk management practices suggested by the OCC have been largely precatory.
The proposed guidelines suggest minimum standards for the design and implementation of a risk governance framework. While the proposed guidelines would apply to banking organizations with consolidated assets equal to or greater than $50 billion, once they are effective, they will be influential regarding the risk management practices of smaller banks. The guidelines document (Docket ID OCC-2014-0001) is available here.
The overall goal of the proposal is to help banking institutions in “defining and communicating an acceptable risk appetite across the organization.” The measures should address such things as the capital, earnings, and liquidity that may be at risk on a firm-wide basis, the risk that may be taken in each line of business, and each key risk category monitored by the institution. A bank’s risk management practices should cover the following categories of risk: credit risk, interest rate risk, liquidity risk, price risk, operational risk, compliance risk, strategic risk, and reputation risk.
The proposed guidelines define some organizational units as “fundamental” to the risk management. These units are “front-line units, independent risk management, and internal audit.”
The comment on the role of in-house lawyers came from …
2013 was an active year for the Banking & Finance Law Report. Our authors covered a wide range of topics — from legislative and regulatory changes to court opinions to financing and bankruptcy matters in the healthcare, agricultural and oil and gas industries. To offer a glimpse into the news and trends of the past year, following is a synopsis of the 10 best-read articles of 2013.
1. Major Changes to Affirmative Action Requirements Become Effective March 24, 2014
by Mike Underwood
In just two months, financial institute and other types of employers will need to comply with new affirmative action rules that:
- Require employers to gather and retain data showing the results of their recruiting and hiring efforts and to set numeric targets for hiring veterans and disabled persons
- Include significant additional obligations for reviewing, analyzing and documenting good-faith efforts and results
- Specify that employers must offer applicants the opportunity to self-identify as a covered veteran or disabled person before a job offer occurs
Many employers may face a real challenge identifying and networking with recruiting sources that can refer qualified candidates for their businesses. They also will likely need to adjust data collection, retention, and analysis processes. Read the full article.
2. Ohio Passes Legislation Preventing Recovery on “Cherryland” Insolvency Carveouts in Nonrecourse Loans, Among Other Changes
by Amy Strang
Ohio’s Legacy Trust Act (Am. Sub. H.B. 479), which became effective in March 2013, prohibits the use of post-closing solvency covenants as nonrecourse carveouts in a nonrecourse …