Over the last several months, we have become aware of a number of changes to various regulator’s frequently asked questions. These changes are frequently made without any public announcement, and, in some cases, without any notation that the FAQ’s have been modified at all. Frequently, banks are made only made aware of the change when they (a) aren’t aware of the initial FAQ, and (b) subsequently ask the question and are directed to the FAQ.
On November 1, 2011, the FDIC updated its Frequently Asked Questions regarding the “High-Rate Area” exception to the market rate caps for less than well-capitalized institutions. Previously, institutions relying on a “high-rate area” designation had to re-apply every calendar year to maintain the designation. However, late in 2011, the FDIC determined that institutions that had received a high-rate determination from the FDIC would no longer be required to submit an annual high-rate determination request. Instead, the high-rate area designation will automatically renew until and unless the FDIC notifies the institution that it is no longer operating in a high-rate area. In light of continued historically low interest rates, the current national rate caps have not proven to generally be difficult for banks to comply with, but this modification (if it isn’t changed again) could provide welcome relief if/when rates rise.
On February 16, 2011, the Treasury updated its Frequently Asked Questions regarding the Capital Purchase Program changes under the American Recovery and Reinvestment Act of 2009. Without acknowledging any change to the FAQ, Treasury reduced the minimum repurchase amount to the greater of (i) 5% of the issue price of the preferred and (ii) $100,000.00 in principal amount. Previously, Treasury required institutions seeking to repurchase their TARP investment to repurchase at least 25% of the principal investment.