Imágenes de páginas
PDF
EPUB

15

1

or officer or other person, and for good cause shown, or (B)

2 the Attorney General of the United States. Unless such di

3 rector, officer, or other person shall appear at the hearing

::4 in person or by a duly authorized representative, he shall

5 be deemed to have consented to the issuance of an order

6 of such removal and/or prohibition. In the event of such

7 consent, or if upon the record made at any such hearing the

8 agency shall find that any of the grounds specified in such

9 notice has been established, the agency may issue such

10 orders of suspension or removal from office, and/or prohi11 bition from participation in the conduct of the affairs of the 12 bank, as it may deem appropriate. In any action brought 13 under this section by the Comptroller of the Currency in 14 respect to any director, officer or other person with respect 15 to a national banking association or a District bank, the

16 findings and conclusions of the Administrative Law Judge

17 shall be certified to the Board of Governors of the Federal

18 Reserve System for the determination of whether any order

19 shall issue. Any such order shall become effective at the

20 expiration of thirty days after service upon such bank and the 21 director, officer, or other person concerned (except in the 22

case of an order issued upon consent, which shall become 23 effective at the time specified therein). Such order shall 24 remain effective and enforceable except to such extent as it

16

1 is stayed, modified, terminated, or set aside by action of 2 the agency or a reviewing court.”.

3

(e) Section 8 (i) of the Federal Deposit Insurance Act,

4 as amended (12 U.S.C. 1818 (i)), is amended by redesig5 nating subsection 8 (i) as 8 (i) (1) and by adding a new 6 subsection 2 (i) (2) to read as follows:

“8 (i) (2) Any insured bank which violates and/or any 8 officer, director, employee, agent, or other person participat

7

9 ing in the conduct of the affairs of such a bank who violates

10

the terms of any order which has become final and was issued

11 pursuant to subsections (b) or (c) of this section, shall for

12 feit and pay a civil penalty of not more than $10,000 per day 13 for each day during which such violation continues. The 14 appropriate Federal banking agency shall have authority to 15 assess such a civil penalty, giving due consideration to the

16 appropriateness of the penalty with respect to the size or

20

17 financial resources of the bank or person charged. When 18 assessed, such a civil penalty may be collected by the appro19 priate Federal banking agency by suit or otherwise.”.

SEC. 7. Section 18 (j) of the Federal Deposit Insurance 21 Act, as amended (12 U.S.C. 1828 (j)), is amended by re22 designating section 18 (j) as “18 (j) (1)” and by adding the 23 following new subsections: 24

“18 (j) (2) The provisions of section 22 (h) of the Fed25 eral Reserve Act, as amended, relating to limits on loans and

26 extensions of credit by a member bank to its officers or di

17

1

rectors or to any individual who directly or indirectly owns,

2 controls, or has the power to vote more than 5 per centum of

3 any class of voting securities of such member bank or to

4 companies controlled by such an officer, director, or indi

5 vidual, shall be applicable to every nonmember insured bank

6 in the same manner and to the same extent as if such non

7 member insured bank were a State member bank.

8

“18 (j) (3) Any nonmember insured bank which vio

9 lates and/or any officer, director, employee, agent, or other

10 person participating in the conduct of the affairs of such non

11 member insured bank who violates any provision of section 12 23A or 22 (h) of the Federal Reserve Act, as amended, or 13 any lawful regulation issued pursuant thereto, shall forfeit 14 and pay a civil penalty of not more than $1,000 per day for 15 each day during which such violation continues. The Cor16 poration shall have authority to assess such a civil penalty, 17 giving due consideration to the appropriateness of the pen18 alty with respect to the size or financial resources and good 19 faith of the nonmember insured bank or person charged, the 20 gravity of the violation, and the history of previous viola21 tions. When assessed, such a civil penalty may be collected, 22 by suit or otherwise, by the Corporation. As used in this 23 section, the term 'violates' includes without limitation any

24 action (alone or with another or others) for or toward caus25 ing, bringing about, participating in, counseling, or aiding

[blocks in formation]

The CHAIRMAN. e will proceed to hear testimony from the three bank regulatory agencies as to the reasons why passage of S. 2304 is important and how these powers will better enable them to ensure a safe and sound banking system, and then we have a panel of two distinguished bankers who will follow.

I might say in view of the fact that we have five witnesses this morning, any abbreviation of statements will be appreciated and the entire statements in every case will be printed in full in the record.

Our first witness is Governor Holland of the Federal Reserve Board. Governor Holland, go right ahead.

STATEMENT OF ROBERT C. HOLLAND, GOVERNOR, FEDERAL

RESERVE SYSTEM Mr. HOLLAND. Thank you, Mr. Chairman, I am pleased indeed to be here. I can't tell you how appreciative our Board is that you are bringing forward this bill to hearings and how appreciative we are of your strong support.

We agree it isn't a panacea. We believe it is a set of legislative scalpels that will let us get in there and cut at weaknesses. At deficiencies that we have actually seen in the experience of the last few years. We look forward very much to having Congress give us that kind of power. We certainly intend to use it if we get it.

I am pleased to appear before this committee on behalf of the Board of Governors of the Federal Reserve System, to discuss the Board's reasons for recommending the enactment of legislation embodied in S. 2304. Let me try to summarize the proposals and the Board's views thereon in rather general terms, and then respond to any specific questions.

These proposals arise from a number of studies which the Federal Reserve conducted in the aftermath of the banking difficulties of recent years. One objective of those studies was to determine whether there were

some feasible new measures that would decrease the incidence of specific banking difficulties or would increase the effectiveness of remedial regulatory action once a particular bank difficulty was identified. In fact, those studies have turned up a number of constructive suggestions for reducing banking problems without at the same time unduly interfering with the effective conduct of banking business.

Some of those suggestions involved changes in procedures or regulations which the Federal Reserve could introduce under its existing authority, and we have done so. But several suggested steps needed statutory authorization. We have refined those ideas, in coordination with the other Federal bank regulatory agencies, and they are now embodied in the present S. 2307, submitted jointly on behalf of all three agencies.

The legislative proposals in S. 2304 can be divided into three general categories: (1) Proposals for civil penalties for violations of various provisions of Federal banking law which presently carry no penalties or carry only criminal penalties; (2) a proposal to restrict dealings with insiders; and (3) proposals to increase and streamline the ability of the agencies to take remedial actions.

An examination of the present restrictions on the operation of banks and actions of bank officers, directors, and employees indicates that in many instances violations of those restrictions carry either no penalties or solely criminal penalties. The Board's experience with the operations of the criminal penalty provisions under the Bank Holding Company Act is that the application of these provisions is a slow and tedious process. Furthermore, in order to obtain a conviction it must be established that the violation was willful. Courts in the past have read this as requiring a showing not only that the individual intended to take the action, but that in so doing the individual intended to break the law. This is a very difficult matter to prove, and it is believed that these difficulties of proof have decreased the effectiveness of the criminal remedy as a deterrent to particular actions in violation of the act.

There are other provisions of banking law for which there are either inadequate or no deterring penalties attached to any violation. For instance, section 23A of the Federal Reserve Act places stringent limitations on transactions between affiliates. Violation of this provision, however, currently carries no civil or criminal penalties. In recent experience, two examples have come to the Board's attention which, in the Board's opinion, involved violations of section 23A with respect to transactions between the banking and nonbanking affiliates of a holding company. In both instances, these transactions contributed heavily to the ultimate failure of the banking subsidiary. Once these transactions came to the attention of the appropriate regulatory authorities, the only available remedy would have been a cease-and-desist order under the Financial Institutions Supervisory Act of 1966 requiring reversal of the transaction. However, since the funds were no longer available to accomplish such a reversal, this represented a hollow remedy indeed.

The Board strongly believes that the existence of an expeditious civil penalty procedure will act as a deterrent to this kind of activity and should significantly decrease the incidence of it. For this reason, the Board has recommended in the proposed legislation that civil penalties be applied to violations of the Bank Holding Company Act, section 23A of the Federal Reserve Act, section 22 of the Federal Reserve Act relating to loans to officers and directors--as proposed to be amended-violations of final cease-and-desist orders, and certain other provisions. In order to help insure that these penalties would only apply in an appropriate and equitable manner, the proposed bill provides that, in assessing the amount of the penalty, the responsible agencies must take into account the financial resources and good faith of the person or organization charged with the violation, the gravity of the violation and the history of previous violations. Any penalty so assessed may be collected by court action and would be subject to judicial review.

The second area covered by this bill is the establishing of appropriate limitations on banking transactions with insiders. The history of banking difficulties over the last few years indicates that, in numerous instances, banks have encountered difficulties by virtue of having incurred excessive risks through a high concentration of loans to “related persons.” The Board recognizes that, in the banking industry as a whole, major abuses by insiders are not common. The Board further recognizes that the board of directors of a bank or bank holding company typically includes a number of community leaders, not the least of whom are officials of various businesses in the area.

« AnteriorContinuar »