Press Release

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May 24, 2013

Press Release

Washington DC Meetings with FDIC and OCC

The Subchapter S Bank Association together with the American Bankers Association held meetings yesterday in Washington with senior officials at the Office of the Comptroller of the Currency and the FDIC to discuss specific S corp bank concerns stemming from the Basel  III proposals. The meetings were attended by chief executive officers from 6 banks around the country who are members of the Association.

The S Corp bank issues discussed were:

  1. Increased capital requirements from the proposed rulemaking, including the capital conservation buffer which would prohibit the payment of dividends and bonuses in the event the buffer is not met;  
  2. The pronounced impact on S corp banks, compared to C corp banks, if AOCI must be deducted from tier 1 capital;  
  3. The elimination of trust preferred securities as a viable capital instrument, despite the fact that Dodd Frank Section 171 (the Collins Amendment) specifically exempted banks under $15 Billion and small bank holding companies; 
  4. The chilling effect of increased risk rating on residential mortgages, especially in rural markets; and 
  5. Pension plan liability proposed to be deducted from tier 1 capital.

Specifically, we asked that the agencies permit S corp banks to pay a dividend to shareholders, in an amount which would be equal to the amount of taxes the bank would pay if it were a C corp.  The representatives at each of the Agencies listened intently and commented that they understood the concerns and thanked the group for its input.

In addition, the Association discussed its proposal to authorize S corp banks and their holding companies to issue preferred stock as an alternate means for banks to raise capital.

It is widely anticipated that these rules may become final as early as 45 days from now, and as such are likely close to final form.  Though the Agencies were not able to specifically comment on the issues raised, we are optimistic that many of our concerns will be addressed in the final rule.