Should federal regulators step in and seize a seriously troubled savings and loan before it becomes insolvent?
That question is posed by the Federal Home Loan Bank Board in seeking public comment for 30 days on an advance notice of proposed rulemaking.The proposal would clarify the bank board's existing authority to take over a thrift institution when its capital falls to a dangerously low level.
The agency is considering setting that level at 1.5 percent of a thrift's total assets. An institution that lets its capital decline to that level would automatically be considered in an unsafe and unsound condition to transact business, thus triggering the bank board's statutory authority to appoint a conservator or a receiver for the institution.
The agency thus would have the option of taking over a failing institution before all of its capital is dissipated. That would reduce the risk to the Federal Savings and Loan Insurance Corp. (FSLIC), which has to absorb any losses in its role of insuring deposits.
The early intervention suggestion is a companion to a proposed regulation, adopted by the board and published in the Federal Register Dec. 23, that would change the requirements for the minimum amount of capital FSLIC-insured institutions must hold. The bank board is seeking public comment for 90 days on that measure, which would base a thrift's required capital on the degree of risk of its assets.
Final versions of both measures are likely to be considered by the bank board at the same time, following the public comment periods. The bank board has scheduled two days of public hearings on the minimum capital requirements and the early intervention concept. The hearings are scheduled for Feb. 9 and 10, from 9 a.m. to 5 p.m. in the Bank Board's amphitheater, 1700 G St. N.W., Washington.