PONY EXPRESS COMMUNITY BANK
August 3, 2004
Robert E. Feldman, Executive Secretary
Attn: Comments / Executive Secretary
Section
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429
RE: Comments -- FIL-63-2004
I have reviewed the above-reference FIL and wish to make some constructive
comments.
The basic premise of the proposed
guidelines regarding overdraft accounts seems sound. I agree with the "Best Practices" and "Legal
Risks" detailed in the FIL.
Regarding the "Safety & Soundness Considerations",
I suspect that some financial institutions have become aggressive in
paying consumer
overdrafts without putting into place appropriate policies, procedures,
and practices. Only in such instances does it seem appropriate to implement
regulatory requirements such as precisely when an account should be charged
off.
While I agree, in principal,
with the requirement that "overdraft
losses (other than the portion of the loss attributable to uncollected
overdraft fees) should be charged off against the allowance for loan
and lease losses...", my opinion is that there should be reasonable
latitude within this section. Overdraft accounts that become problematic
have often times been so for some time and, in the later stages of the
account's life cycle, the bankers have recognized problems were developing
and paid very few of the checks. In such instances, the amount that would
be appropriately charged to ALLL would be minimal in dollar amount. Where
the dollar amount is minimal, the research and time required to determine
the appropriate amount for ALLL does not seem warranted.
In closing, I suggest that, if a financial institution actively and
appropriately manages the risks of overdrawn accounts, regulatory guidelines
are not necessary. If an institution fails to actively and appropriately
manage the risks associated with overdrawn accounts - and such failure
poses risk of imparment of capital, asset quality, and earnings of that
institution - then the financial institution is engaged in unsafe and
unsound banking activities. The regulatory agencies already possess the
tools necessary for effecting change in such an institution's management
and/or ownership.
Thank you for considering my comments.
Very truly yours
Robert A. Means
President
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