Regulators crack down on Reg H

Northwestern Financial Review, Dec 15-Dec 31, 2004 by Hilgert, Jackie

Bankers who've been preoccupied with BSA and the fine points of complying with the USA Patriot Act might be surprised to learn that regulators are putting a renewed focus on flood insurance. Regulators are issuing letters to boards, memorandums of understanding, and fines - sometimes big fines - to banks that have dropped the ball on implementing a flood insurance program, said Chuck Lewis, president of UMB Consulting.

A bank that can attest to this renewed regulator focus on flood insurance is Five Points Bank, Grand Island, Neb. The $362 million, state chartered institution was recently assessed a $10,000 civil money penalty for violating Reg. H.

"Civil money penalties are all unique," Lewis said, "but they usually indicate a lack of a formalized program." Lewis said there's been plenty of warning about this and regulators are seeing a lot more exposure.

"There is a lot more debt secured by real property right now, and examining agencies see that," Lewis commented. "We've got too many regs, but this is one banks have not kept up on."

By Jackie Hilgert