On November 29, the Office of the Comptroller of the Currency (OCC) proposed a rule that would remove references to credit ratings in the OCC’s non-capital regulations as required by Dodd-Frank Section 939A. In particular, the OCC proposes to amend the definition of “investment grade” in 12 CFR Part 1 to no longer reference credit ratings. The proposal will generally require banks to make assessments of a security’s creditworthiness similar to assessments currently required for the purchase of unrated securities. The notice distinguishes between a bank’s requirement to determine if an investment is investment grade and the granular risk measurements required under risk-based capital regulations. Bank regulators are still exploring development of alternative standards appropriate for those frameworks. The comment period ends December 29, 2011.
The OCC also proposed related guidance to assist national banks in meeting due diligence requirements in assessing credit risk for portfolio investments. The OCC expects banks to consider a variety of factors relevant to a particular security when determining whether a security is a permissible and sound investment. The range and type of specific factors an institution should consider will vary depending on the particular type and nature of the securities. However, as a general matter, a bank will have a greater burden to support its determination if one factor is contradicted by the finding under another factor. The guidance includes a table of appropriate factors for designated instruments a bank should evaluate prior to an investment purchase and periodically after purchase.
On November 21, Joint Select Committee on Deficit Reduction Co-Chairs issued a statement that the committee would not make a bipartisan agreement available to the public by the November 23 deadline. We were specifically tracking this matter to see if any of the Obama Administration insurance-related tax proposals would be included in the Committee’s recommendations to Congress. One of the Administration’s proposals would restrict the 264(f) pro rata interest expense disallowance exception for COLI to only include 20-percent owners prospectively (i.e., only impact plans purchased after enactment). Currently, the exception includes officers, directors and employees as well as 20-percent owners.
On November 18, the parties filed their third joint status report. In that report, the parties outlined their intentions if their ongoing settlement negotiations failed. The plaintiff is seeking to certify a class and recover the death benefits that the plaintiff alleges American Greetings did not have a right to receive. The plaintiff alleges that American Greetings did not give notice or get consent to procure the related insurance policies. American Greetings maintains that the case should be dismissed because the policies in question are not subject to Oklahoma law, that they had an insurable interest in the lives of the insureds, and that the policies were valid and lawful. Further, American Greetings asserts that the plaintiff cannot meet the burdens for certifying a class, namely numerosity. American Greetings claims that there are only 14 potential claimants. American Greetings is an employer related to the Havenstrite v. Hartford matter.