Regulatory Relief in Areas Affected by Ice Storms
January 15, 1998
Circular No. 11019

To the Chief Executive Officers of All State Member Banks and Domestic Bank Holding Companies, in the Second Federal Reserve District:

Because of the effect recent winter storms have had on the northeastern New York region, banking organizations in this area may encounter difficulties in complying with certain federal statutes and regulations. As a result, the Federal Reserve wishes to remind you that there is regulatory relief available to facilitate recovery in the affected areas.

The Federal Reserve has long encouraged bankers to work with borrowers in communities affected by disasters. The effects of a disaster on local businesses and individuals are often transitory. Therefore, it is understood that you may have to take prudent steps to adjust or alter terms on existing loans in areas affected by this disaster. With proper risk controls and management oversight, the actions taken by your organization can contribute to the health of the local community and facilitate recovery, as well as serve the long-term interests of your institution.

The Federal Reserve recognizes that efforts by banking organizations to work with borrowers in communities under stress, if conducted in a reasonable way, are consistent with safe and sound banking practice and are also in the public interest. Financial institutions may, for example, work with borrowers to extend the terms of repayment or otherwise restructure the borrowers debt obligations. Such cooperative efforts can ease pressures on troubled borrowers, improve their capacity to service debt, and strengthen the financial institutions ability to collect on its loans. Financial institutions may also ease documentation requirements or credit-extension terms for new loans to certain borrowers, consistent with prudent banking practices. Such easing may help borrowers to recover their financial strength and place them in a better position to service their debts.

Beyond the Federal Reserves longstanding policy of encouraging banking organizations to work with borrowers affected by natural disasters, several types of regulatory relief also are available to facilitate recovery in areas that have been declared a major disaster area by the President. On January 10, 1998, the President declared that a major disaster exists in the counties of Clinton, Essex, Franklin, Jefferson, and St. Lawrence. The Depository Institutions Disaster Relief Act of 1992 (DIDRA) provides the federal banking agencies with the authority to waive their real estate appraisal regulations for real estate-related financial transactions involving property affected by a natural disaster. Consistent with DIDRA, the Federal Reserve will consider issuing such a waiver if disaster-affected regulated institutions encounter difficulty in obtaining appraisals for transactions that would aid reconstruction and rehabilitation in disaster affected areas. You should notify your portfolio manager at the New York Reserve Bank or Scott Freeman, Bank Supervision Officer, if you encounter difficulties in complying with the appraisal regulation as a result of damage caused by recent winter storms. Based on a need for appraisal regulatory relief, the Federal Reserve Board may waive its appraisal requirements in the five counties affected. Regulated institutions will be notified if such relief is granted.

The recent winter storms may have caused interruptions in bank services, requiring you to cease temporarily operations at one or more of your offices. In such situations, the branch closing provisions of section 42 of the Federal Deposit Insurance Act would not apply. Although prior notice may not be possible, you should notify your customers and the banks primary federal regulator in a manner specified by section 42 to the extent possible and as soon as possible after the decision to close the branch has been made. Section 42 would apply, however, if you close and do not reopen the branch following the incident. For further guidance, contact James Beit in Banking Applications at the New York Fed.

Further, the recent storms may affect your compliance with reporting and publishing requirements under various laws and regulations. In the event your organization encounters difficulties complying with any reporting requirement, you should contact Kenneth Lamar, Assistant Vice President in our Statistics Function.

When extending consumer credit secured by a dwelling located in the disaster area, you may temporarily use preprinted forms to obtain a consumers waiver of the right to rescind. In such instances, the consumers need to obtain funds immediately is regarded as a bona fide personal financial emergency for purposes of the Board's Regulation Z (Truth in Lending. For additional information, you may contact Janice Oser in our Compliance Examinations Department.