Former OTS Regional Director Vigna Opines on Disclosure of Various Regulatory Matters
Excerpts from “Expert Report of Angelo A. Vigna”:
“III. Summary of Opinions
6. Based on my review of the materials and my knowledge and experience as a banking regulator, I conclude the following:
– It was appropriate for the Bank to calculate and report its regulatory capital ratios at March 31, 2008 in accordance with criteria approved by the OTS, the Bank’s primary federal regulator.
– It is a common regulatory practice for regulators to require institutions under their supervision to submit non-public specialized reports covering areas of concern or interest to the regulator.
– The Bank was prohibited by OTS regulation from publicly disclosing its CAMELS rating or any potential changes to its CAMELS rating.
– It has been the OTS’s longstanding policy and practice to look to thrift holding companies as a source of strength for their thrift subsidiaries. In this regard, it is common and customary for holding companies to maintain sufficient capital at their thrift subsidiaries through capital markets transactions.”
“11. Because the Bank’s primary federal regulator, the OTS, approved the transaction (the $18 million intercompany receivable) and did not raise any safety and soundness concerns, it is my opinion that the Bank acted appropriately by calculating its capital ratios as of March 31, 2008, in accordance with the criteria approved by the OTS.”
“12…..Accordingly, Bancorp’s disclosures in its 2007 10-K and first quarter 10-Q that the Bank was well capitalized were entirely accurate.”
“17…..Indeed, any public disclosure of such information (the CAMELS rating or possible changes to it) by Indymac management could have resulted in regulatory and/or criminal sanctions.”
“18…..Accordingly, there was nothing for Indymac to disclose with respect to its CAMELS rating, or the effects thereof, in the relevant SEC filings.”
“21…..Investors in a holding company like Bancorp would well understand that capital raised through a direct stock purchase plan or otherwise would have been used to maintain the subsidiary bank’s capital ratios and otherwise support its operations.”
“22…..For this further reason, investors would well understand that Bancorp would likely have contributed capital to the Bank to support its capital ratios and otherwise maintain the Bank’s financial strength.”