Changes to Georgia Banking Law from the Recent Georgia PNC Bank Case

March 25, 2016 | Charles Bowen

The Georgia Supreme Court recently heard the case of PNC Bank National Association v. Smith, which sought to determine whether a lender had to comply with the confirmation statute laid out in O.C.G.A. § 44-14-161.  If so, the Court also was asked to decide whether guarantors—and borrowers, by extension—could waive the protections set forth by said law.

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Topics: Georgia Banking Law

Incentive Alignment - How to Structure and What to Avoid

April 3, 2015 | Charles Bowen

Question

How can banks and loan officers be incentivized to encourage economic growth responsibly?

Answer

Incentives must encourage lenders to properly weigh risk and make decisions with a long term perspective in which they are exposed to both the upside and downside of authorized loans.


Humans are driven by a variety of motivations; in the workplace, these often come in the form of incentives tied to compensation. The theory is straightforward: if you reward desired behavior, it will lead to greater performance and the achievement of goals. Unfortunately, if incentive structures are not properly designed and managed, they may inadvertently encourage undesirable behavior which can lead to negative outcomes. In the late 2000s, systematic failures in the real estate market and the aggressive selling of mortgage-backed securities and derivative products by financial institutions contributed to a massive global economic recession. In addition to a lack of regulation, the "heads, I win; tails, you lose" compensation structure of lending exposed banks to excessive risk while loan officers raked in exorbitant bonuses. In the wake of this financial crisis in which many banks collapsed and others were bailed out with taxpayer dollars, regulation such as theDodd-Frank Wall Street Reform and Consumer Protection Act have forced banks to reexamine not only their lending practices but also they way in which they incentivize their loan officers.

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Topics: Georgia Banking Law

Tiered Regulation: Good or Bad for Banks?

March 25, 2015 | Charles Bowen

Question:

Is Tiered Regulation good or bad for banks?

 

Answer:

It depends on the type and size of the bank and its respective regulatory requirements.

Known as “The Great Recession,” the major economic decline of the late 2000s continues to have significant impact on the performance and regulation of markets in the United States and globally. The unemployment rate in the U.S. doubled when over 7.5 million jobs were lost, home values plummeted, businesses failed and trillions of dollars in net worth evaporated. Much of the decline is blamed on a systematic failure in the real estate market and the marketing of mortgage backed securities (MBSs) and derivative products by financial institutions.

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Topics: Georgia Banking Law

If Marijuana is Legalized, Will Georgia Banks Collect the Green?

March 12, 2015 | Charles Bowen

Question:

If the State of Georgia legalizes the use of marijuana for medical and/or recreational use, will banks be able to legally work with those involved in the industry?


Answer:

Yes, but with restrictions that may be costly.

Since Congress passed the Controlled Substances Act (CSA) in 1970, marijuana has been classified as a Schedule I narcotic drug and it is therefore a federal crime to manufacture, possess, use or distribute it. The Financial Crimes Enforcement Network (FinCEN), under the purview of the United States Department of Treasury, enforces the Bank Secrecy Act (BSA) of 1970 which “requires U.S. financial institutions to assist U.S. government agencies to detect and prevent money laundering.” The BSA requires banks and credit unions to monitor their customer’s accounts for suspicious activity which may be related to crime or terrorism. Further, it specifically forbids banks from doing any business (either knowingly or negligently) with any person or organization engaged in illegal activity. FinCEN also mandates the filing of Suspicious Activity Reports (SAR) by financial institutions when they believe an account holder may be breaking the law.

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Topics: Georgia Banking Law

Will the FDIC Compensate Parties Wronged by a Bad Contract?

January 30, 2015 | Charles Bowen

The Question:

Is the FDIC-R required to compensate parties when a contractual error makes compliance with the contract infeasible?

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Topics: Georgia Banking Law

What Georgia Banks Need to Know About New Rules from the DBF

January 27, 2015 | Charles Bowen

One of our recent blog posts discussed the potential impacts of the proposed rule changes from the Georgia Department of Banking and Finance (GDBF). The GDBF has now released the final versions of those rules. Here is a recap of what is important for Georgia banks to know going forward.

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Topics: Georgia Banking Law

Proposed Changes to Georgia Banking Law

December 1, 2014 | Charles Bowen

New rules suggested by the Georgia Department of Banking and Finance are scheduled for consideration by the Department on Friday, December 5, 2014. To see the full list of proposed rules, visit this link: Proposed Changes to Georia Banking LawComments on the proposed rules will be taken until the close of business the day prior to the vote. The rules and their proposed changes are complex.  This article highlights several components of the suggested amendments that are especially noteworthy for Georgia banks and interstate banks doing business in Georgia.

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Topics: Georgia Banking Law

Are Bank Directors and Officers Individually Liable Under Georgia Banking Law?

November 24, 2014 | Charles Bowen

The Questions:

  1.  Does a bank director or officer violate the standard of care established by  O.C.G.A. § 7-1-490 when he or she acts in good faith but fails to act with “ordinary diligence” as that term is defined in O.C.G.A. § 51-1-2?

  2. Can a bank officer or director be held individually liable if they are shown to have been ordinarily negligent in performing their professional duties or to have otherwise breached a fiduciary duty?

The Answer to Both Questions:  

YES

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Topics: Georgia Banking Law

Do Georgia Usury Laws Restrict Banking Fees?

November 5, 2014 | Charles Bowen

The Question

Do Georgia usury laws prohibit accumulating bank fees from becoming significantly higher than the depositor’s average annual balance? 

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Topics: Georgia Banking Law

Georgia Banking Law Lets Nonprofits Offer Mortgages Without a License

October 28, 2014 | Charles Bowen

Georgia banking allows employees of nonprofit corporations to originate mortgages even without a mortgage originator license. Recent legislation clarifies what constitutes a nonprofit corporation for purposes of this law.  

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Topics: Georgia Banking Law