| Bank
Accounting & Finance
Practitioners' perspectives
on industry best practices and trends
Recent Issues
October 2009
TARP Funding: Who and
Why?
Theresa F. Henry
Summary financial information for a sample of banks that took advantage
of the capital purchase program-or not.
Accounting for Loan Losses: Is Dynamic Provisioning the Answer?
By Luis Betancourt and Charles P. Baril
Dynamic provisioning could result in more robust and countercyclical loan
loss provisions and levels of the allowance of loan and lease losses.
Bargain Purchase Gains under FAS-141R
By Kenneth Janson
When the Federal Deposit Insurance Corporation offers a loss-sharing facility
to the acquirer of a failed institution, a contingent asset is created and
must be booked at its fair value.
Dealing with Increased Risk of Regulatory Enforcement Actions
Frank C. Bonaventure
A bank should be prepared to respond when an enforcement action is presented
to it by a regulator.
Structured Investment Vehicles: The Unintended Consequence of Financial
Innovation
By Michael Ehrlich, Asokan Anandarajan and Benjamin Chou
Innovations that were designed to solve one market problem evolved over
time into critical weaknesses in the fabric of our financial system.
COMPLIANCE
Legislation Pending on Investment Advice to 401(k) Account Clients
By Dana M. Muir
Congress is considering severely restricting banks' ability to provide advice
to their 401(k) account clients.
SEC UPDATE
SEC Proposes New Guidance on Executive Pay, Updates Staff Accounting
Bulletin Series
By Patrick R. Colabella, Adrian P. Fitzsimons and Victoria Shoaf
Proposed rule changes would improve disclosure of overall compensation policies
and their impact on risk taking as well as stock and option awards to executives
and directors.
Top
August 2009
Executive Incentive
Practices Post-TARP
By Susan O'Donnell
What went wrong, how incentive compensation practices will change post-
TARP and likely best practices going forward.
FASB Issues Guidance on Estimating Fair Value
By Cal Christian and Dennis O'Reilly
FSP 157-4 provides guidance in valuing assets when the markets for identifying
transactions are not orderly.
Financial Patents after the Bilski Opinion
Paul Schaafsma
A federal appeals court decision potentially restricts the incentives
for innovation provided by the patent system.
MERGERS & ACQUISITIONS
Antitrust Considerations and the Weakened Firm Defense
By Matthew Cantor and Marlene Koury
The failing firm defense permits what would otherwise be an anticompetitive
transaction when the alternative is that the target will immediately exit
the relevant market.
RISK MANAGEMENT
Are Financial Models Really to Blame?
John R. Segerstrom
Management must know the data, assumptions, omissions, questions and risk
relationships incorporated within a computerized analysis.
SEC UPDATE
New Guidance on Other-Than-Temporary Impairment, Proposals on
Shareholder Rights, Funds Controlled by Advisers
By Patrick Colabella, Adrian P. Fitzsimons and Victoria Shoaf
SEC staff positions provide guidance for assessing whether an impairment
of a debt security is other than temporary as well as how such impairments
are presented and disclosed in the financial statements.
RISK GOVERNANCE
Crisis Changes View of Risk Management
By Bill Schlich and Hank Prybylski
Eighty-five percent of respondents at 40 global banks said risk governance
projects are under way in their businesses.
Top
June 2009
The Alphabet Soup of the
Financial System Bailout
By Carol Hempfling Pratt
Treasury, the FDIC and the Federal Reserve are administering an overwhelming
number of new plans and programs-each with its own acronym.
Fortifying Liquidity Management
By Steve Turner
Post-bubble, the time has come for a thorough review and modernization of
bank liquidity management.
Tax-Efficient Business Practices in the Face of Unprecedented International
Tax Enforcement
By Douglas E. Whitney, Gregory G. Palmer and Matthew C. Boch
The upsurge in international tax enforcement extends well beyond the highly
publicized efforts to crack down on accounts and businesses located in traditional
tax haven jurisdictions.
Rate Shocks in Value-Based Measures of Interest-Rate Risk
By Michael R. Arnold and Dai Zhao
Shock-based risk calculations in value-based risk analyses may potentially
mislead risk governance committees into thinking their institutions' equity
is less exposed to interest rates than is actually the case.
REGULATORY UPDATE
Regulatory Reform: We Need Music, Not Noise
By Carol Beaumier
Amid crisis, a return to fundamental principles can create a process for
redesigning a regulatory framework that aims to ensure a vital and competitive
financial system.
RISK MEASUREMENT
The Role of Confidence Management in Liquidity Risk Contingency
Planning
By Leonard Matz
To recover from a contingent liquidity stress scenario, a financial institution
needs its investors and the general public to maintain confidence that the
bank has sufficient liquidity.
CAPITAL MANAGEMENT
Capital Purchase Program Funds: Thanks, but Maybe No Thanks
By Daniel G. Murray and William H. Quirk III
Banks that have applied and been accepted to the CPP must again evaluate
the pros and cons of accepting funding.
SEC UPDATE
SEC Sets Stage for Credit Default Swap Oversight
By Patrick Colabella, Adrian P. Fitzsimons and Victoria Shoaf
Proposed rules are designed to encourage the development and operation of
one or more credit default swap central counterparties and credit default
swap exchanges.
PERFORMANCE MEASUREMENT
It Takes More Than a Village: The Decline of the Community Bank
By Bart Narter
The number of commercial banks in the United States is declining rapidly,
from 11,462 at the end of 1992 to 7,146 in September of 2008.
Top
April 2009
Credit Union Financial
Performance: The Impact of Asset Size
By Harold M. Sollenberger and Andrew W. Stanecki
Within the credit union industry, asset size creates managerial, operational
and financial differences that affect member service, safety, soundness
and competitiveness. [Additional
data available for download.]
Case Study: Improving Branch Profitability and Service with Data
Envelopment Analysis
By H. David Sherman and Joe Zhu
Many banks use data envelopment analysis to benchmark branch expenses
and quality.
The Sarbanes-Oxley Act and the U.S. Banking Industry
By Philip H. Siegel, John O'Shaughnessy and David P. Franz
During the period that the Sarbanes-Oxley Act was in effect, there is
a marked negative divergence for SEC-registered banks as opposed to those
banks that do not report to the SEC.
LENDER LIABILITY
Litigation Related to Subprime Mortgages: A Review of Accounting
Concepts
By Anthony M. Lendez and Lee M. Dewey
How can mortgage lenders defend themselves against lawsuits related to
the subprime mortgage crisis?
CREDIT CARDS
Using Customer Analytics to Improve Customer Retention
Bill Saubert
How likely is a customer to leave? How profitable is the customer relationship?
Together, answers to these questions should drive decision making for
customer retention.
INTERNAL CONTROL
Risk Management for Remote Deposit Capture
By Erika L. Del Giudice and Nathan Z. Johns
Banks are adopting remote deposit capture to process checks and other
monetary instruments more efficiently.
SEC UPDATE
SEC Report to Congress Supports Use of Fair-Value Accounting
By I. Hilmi Elifoglu, Adrian P. Fitzsimons and Srinivasa Ramanujam
The report recommends that additional guidance for determining fair value
of investments in inactive markets be developed.
IT STRATEGY
Integrating IT in a Time of Shotgun Mergers
By Michael Markulec
What assets are on the target institution's network? How is the network
connected to other networks? What network risks is the acquirer taking
on?
Top
February
2009
Compendium of Financial
Crisis Tax Guidance
By E. Ray Beeman
Since summer 2007, more than 20 items of tax guidance have dealt with
the tax impact of the financial crisis.
Global Accounting Convergence and U.S. Financial Institutions
By Kamala Raghavan
The SEC has proposed that U.S. issuers be allowed to prepare financial
statements in accordance with International Financial Reporting Standards.
Needed: A New Community Bank Model
By Dave Martin
How to address a large and widening gap in profitability between community
banks and larger banks-a gap that didn't exist 10 years ago?
A CIO's Perspective on IT Budgeting
By John Nerenberg
Bridging the language barrier between finance and IT could result in better
decisions.
REGULATORY UPDATE
The Regulators' Primer on Surviving a Liquidity Crisis
By Carol M. Beaumier
A number of factors have contributed to alter the nature of liquidity
risk in recent years.
RISK MEASUREMENT
How to Quantify and Manage Liability Stickiness
By Leonard Matz
Stickiness: Hard to identify, hard to quantify and varies based upon scenario
and degree of stress.
INTERNAL AUDIT
The Changing Landscape for Internal Auditors in Financial Institutions
By Randy Marshall and Rick Magliozzi
Auditors identify information security, fair-value accounting and IT development
as important capabilities that need improvement.
GLOBAL BANKING
The Evolution of the Finance Operating Model
By T. J. Letarte and David Gittleson
CFOs move beyond stewardship to business strategy.
DATA SECURITY
Controlling Risk with a Data Governance Framework
By Prat Moghe
Data governance should encompass not only risk control but also strategies
for the most effective use of information.
Top
December
2008
Litigation and Enforcement
One Year into the Credit Crunch
By John F. Cooney and John Beaty
The federal supervisory agencies have yet to take a significant number
of public enforcement actions against insured depository institutions
for poor underwriting or investment decisions.
Is Fair-Value Accounting Responsible for the Financial Crisis?
By Marsha Wallace
Would the elimination of fair-value accounting solve the problems facing
financial institutions?
Accounting for Troubled Debt Restructurings
By Luis Betancourt, John Briggs and Charles P. Baril
Under GAAP, there are accounting consequences to loan modifications.
Retail Deposits: Pricing to Win in a Tight Market
By Sherief Meleis and Richard Solomon
Advanced pricing capabilities are critical in tapping pockets of opportunity
in a turbulent market, as shown in a 25-bank study.
Private Equity Investment in U.S. Financial Institutions
By Timothy R. McTaggart, J. Bradley Boericke and Travis P. Nelson
A new Fed policy makes it easier for private equity companies and hedge
funds to take significant, but noncontrolling, stakes in a banking company.
FASB REPORT
Banks Face New Disclosures about Derivatives
Barbara Apostolou and Nicholas G. Apostolou
Assisting investors to make better judgments about the contribution of
derivatives to earnings and financial risk.
SEC UPDATE
SEC Issues Guidance on Fair-Value Accounting and Amends Rules
Applicable to Foreign Issuers
By Adrian P. Fitzsimons, Shreekant G. Joag and Sreedhar V. Kavil
SEC's late September guidance responds to criticisms of the fair-value
rule.
Top
October 2008
Fair-Value Accounting,
CDOs and the Credit Crisis of 2007-2008
By Donald R. van Deventer
Valuation is the key to successful risk management and to successful reporting
of value created.
A Practical Approach to Designing and Executing Bankwide Efficiency
Programs
By Claude A. Hanley Jr.
What factors separate successful and unsuccessful efficiency efforts?
Fundamental Analysis to Evaluating Bank Performance
By Cal Christian, Jacquelyn Sue Moffitt and Lynn A. Suberly
In explaining current-year returns, measures of capital adequacy may provide
the greatest insight, while measures of asset quality and earnings provide
some informational content.
Interactive, Intelligent Information for Financial Reporting
By Michelle Savage
XBRL is already in use among banks but is about to transform the way all
companies do business in many different ways.
Control Lessons from the Société Générale Fraud
By Steve Allen
Trading managers need to give control personnel the proper backing and
to explain to traders the motivation for control investigations.
LEGISLATIVE COMMENT
Why the Market Should Set Credit Card Interchange Fees
By Brian W. Smith, Abbott B. Lipsky Jr., Andrew J. Robinson and William
J. Rinner
Interchange fees allow the multiparty credit card payment systems to reach
an efficient equilibrium.
RISK MEASUREMENT
Market Turmoil: Are Our Models Letting Us Down?
By Leonard Matz
How did so many smart risk managers lose so much?
SEC UPDATE
SEC Proposals Address Credit Rating Agencies, Technology and Small
Business
By Adrian P. Fitzsimons and Benjamin R. Silliman
The SEC released the findings from its staff's examinations of three major
credit rating agencies.
Top
August 2008
Will Hurricane Season
Spell Disaster for the Capital Markets?
By Anthony H. Catanach Jr. and Greg McBride
Regulators have begun questioning the adequacy of financial reporting
for off-balance-sheet vehicles in the banking industry. A similar problem
may be brewing in the insurance industry.
Lessons from the Dark Side of the Credit Crunch
By Rodney Nelsestuen
The global credit crisis has heightened the importance of audit independence
as well as increased risk for audit firms and their customers.
Has the Time for Regulatory Restructuring Arrived?
By Thomas P. Vartanian
The US Treasury Department proposes to overhaul the federal financial
regulatory system.
Profitability Reporting as a Strategic Tool
By Jeffrey P. Marsico
Because profitability reporting is not required by regulations, community
banks frequently neglect this important strategic tool.
Integrating Compliance Risk Management into Enterprise Risk Management
By Michael A. Dawson
Institutions must clearly define what they mean by "integration."
Prepayment Risk and Bank Performance in Rising and Falling Interest-Rate
Environments
By Alex Fayman and Ling T. He
How does prepayment risk affect return on loans in different interest-rate
environments?
RISK MEASUREMENT
Defining and Using Liquidity KRIs
By Leonard Matz
Insufficient liquidity can kill the bank suddenly but too much will kill
it slowly.
GOVERNANCE, RISK, COMPLIANCE
The Controls Challenge
By Michael Paul Cangemi
As a percentage of net income, compliance spending by financial institutions
increased 30 percent between 2002 and 2006.
SEC UPDATE
Pozen Committee Update: Conceptual Approaches and Future Considerations
By M. E. Ellis, Adrian P. Fitzsimons and Arlene Joyce Furfero
The SEC advisory committee has established a conception framework to address
inconsistencies in data aggregation, uncertainty associated with fair
value measures, the lack of an effective disclosure framework and other
issues.
Top
June 2008
Restatements at Financial
Institutions: Lessons Learned
By Victor Valdivia
It is common for management to underestimate the effort and time required
to complete the restatement.
Managing Difficult Financial Reporting Situations
By P. Woodbridge Wallace, Marco Carducci, Daniel C. Dipillo
Investigating alleged misconduct and determining materiality: two aspects
of difficult financial reporting situations.
Developing a Comprehensive Investment Decision Framework for Mortgages
By Emil Matsakh, Will Callender, and Ken Alverson
If history holds true, the next several years may offer exceptional returns
for the savvy investor.
Model Risk Management: Key Considerations for Challenging Times
By Richard R. Pace
What are the obstacles to building an effective model-risk-management
program?
MORTGAGE SERVICING
Reg AB: Lessons Learned and Insights from Year One
By Mike Seelig and Ron Freeman
80 percent of the instances of material noncompliance involved just 6
of the 30 criteria by which servicer performance is measured.
RISK MANAGEMENT
Société Générale: History Repeats Itself
By Carol M. Beaumier
A reminder that without basic controls a lone individual can expose a
company to high risk and significant losses.
SEC UPDATE
Pozen Committee Update: Improvements to Financial Reporting
By M. E. Ellis, Adrian P. Fitzsimons and Arlene Joyce Furfero
The SEC advisory committee, with a broad charter to increase the value
of financial information to investors while reducing the complexity of
the financial reporting system, issues a progress report.
Top
April 2008
Securitization Accounting:
Are You Ready for the Credit Crunch Challenge?
By James R. Mountain
Accounting for securitization transactions adds complexity to efforts
to assist struggling borrowers.
Stock Valuation Using Fair-Value Accounting Data
By Marsha Wallace
How does fair-value accounting data differ from the accounting information
that is produced under current accounting standards?
A Framework for Governance, Risk Management, and Compliance
By Tom Grubb and Tom Burke
Banks can apply best practices in security governance and risk management
to the broader discipline of governance, risk management and compliance.
U.S. Subprime Crisis: Risk Management's Next Steps
By Matthew A. Moore and Michael J. Brauneis
Financial institutions reconsider credit practices, quantitative models,
governance structures and risk-management activities.
RISK MEASUREMENT
Back Testing Interest-Rate-Risk Models
By Leonard Matz
Data testing and assumption testing are essential elements of interest-rate-risk
modeling.
COMMUNITY BANKING
Economic Value of Equity for Community Banks
By Hugh Blaxall, James L. Glueck and Brian A. Velligan
For community banks, core deposit intangibles drive economic value of
equity.
ASSET/LIABILITY MANAGEMENT
Some Evidence on Optimal Hedging and Futures Expiration Choice
By Rob Wolf
To keep a balanced hedge, a futures maturity should be selected where
the rate of change of futures volatility is set equal to the rate of change
of the spot volatility.
SEC UPDATE
SEC Staff Issues
Help for Expensing Employee Stock Options and on Reporting Internal Controls
over Financial Reporting
By I. Hilmi Elifoglu and Adrian P. Fitzsimons
A new SAB aims to assist public companies in valuing stock option grants
to their employees for income statement purposes.
DATA SECURITY
Managing Information Privacy
By Jim Hietala
Financial institutions need a structured process for protecting personally
identifying information.
CARD LOYALTY PROGRAMS
Understanding the Costs of Point-Burner Campaigns
By Bob Konsewicz
Clearer communication between accounting and marketing can produce a stronger
and more cost-efficient loyalty program.
Top
February
2008
Risky Business Requires
Better Risk Management
By Fred Poorman
Banks should consider integrating credit-risk measurement and management
into their ALCO process.
Valuing Mortgage-Servicing Rights under FAS-157
By Robert J. Cochran
The move from expected-income-based valuations to market-based valuations
could pose challenges for some financial institutions.
Taking an Organizational Viewpoint of Decision Support Software
By Jennifer L. Blaskovich and Brian P. McAllister
Successful use of decision support technology necessitates a composite
view of how the technology links to organizational objectives.
Consent of the Governed: Prerequisite for Good Governance
By John R. Segerstrom
Effective governance improves performance. Whatever the effort required,
establishing a sound governance process invariably is worth it.
Measuring Extreme Financial Risk with Power Laws
By Roderick Powell
The use of a normal or thin-tailed distribution underestimates the odds
of large price swings during periods of irrational exuberance or panic.
RISK-BASED CAPITAL
Liquidity Risk and Capital Allocations
By Leonard Matz
Does it make sense to allocate capital for liquidity risk?
REGULATORY UPDATE
Anti-Money-Laundering Compliance: Elements of a Successful Program
By Carol M. Beaumier
What do regulatory enforcement actions tell us about ways to establish
and maintain effective anti-money-laundering compliance?
SEC UPDATE
Roundup of SEC Activities, including SAB on Loan Commitments
By Adrian P. Fitzsimons and Benjamin R. Silliman
Three measures are expected to modernize and improve the SEC's capital-raising,
reporting and disclosure requirements for smaller companies.
Top
December
2007
Managing
Liquidity Risk
By Michael Guglielmo
All financial institutions need a plan for managing liquidity and funding
that safeguards against an institution-specific or systemic liquidity
crisis.
Basel II Update
By Dwight C. Smith III
An update on the rulemaking process for Basel II, including the bank regulators'
latest consensus.
Credit Unions Then and Now: Performance Analysis Shows Long-Term
Trends
By Harold M. Sollenberger and Colin Taggart
The last two decades brought sustained growth in the credit union industry
and the maturation of credit unions into legitimate consumer finance competitors.
Defining What Makes a Bank Highly Efficient
By Mack Wood
Fierce competition for deposits, compression of profit margins, regulatory
requirements and concerns about identity theft are among factors that
put pressure on the efficiency ratio.
MORTGAGE BANKING
Customer Retention and the Value of Mortgage-Servicing Rights
By Pamela Smith Baker
Mortgage lending firms are entering a difficult period, as subprime markets
decline and concerns about liquidity rise. In such a market, attracting
and retaining quality customers becomes essential.
INTERNAL AUDIT
A Risk-Based Approach to Achieving Audit Committee Effectiveness
Jay C. Thibodeau and Thomas R. Packwood
U.S.B. Holding Co., Inc. uses a risk management dashboard so audit committee
members are able to comprehensively assess the risks facing the company.
REGULATORY UPDATE
The Dawn of Sarbanes-Oxley Efficiency and Effectiveness: A Financial
Institution Perspective
By Rick Magliozzi
Financial institutions should take a fresh look at how they approach Sarbanes-Oxley
compliance and how they have institutionalized their approach.
SEC UPDATE
New Rules Implement the Bank Broker Provisions of the Gramm-Leach-Bliley
Act
By Adrian P. Fitzsimons and Benjamin R. Silliman
Rules ease restrictions on banks' ability to conduct securities transactions
for customers.
Top
October 2007
The Subprime Mortgage
Market: Current State and the Road Ahead
Nikhil G Bhingarde, Harpreet S. Khasseria and Balaji Yellavalli
More than 50 subprime mortgage lending companies have failed since the beginning
of 2007.
Interest Rates and the Value of Bank Equity
By Haiyan Yin, Jiawen Yang and William C. Handorf
Bank stock prices move inversely to the federal funds rate engineered by
the Federal Open Market Committee. The impact is much stronger when measured
against the surprise or unexpected rate change than the actual rate shift
announced by the Federal Reserve. [Supplemental
pdf available for download.]
The Execution Challenge: Translating Strategy into Action
By Claude A. Hanley Jr.
A strategic plan is just the beginning. Seven practices to follow through
for results.
Successful Acquisition Strategies Require Due Diligence
By Rick L. Childs
Strategic alignment and model assumptions require careful scrutiny.
Improving Profitability Measurement by Fine-Tuning Indirect Operating
Expense Allocations
By Mike Kuehne and Anna-Fay Lohn
Best practices for allocating indirect expenses.
REGULATORY UPDATE
Subprime Mortgage Lending: New and Evolving Risks, Regulatory Requirements
By Michael Brauneis and Steven Stachowicz
Current and proposed regulatory requirements related to subprime loans,
with a review of the best practices of responsible subprime lending programs.
SEC UPDATE
SEC Approves PCAOB Auditing Standard
By Adrian P. Fitzsimons and Benjamin R. Silliman
The SEC expects the auditing standard to make audits and management evaluations
under Section 404(b) of the Sarbanes-Oxley Act more risk based and scalable.
COMPLIANCE
Compliance in the Performance Management Context
By James Fisher
How connecting performance management and compliance can simplify reporting
and provide business benefits.
AUDITING
An Overview of Audit Standards Affecting Community Banks
Natalya V. Delcoure and James B. Bexley
The Audit Risk Standards provide guidance in regard to the auditor's assessment
of the risks of material misstatements caused by an error or fraud to banks'
financial statements.
Top
August 2007
Developing and Implementing
an Operational Loss Data Collection Program
Victoria Garrity
Understanding operational losses is the first step toward managing their
risk.
The CFO's New Role in Merger Revenue Synergy
By Dave Kaytes and Sherief Meleis
By quantifying opportunities to refine branch network presence and product
pricing in each local market, financial chiefs can transform M&A revenue
enhancement.
Starting an Audit Function in a Fast-Paced Environment
By Bruce Caplain
Best practices for starting or revamping an audit function.
Capital-Based Profitability Measurement
By Thomas A. Hannagan
Risk-adjusted profitability lets managers compare performance across business
or product segments using the same yardstick.
TAXES
Financial Services Companies Increase Preparedness as Transfer Pricing
Challenges Escalate
By Barbara Mace, Chris Faiferlick and Marc Levy
More and more countries are adopting transfer pricing rules or increasing
audits under their existing rules.
RISK MANAGEMENT
Top 10 Priorities for Internal Audit in a Changing Environment
By Carmen Rossiter
Our world has changed. The risk profile of financial services organizations
has changed. Stakeholder expectations have changed.
Management Accounting
Ways to Improve Budgeting and Forecasting
By Jamie Miller
A survey of large institutions finds that organizations are dissatisfied
with existing, inefficient financial planning processes.
SEC UPDATE
SEC and PCAOB Plan to Grant Relief to Smaller Companies
By Adrian P. Fitzsimons and Benjamin R. Silliman
The SEC approved the PCAOB's Auditing Standard No. 5, which aims to eliminate
procedures that are unnecessary to achieve the intended benefits and make
the audit clearly scalable to fit the size and the complexity of any company.
CORPORATE GOVERNANCE
Communicating with Directors via Board Portals
By Alex Sodi
Web-based technologies can improve board performance, but risks need to
be managed.
DISASTER RECOVERY
Trends in Business Continuity Planning
By Bob Williamson
A survey finds that 83 percent of financial organizations have a business
continuity plan in place.
Top
June 2007
Precursors of Nonperforming
Loans in Large Domestic Banks in the United States
By Gaurav Kumar
A regression analysis suggests that information in the Fed's quarterly
surveys of senior loan officers can be a precursor to a pattern of credit
deterioration at large domestic banks.
Successful Sarbanes-Oxley Section 404 Strategies for Nonaccelerated
Filers
By Dennis M. Hild
For nonaccelerated filers, new management guidance and a new auditing
standard should result in more efficient compliance.
An Index of Risk Management and Value Creation
William C. Handorf
An index that combines capital, earnings and risk is useful for business
planning and financial analysis.
SFAS No. 158: A Reform of Pension Liability Recognition
By Orapin Duangploy and Diana K. Pence
With the funded status of pension benefits required to be reported on
the balance sheet, the amount of liability is likely to be increased.
An Examination of Mortgage Loan Servicing Rights and Fair Value
Accounting
By Robert J. Cochran, Edward N. Coffman and David W. Harless
Mortgage servicing rights-assets for which there is no liquid market-are
not valued by the equity market as highly as other recorded assets.
REGULATORY UPDATE
Banking Agencies Develop Sound Risk-Management Practices to Address
Concentrations in Commercial Real Estate Lending
By Adrian P. Fitzsimons and I. Hilmi Elifoglu
The new guidance reinforces and enhances rules for real estate lending
and loan portfolio management in light of changes in institutions' lending
activities.
Top
April 2007
Preparing for Your
Next ALM Exam or Audit
Michael R. Guglielmo
Reading, 'riting and 'rithmetic are key to preparing for an ALM exam.
An overview of strategies to get ready for a review.
Best Practices for Reducing Model Risk Exposure
William J. McGuire
Specific sources of model risk and how you can reduce your institution's
exposure.
Regulation FD: A Refresher and Update
By Peter Rossiter
How the SEC has applied Regulation FD and what best practices companies
have developed for compliance.
Bank-Owned Life Insurance: An Investment Perspective
Fred Poorman Jr.
Eighty percent of the largest US banks own BOLI. A discussion of investment
choices.
Taking Scorecards Beyond Theory
By Don Allen Price and Chris Bohner
Techniques for ensuring that scorecards and strategy line up.
COMPLIANCE
Integrating Risk, Compliance and Control for Efficiency… and Effectiveness
By Dennis Chesley and Robert Gormly
A more coordinated approach to risk, compliance and control could reduce
administrative burden.
TECHNOLOGY
IT Automation and Integrated Compliance
By Jim Hietala
Financial institutions must understand and effectively manage the risks
they inherit from third-party service providers.
SEC UPDATE
SEC and Banking Agencies Adopt Statement on Structured Finance
Transactions
By Adrian P. Fitzsimons and Benjamin R. Silliman
Institutions may face increased legal or reputation risk due to a customer's
failure to properly account for or disclose elevated-risk structured finance
transactions.
ETHICS REPORT
FCPA: What It Is and Why It Matters to You
By Paul R. Berger and Bruce E. Yannett
The globalization of business means that public and private companies
are affected by the Foreign Corrupt Practices Act.
Top
February
2007
Technology Risk Assessment
and Mitigation: Recent Best Practices
By Joel Lanz
Technology risks continue to evolve. Risk assessment and risk mitigation
are changing to keep pace.
Compliance Costs in the Second Year of Sarbanes-Oxley: The Evidence
from Bank Audit Fees
Kenneth R. Janson and James H. Scheiner
For 35 regional banks, fees for audit and audit-related services declined
in 2005; for 42 others, fees increased.
Basel II and IA: An Update
By Dwight C. Smith III
An overview of the Basel II Notice of Proposed Rulemaking and an analysis
of the draft Basel IA Notice of Proposed Rulemaking.
ASSET-BACKED FINANCE
Reg AB Is Here to Stay: What Does This Mean for Servicers?
By Mike Seelig, LaWanda Morris, and Tom Knox
Regulation AB establishes consistent servicing standards for securities
backed by mortgages, auto loans, credit card receivables, etc.
RISK MANAGEMENT
Enterprise Risk Management and Controls-Monitoring Automation Can
Reduce Compliance Costs
By Mark Nelson and James Ambrosini
Within an ERM framework, financial institutions can ask, "What are my biggest
risks?" and "How do I manage these risks to get them to a level suitable
for my business?"
FASB YEAR IN REVIEW
Three New Standards to Be Implemented in 2007
By Cal Christian
Accounting for hybrid financial instruments and accounting for servicing
assets and liabilities are among new standards for 2007.
FASB AND THE EITF
FASB Issues New Statement on Fair-Value Measurements
By Adrian P. Fitzsimons and Benjamin R. Silliman
A new FASB statement establishes a framework for measuring fair value and
increases disclosures about fair-value measurements.
TECHNOLOGY STRATEGIES
Passive versus Active Compliance
By James Crump
Businesses can reap significant benefits by implementing compliance-driven,
real-time control with a focus on solving business challenges.
Top
December
2006
Competition, Pricing
and Economic Capital
George Thomas
Even banks not expected to be subject to Basel II capital requirements
can benefit from applying some of the Basel concepts to risk management
and risk-based pricing.
Tying Management Information to the Front Line
By Jeffrey P. Marsico
Tying management information to individual performance can be an effective
method to increase profitable relationships, reward top-performing employees
and improve your bank's bottom line.
Bank Mergers and Valuation: An Empirical Study
By Stanley Block
Postderegulation, the emphasis in bank mergers has shifted from cost cutting
to revenue generation.
What Happens to Undercapitalized Credit Unions?
By Harold M. Sollenberger and Colin Taggart
The NCUA's 1999 framework for defining capital adequacy seems to have
resulted in stronger capital ratios overall for credit unions.
Measuring Market Reaction to Gains Trading by Banks
By Lynn Suberly
Additional disclosures increase investor attention to unrealized losses.
SEC UPDATE
Staff Accounting Bulletin Addresses the Process of Quantifying
Financial Statement Misstatements
By Adrian P. Fitzsimons and Benjamin R. Silliman
New Staff Accounting Bulletin seeks to end diversity in practice in adjusting
for prior years' errors.
RISK MANAGEMENT
Building an Antifraud Framework
By Nicole R. Durbin
In addition to preventing fraud, antifraud programs can improve internal
and external audits.
Top
October 2006
"And Now My CFO Will
Review the Numbers"
By David L. Martin
Why are so many investor presentations unsuccessful? How can presenters
get better results?
Shopping to Buy a Bank? Should Your Due Diligence Be More Diligent?
By Gordon J. Goetzmann
Many acquisitions end up destroying shareholder value because of disappointments,
not on the cost side but in organic revenue growth.
Developments in the Risk Management of Bank-Owned Life Insurance
By Brian W. Smith, Angela Angelovska-Wilson and Aman Solomon
The existing regulatory environment for BOLI requires that banks focus
on creating comprehensive postpurchase compliance programs that fully
address the risk management of existing policies and third-party relationships.
Anti-Money-Laundering Risk Rating That Drives Revenue
By Gregg E. Anderson
The same tools and procedures that are used to perform Bank Secrecy Act
and anti-money-laundering due diligence can be used to enhance revenue
through cross-selling and other marketing techniques.
Integrating Anti-Money Laundering into the Compliance Structure
Kamala R. Raghavan
By recognizing and emphasizing the critical interrelationships between
BSA/AML compliance, overall customer relationships and internal control
structure across business lines, the financial institutions can derive
maximum value from compliance efforts.
IT FOCUS
Understanding Data Forensics
By Paul G. Lewis and Brian Gray
What should a company do if it finds itself in litigation and ordered
to produce electronic data?
SEC UPDATE
SEC to Improve Implementation of Management's Reports on Internal
Control
By Adrian P. Fitzsimons and Benjamin R. Silliman
A new concept release aims to help companies evaluate internal control
over financial reporting in a practical and cost-efficient manner.
Top
August 2006
Improving Forecasting
and Performance Measurement
By H. Walter Young
Criteria for successfully implementing an integrated ALM, forecasting
and performance-measurement process.
Derivatives Use in Bank Risk Management
Adrian Cowan
More banks are incorporating derivatives as part of their risk-management
strategy.
FASB Proposes to Expand Fair Value Accounting
Douglas K. Schneider and Mark G. McCarthy
The proposed standard will allow firms to choose the fair value method
on certain financial assets and financial liabilities.
Disaster Recovery
Hurricane Katrina: One Bank's Experience
By Michael E. Nolan
How Fifth District Savings Bank created and then implemented an entirely
new business recovery plan after the category 5 hurricane struck New Orleans.
Compliance
Containing the Cost of Compliance
By John Garvey and Miles Everson
Look outside the financial services industry for models that turn compliance
into competitive advantage.
Anti-Money Laundering
SAR Filings: Compliance Is Not Enough
By Mike Harper
As banks seek to curb the numbers of SARS filings, they must look to not
only detection but also investigation of money-laundering alerts.
SEC Update
Revised Statement on Structured Finance Activities
By Adrian P. Fitzsimons and James W. Thompson
The statement addresses rare structured finance transactions that could
be used to misrepresent a customer's financial condition to investors
and that could pose legal and reputational risk to financial institutions.
Regulatory Outlook
US Basel II Notice of Proposed Rulemaking Seeks to Maintain Strong
Capital Base in the United States
By Michael Schuchardt
Banking regulators have proposed an extended transitional period to Basel
II as well as a maximum threshold for aggregate capital reduction.
Top
June 2006
A Strategic Approach
to Credit Union Capital
Harold M. Sollenberger
Credit unions should act strategically to assure adequate risk protection
and lever competitive advantage.
Business Plans, Portfolio Management and Basel II
William C. Handorf and Morgane Suriray
How might lower risk weights affect business plans?
Are Share Repurchases Effective Signals to the Market?
Kamala R. Raghavan
When faced with accumulation of excess cash flow, firms are increasingly
using share repurchases to distribute excess cash flow, citing motives
of signaling the market about share undervaluation and inherent strength
of the firm.
Effects of Litigation on Investment Returns
Chee Ng
The magnitude of the decline in valuation of 10 brokerage houses is statistically
and significantly correlated with the size of settlement reached with
New York State.
INTERNAL AUDIT
An Analysis of Job Stress Outcomes among Bank Internal Auditors
Linda Lee Larson and Elizabeth J Tipton Murff
Bank internal auditors were on average satisfied with their jobs and had
moderate levels of job burnout.
SEC UPDATE
SEC Proposes Changes to Executive Compensation Disclosure Requirements
By Teresa M. Danile and Adrian P. Fitzsimons
Compensation, related-party transactions, director independence and board
committee functions would be included in the proposed disclosures.
Top
April 2006
Internal Control and
Operational Risk: FDICIA, Sarbanes-Oxley and Basel II
By Kamala Raghavan
Together, concepts from FDICIA, COSO, SOA and Basel II provide a solid
framework for effective management of operational risk and capital.
Critical Accounting Policy Disclosures for Financial Institutions
By Theresa F. Henry and Mark P. Holtzman
When elements of uncertainty about future events and materiality align,
a critical accounting policy is most likely to result.
The Case for the Virtual Bank
By William M. Saubert
A new bank operating model is needed, one that aims to create a full-service
bank with the smallest number of employees possible.
FDICIA and Sarbanes-Oxley Requirements: Impact on Bank Audit Fees
By Kenneth R. Janson and James H. Scheiner
Did existing FDIC requirements cause banks to be less severely affected
by the external review mandates of the Sarbanes-Oxley Act?
Implementing Activity-Based Costing in the Banking Industry
By Jeffrey Witherite and Il-woon Kim
A case study describes some challenges to implementing activity-based
costing.
REGULATORY UPDATE
Should Your Board Have a Compliance Committee?
By Carol M. Beaumier
Financial services companies often define compliance broadly to include
adherence to regulatory guidance and expectations and not just with specific
laws and regulations.
PERFORMANCE MEASUREMENT
Data: Is More Better… Or Is It Simply More?
By Craig Hartman
As an industry, we need neither more data nor greater precision in our
calculations as much as we need more understanding of the dynamics of
our business.
SEC UPDATE
SEC Proposals Address Internet Availability of Proxy Materials,
Tender Offers and Foreign Issuer Deregistration
By Adrian P. Fitzsimons and Laura Lee Mannino
Changes to the best-price rule give bidders and target companies greater
certainty as to the manner in which the best-price rule will be applied
to employment and severance arrangements.
Top
February
2006
The Audit Committee as
Sleuth: Conducting an Internal Investigation
By Peter L. Rossiter and Jay Williams
How to structure, conduct and complete investigations into allegations of
corporate wrongdoing.
Core-Deposit-Gathering Models: What Works Best?
William J. McGuire
Banks can use some specific defensive tools to minimize their risks from
cybercrimes.
Financial Management Software in Retail Banking: Applications and
Users Are Evolving
By Kathleen Khirallah
Increasing complexity, tight deadlines and interdependencies of distributed
managers are driving a more integrated approach to bank financial management.
Cyberthreats Facing the Banking Industry
Tommie Singleton, Aaron Singleton and Geoff Gottlieb
How asset/liability management factors affect the performance contributions
of traditional branching, high-convenience banking and Internet banking.
REGULATORY OUTLOOK
Multifactor Authentication: A Blow to Identity Theft?
Carol M. Beaumier
Multifactor authentication is an important step toward mitigating the risk
of account hijacking
FASB UPDATE
Fair-Value Option to Account for Financial Asset-Servicing Rights
Kang Cheng
The proposal standard would permit, but not require, servicing companies
to account for asset-servicing rights at fair value.
INTERNATIONAL STANDARDS
New International Standard for Disclosures of Financial Instruments
Sylwia Gornik-Tomaszewski
The IASB issued a new standard on disclosures of qualitative and quantitative
information about risk exposures arising from financial instruments.
COMMUNITY BANK A/L MANAGEMENT
Derivatives Arrive at Community Banks
Tom McKernan
Derivatives enable bankers to assume risks on behalf of their customers
that bankers could not prudently assume otherwise.
Top
December
2005
SOA Attestation: What
Are the Initial Costs for Banks?
Susan W. Eldridge and Burch T. Kealey
Smaller and more complex banks faced higher SOA audit unit costs as did
banks that reported ineffective internal controls.
Accounting for Derivatives at Fannie Mae
Cal Christian
Misuse of the shortcut method of accounting for derivatives is one important
accounting error.
Financial Product Patents: An Update
Paul E. Schaafsma
An institution that successfully develops a broad patent portfolio in
financial products and services could establish a competitive advantage.
CAPITAL REQUIREMENTS
Basel II and Basel IA: New Capital Rules on Track, But Still a
Long Trip Ahead
Dwight C. Smith III
The uproar over Basel II continues. Meanwhile, regulators propose risk
weights that would apply under Basel IA and rules to achieve parity between
state- and nationally chartered banks.
REGULATORY OUTLOOK
Auditing Anti-Money-Laundering Compliance
Carol M. Beaumier
A new FFIEC manual documents the elements of an effective anti-money-laundering
program.
SEC UPDATE
SEC Proposes to Further Differentiate Reporting for Large and
Small Issuers
By Adrian P. Fitzsimons and Laura Lee Mannino
SEC proposes to create a new category of accelerated filers and further
defers Section 404 for smaller companies.
COMPLIANCE
Integrating Risk Management and Compliance
Luc Brandts
Integrating compliance projects can conserve resources and create business
benefits.
COMMUNITY BANKING
Keys to Achieving Technology Optimization
Brad Smith
Community financial institutions are finding ways to make better use of
the technology they already own.
BOOKS
S&Ls-A Little-Known Past, an Uncertain Future
David J. Ginzl
A comprehensive history has implications for the nature of governmental
regulation and the relationship between regulators and the regulated.
Top
October 2005
Goodwill Impairment
Potential: Lessons from Purchase Acquisitions
Susan W. Eldridge
An analysis of purchase acquisitions shows that careful identification
and valuation of non-goodwill intangibles-for example, mortgage-servicing
rights-is important.
Do Executive Options Promote Share Repurchases?
Kamala R. Raghavan
Evidence that executive options play a significant role in influencing
managers' choice of repurchase over dividends in banks.
The Economic Consequences of FAS-133 for Bank Holding Companies
Jongchan Park
A review of bank holding companies that trade or use derivatives finds
negative stock price reactions around two events related to FAS-133.
BANKING TRENDS
MBNA Acquisition Marks Turning Point for Credit Cards
By Theodore Iacobuzio
The acquisition of MBNA marks the end of the era of the monolines.
SEC UPDATE
SEC Changes Rules for Registration, Communications and Offering
Processes
By Adrian P. Fitzsimons and Laura Lee Mannino
The SEC hopes the new rules will facilitate greater availability of information
to investors and the market with regard to all issuers.
INTERNATIONAL STANDARDS
Convergence of U.S. GAAP with International Financial Reporting
Standards: An Update
Sylwia Gornik-Tomaszewski
FASB and the IASB make proposals to improve and align the accounting for
business combinations.
BOOKS
Jack Welch's "Road Map" to Winning
David J. Ginzl
Advice that applies to corporate executives and CEOs, small-business owners
and middle managers, workers considering new careers and college graduates
looking for that first job.
Top
August
2005 Building
a Consensus on Credit Union Capital Adequacy
Harold M. Sollenberger
To find the appropriate capital level, executives and board members should
undertake a consensus-building assessment of risks.
Employee Stock Option Valuation: Regional Bank Response to SFAS
No. 123R
Adrian Cowan
An overview of the response of large, domestic regional banks to the expensing
of employee stock options.
The Value Relevance of Goodwill Impairment Loss
Orapin Duangploy, Margaret Shelton and Khursheed Omer
A study of the association between stock price and income after adjustment
of goodwill impairment loss finds that despite the noncash nature of the
goodwill impairment loss, it has value relevance.
Biased Rounding in the Reported Earnings of Financial Firms
Sharon P. Cox, Liming Guan and John Wendell
Digit pattern analysis finds that reported earnings are rounded up more
often than rounded down.
FASB AND THE EITF
A New FASB Standard for Accounting Changes: Implications for the
Banking Industry
James M. Kohlmeyer III, Mark Rieman and Douglas K. Schneider
The Financial Accounting Standards Board has issued a new accounting standard
that will fundamentally change how the cumulative effect of a change in
accounting method would be reported.
TECHNOLOGY UPDATE
Audit Preparation That Aligns Business and IT
Chris Whitney
Assessing compliance readiness for back-office applications and procedures
presents a tremendous IT operations challenge.
SEC UPDATE
SEC Staff Issues Guidance on the Implementation of Internal Control
Reporting Requirements
Adrian P. Fitzsimons and Gerard A. Lange
The SEC staff provides clarifications for year two of SOA reporting on
internal controls.
BOOKS
Corporate Governance and the Failure to Act
David L. Martin
Failures of leadership and governance show the complexity of the challenges
facing corporate directors.
Top
June
2005
Bank Mergers and Their
Impact: A Survey of Academic Studies
Lance Nail and Franco Parisi
An overview of the academic literature on bank mergers, with a discussion
of practical implications.
Case Study: Effect of Bank Acquisitions on Shareholder Returns
Alan P. Mayer-Sommer, Sharon Sweeney, and David A. Walker
A case study of three acquisitions explores the differences among the
target banks-and the results that the acquirer achieved.
Extending Due Diligence to Improve Mergers and Acquisitions
Steve McGrady
Examining cultural and other nonfinancial factors can assist acquirers
with postmerger implementation planning.
The State of the Electronic Mortgage Industry
Ray Graber and Tom Burke
All-electronic mortgages promise not only regulatory compliance but also
fast, efficient origination, underwriting, closing, postclosing and preparation
for sale.
COMMUNITY BANKING
S Corporation Elections After the American Jobs Creation Act of
2004
Richard A. Soukup and John R. Ziegelbauer
Aspects of the 2004 Tax Act make the S Corporation form of ownership more
attractive for community banks and thrifts.
INTERNAL CONTROL
Design, Implementation and Assessment of an Entity-Level Antifraud
Program
Ed Flynn
With the appropriate support and attention from senior management, a well-managed
antifraud program should pay for itself.
OUTSOURCING
Finance and Accounting Outsourcing Can Improve Control
Barbara J. Duganier
Many organizations believe they achieve more clearly defined and transparent
business processes in an outsourced environment.
BOOKS
Business Management in the Age of Terrorism
David J. Ginzl
Can Israeli businesses' best practices for dealing with terrorism be applied
to U.S. companies?
Top
April
2005
The Financial Imperative
for Cost-Effective Product Development and Delivery
William M. Saubert
Financial institutions should use products to frame their thinking about
growing revenues and controlling costs.
Is the Bank Merger Regulatory Review Process Ripe for Change?
Brian W. Smith and Laura R. Biddle
Bank regulators, the Department of Justice, the Federal Trade Commission,
state attorneys general, community groups and other public officials all
play a role.
Basel II and the Challenge for Midtier Banks
Alison Rea
Rules, implementation details and timetables remain in flux for Basel II
implementation. A summary of choices facing midtier banks.
Success Factors for Implementing Enterprise Risk Management
David M. Bowling and Lawrence Rieger
A broad strategic view is the first step toward implementing an
effective enterprise risk management system.
REGULATORY OUTLOOK
Sustaining SOX Compliance
Carol M. Beaumier and James DeLoach
In year two of SOX compliance, the challenge for companies is to move to
a sustainable compliance process.
TAX UPDATE
2003 Dividends Tax Change: Implications for U.S. Banks
C. P. Carter and Kathryn M. Verreault
How do dividend payouts for the 24 largest U.S. banks compare?
RISK MANAGEMENT
Risk Management in Top Financial Firms Continues to Evolve
Edward T. Hida II
A survey of 162 financial institutions finds that firms increasingly are
appointing a chief risk officer. In addition, Basel II compliance challenges
continue to place emphasis on credit and operational risk.
SEC UPDATE
SEC Adopts Comprehensive Rules on Asset-Backed Securities
Adrian P. Fitzsimons and Craig A. Latshaw
New and amended rules and forms to address the registration, disclosure
and reporting requirements for asset-backed securities.
Top
February
2005
Measuring Operations
Risk: Are We Taxiing Down the Wrong Runways?
By Leonard Matz
All three of the principal approaches commonly applied to ops risk are
flawed. Risk managers should evaluate the output from those approaches
with a good understanding of their limitations.
How Transparent Are MD&A Disclosures?
By Carolyn M. Callahan and Rodney E. Smith
A review of more than 400 annual reports fi nds that fewer than 17 percent
of items disclosed in the narrative portions of SEC 10-K reports directly
address future performance.
Boosting Bank Merger Returns: Management Initiatives to Capture
Hidden Value
By H. David Sherman
Two-thirds of bank mergers have generated disappointing shareholder returns.
Bank mergers could be more successful if management captured the lost
potential benefits of mergers through aggressive rapid integration of
operations.
Making Sense of COSO’s New Framework for Enterprise Risk
Management
By David M. Bowling and Lawrence A. Rieger
By putting in place an ERM framework banks can manage risk more effectively
and reduce the total cost of compliance over time.
RISK MANAGEMENT
Corporate Culture and Operational Risk Management
By Joe Hanssen
Consistent guidelines and standards for managing risk across the company
are required to develop a strong operational risk culture.
SEC UPDATE
SEC Proposes Securities Offering Reforms
By Adrian P. Fitzsimons and Craig A. Latshaw
SEC proposals would streamline filings for large issuers and provide more
timely information to investors.
INTERNATIONAL STANDARDS
IASB Issues First Standard on Accounting for Insurance Contracts
By Sylwia Gornik-Tomaszewski
The new standard on insurance contracts is effective for annual periods
beginning on or after January 1, 2005.
Top
December
2004
Enterprise Risk Management
in Financial Services: From Vision to Value
By Virginia Garcia
ERM is not just a matter of compliance with Basel II. Rather, it is a
practice that must be followed to survive in a volatile business climate
by creating a link between risk and returns.
Building a Culture of Control Awareness
By William Martin and Philip Rothman
Control awareness can be fostered through a strong control culture, facilitated
through effective risk management tools/processes and reinforced through
control training. Each employee plays an integral
role in maintaining a strong control environment.
Use and Misuse of Value-at-Risk Analysis for Bank Balance-Sheet
Risk Analysis
By Leonard Matz
Value-at-risk can be insightful when applied to individual instruments,
portfolios or the entire balance sheet. But for portfolios and balance
sheets, VAR can produce misleading results.
Effects of Fair-Value Accounting on Securities Portfolio Restructuring
By Janet C. Papiernik, Heidi Hylton Meier and Etzmun S. Rozen
An analysis of the impact of fair-value accounting on securities classifications
gives insights into the potential effects of fair-value accounting proposals.
ASSET/LIABILITY MANAGEMENT
Balance-Sheet Management for Community Banks
By Todd Taylor and Sasha Antskaitis
Higher-performing banks generate ideas and formulate strategy based on
their assessment of the current balance sheet.
SEC UPDATE
XBRL Voluntary Financial Reporting Program on the EDGAR System
By Adrian P. Fitzsimons and Craig A. Latshaw
The Securities and Exchange Commission (SEC) recently proposed rule amendments
to establish a voluntary program to enable registrants to submit supplemental-tagged
financial information
using the eXtensible Business Reporting Language (XBRL) format.
INTERNATIONAL STANDARDS
Accounting for Noncurrent Assets Held for Sale and Discontinued
Operations Converges
By Sylwia Gornik-Tomaszewski and Victoria Shoaf
Major differences between International Financial Reporting Standards
and U.S. GAAP have been eliminated for accounting for noncurrent assets
held for sale and discontinued operations.
CORPORATE GOVERNANCE
An Empirical Examination of Executive Compensation
By Byron Hollowell
A look at executive compensation practices and performance at 1,500 national
commercial banks, state commercial banks, and federal charted savings
institutions.
Top
October
2004
Basel II for Non–Basel
II Banks
By Marc Intrater
Basel II will affect banks, large and small, in a number of important
ways, including risk management, loan pricing, balance-sheet management
and competitive positioning.
Information Technology and Sarbanes-Oxley Compliance: What the
CFO Must Understand
By Barry N. Lurie
CEOs and CFOs must be able to validate that fi nancial information is
accurate, accessible, preserved and protected.
Transforming the Finance Function
By Thomas M. Goldstein
How LaSalle Bank Corporation transformed fi nance from a task-based organization
into a strategic contributor to the bank’s business.
The Importance of Auditing the Asset/Liability Management Process
By Darnell Canada
An effective audit of the A/LM function examines each aspect of the A/LM
process to ensure ALCO members have the tools and capabilities to affect
balance-sheet performance positively.
TAX UPDATE
Recent IRS Guidance Is Generally Favorable for Banks
By Kyle H. Klein
New guidance on credit card annual fees and late fees and interest related
to tax-exempt income.
AUDITING
SEC Approves Auditing Standard No. 3, “Audit Documentation”
By Craig A. Latshaw
Auditing Standard No. 3, “Audit Documentation,” details the
requirements of registered public accounting firms to prepare and maintain
audit documentation in sufficient detail to support the conclusions reached
in the auditor’s report.
INTERNATIONAL STANDARDS
Inconsistent Standards Remain for Accounting for Financial Instruments
By Sylwia Gornik-Tomaszewski and Eva K. Jermakowicz
International accounting standards for derivatives and hedging instruments
remain unresolved.
REGULATORY OUTLOOK
Meeting Interagency Requirements for Resiliency
By Hannah Im
By December 31, 2004, significant market players must implement the requirements
of the “Interagency Paper on Sound Practices to Strengthen the Resilience
of the U.S. Financial System.”
Top
August
2004
Buying Diversification
Brian J. Ranson and Linda Watts
A review of some ways to take on or adjust credit risk in a balance sheet
or an investment portfolio.
Supporting the Audit Committee after Sarbanes-Oxley: A Practical
Guide
Peter Rossiter
A framework for management to support the audit committee in this dramatically
different environment.
CAPITAL REQUIREMENTS
Recent Developments: Basel II, Trust-Preferred Securities, and
Structured Finance
Dwight C. Smith III
Basel II moves toward completion, capital rules for trust-preferred securities
are adjusted, and new requirements are promulgated for risk management
for complex financial transactions.
TAX UPDATE
Accrual Workpapers Controversy: IRS Not the Only Problem
Charles W. Wheeler
Financial institutions can take steps to protect the analysis they undertook
in entering into tax transactions.
AUDITING
PCAOB Issues Auditing Standard on Internal Control over Financial
Reporting
Michael S. Goldstein
Auditing Standard No. 2, which governs the assessment of the effectiveness
of a company’s internal control over financial reporting, requires
walk-throughs of significant processes.
RISK MANAGEMENT
Risk Assessment for IT Security
Scott Laliberte
A security risk assessment can help identify, quantify, and prioritize
risks.
FASB UPDATE
Financial Instruments with Characteristics of Both Liabilities
and Equity
Adrian P. Fitzsimons and Craig A. Latshaw
Four FASB staff positions clarify issues relating to FASB Statement No.
150.
Top
June
2004
New Equity Markets
and Bank Deregulation
Nancy L. Beneda and Ik-Whan G. Kwon
After the enactment of the Gramm-Leach-Bliley Act in 1999, participation
in equity IPO underwriting by commercial bank underwriters has increased
from 11 percent to 25 percent
of the total dollar amount of new equity issues brought to market.
Credit Union Risk-Based Net Worth Measurements: The First Years
Harold M. Sollenberger
Risk-based net worth measures for credit unions show an industry that
is generally well capitalized.
Rating Banks’ Nontraditional Capital Instruments
Pierpaolo Ferrari
An overview of banks’ nontraditional capital instruments and their
eligibility for regulatory capital treatment, with a summary of criteria
for rating nontraditional capital instruments.
A Five-Step Plan for Comprehensive Information Security and Privacy
Jeffrey Smith and Jill Frisby
A step-by-step plan to protect customer information and address examiners’
increasing scrutiny of Gramm-Leach-Bliley compliance.
SEC UPDATE
New SEC Guidance on MD&A, Loan Commitments, and Current Reports
I. Hilmi Elifoglu and Adrian P. Fitzsimons
The SEC reiterates that MD&A should be a discussion and analysis of
a company’s business as seen through the eyes of those who manage
that business.
INTERNATIONAL STANDARDS
New International Standard on Share-Based Payment
Sylwia Gornik-Tomaszewski
Substantial convergence between US and international accounting standards
in the area of share-based payments could be achieved soon.
BOOKS
Dumb, Dumber, and Dumbest: What Went Wrong at Enron
David J. Ginzl
An examination of the Enron collapse shows what can happen when checks
and balances are ignored, when conflicts of interest and ethical boundaries
are breached, and when ambition and supercharged egos metastasize into
greed and dishonesty.
SOFTWARE
Better Performance Management
Gregg Taylor
Financial institutions that capitalize on a new generation of robust,
integrated performancemanagement tools can improve their profitability
and market position.
Top
April
2004
Unmasking IT Fraud:
Practical Applications of SAS-99
Joel Lanz and Edward M. Patrisso
Three-quarters of the technology budget was subject to fraudulent processes.
How audit best practices uncovered a $1.5 million fraud.
Consolidation Resumes, Again among Larger Banks
David L. Martin and Nicolas R. Bos
The authors expect pressures on community banks and larger banks’
desire for scale and diversification to stimulate merger activity.
Basel I and the Law of Unintended Consequences
D. Rausa Maurice
Globalization, technology, and financial innovation require continual
regulatory innovation, as shown by the anticipated and unanticipated results
of the first Basel capital accord.
ACCOUNTING ROUNDUP
Update on Pending Accounting Issues
Sydney K. Garmong and Christopher L. Moore
Accounting projects to watch in 2004 could affect the allowance for loan
losses, business combination guidance, impairment on securities, loan
participations, and mortgage-servicing
rights.
CAPITAL REQUIREMENTS
Trust-Preferred Securities: FIN-46 Threatens Tier 1 Capital Treatment
Ralph F. MacDonald III, Mark Kanaly, and Dwight C. Smith III
Issuers should prepare for changes to the Federal Reserve Board’s
treatment of trust-preferred securities for regulatory capital purposes.
AUDITING
Accounting Oversight Board Proposes Auditing Guidance and Makes
Inspections Rules
Gerard A. Lange and Craig A. Latshaw
New and proposed PCAOB rules address internal control, audit documentation,
and oversight of non-US firms.
TAX NEWS
No Attribution of Capital to Branches of Foreign Banks
Laura Lee Mannino
A tax treaty, not the IRS rule for determining interest-expense deductions,
applies to taxpayers governed by the treaty.
INTERNATIONAL STANDARDS
Four FASB Exposure Drafts Increase Convergence
with International Standards
Sylwia Gornik-Tomaszewski and Victoria Shoaf
Proposed changes to FASB statements address the accounting for changes
in accounting policies, earnings per share, exchange of nonmonetary assets,
and inventory measurement.
Top
February
2004
New Accounting for
Purchased Loans and Debt Securities
Daniel W. Trigg and Sydney K. Garmong
A new accounting standard will require some purchased loans and debt securities
to be recorded at the value of expected cash flows, not contractual value.
Time to Improve Accounting for Mortgage-Servicing Rights
P. Woodbridge Wallace and Brett Williams
Increased transparency, better disclosure, and more peer-to-peer consistency
are needed in the accounting for mortgage-servicing rights.
FAS-115: The Effect on Gains Trading
Lynn Suberly
Since the implementation of FAS-115, the dollar amounts involved in the
gains trading have declined.
CAPITAL REQUIREMENTS
Basel II: An Update
Dwight C. Smith III
The Basel Committee has proposed removing expected losses from the risk-weighting
process under the internal weightings-based approach. Other fundamental
issues remain, and their resolution will occur over a fairly long time
horizon.
AUDITING
Update on Interim Financial Reporting
Craig A. Latshaw
and Teresa M. Cortese-Danile
SAS-100 addresses client communications, the auditor’s knowledge,
review procedures, management’s representations, the auditor’s
report, and documentation.
SEC UPDATE
New Disclosures about Nominating Committees and Investor Communications
I. Hilmi Elifoglu and Adrian P. Fitzsimons
New disclosure requirements aim to make more transparent to security holders
the operations of the boards of directors of public companies.
REGULATORY OUTLOOK
Predatory Lending: Legislative and Regulatory Challenges
Micah Hallock
Financial institutions involved in subprime lending should be sure that
they have implemented policies and procedures that prohibit predatory
lending and maintain strong controls.
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