State and feds enhance regulation of bank chain
ASPEN ” A bank-holding company that owns four branches in the Roaring Fork Valley this month started facing greater scrutiny from federal and state regulators over concerns about its loans and risk management.
Community Bankshares Inc. entered an agreement with the Federal Reserve Bank of Kansas City and the Colorado Division of Banking that requires the bank-holding company’s board of directors to strengthen oversight of the firm’s management and operations, according to a copy of the agreement.
Community Bankshares Inc. is based in Greenwood Village, a suburb of Denver. It operates 38 branches throughout the state, including banks in Aspen, Basalt, Glenwood Springs and Rifle.
The agreement between the firm and the regulators was signed March 25 and disclosed on April 6. Fred Joseph, acting commissioner for the Colorado Division of Banking, said these types of agreements ” increasing the oversight of banks ” have become more commonplace with the souring of the economy.
The agreement shouldn’t be interpreted to mean that Community Banks of Colorado is in danger of failing, Joseph said. It means that regulators are working with the bank holding company to “get up front” of potential problems.
“It is still a well-capitalized institution,” he said.
Deposits of up to $250,000 are covered by the Federal Deposit Insurance Corp., so Joseph stressed that depositors shouldn’t be concerned about the enhanced scrutiny.
“If their account is federally insured, they can sleep well at night,” he said.
Adam Fortier, Aspen branch president of Community Banks of Colorado, declined comment but provided a press release from Community Bankshares Inc. The company said many of the steps required in the written agreement were already undertaken and accomplished.
“The Agreement is the result of an examination process that took place in a time of unprecedented turmoil in the financial markets,” the statement said. “Community Bankshares Inc. has been proactive in addressing the current economic conditions and while this development was unexpected, it is not surprising given the state of our economy. We are living in unprecedented times.”
The Federal Reserve website indicates that 36 similar written agreements for increased scrutiny have been ordered for banks across the country since Jan. 21.
A 17-page order by the Federal Reserve requires Community Bankshares to provide various management plans over 30-, 60- and 90-day windows. The steps were required after a Nov. 10 inspection of the bank holding company. The findings of that inspection weren’t detailed. However, a major point of the order is that Community Bankshares must beef up its efforts to identify, monitor and control its risks such as problem loans.
The order also requires Community Bankshares to strengthen credit risk management practices in such ways as reducing concentrations of commercial real estate loans.
Community Bankshares was ordered not to extend or renew credit to any borrower “whose extension of credit has been classified as ‘doubtful’ or ‘substandard'” in the November inspection without prior approval by the board of directors, then the action must be justified to the regulators. It has 90 days to “improve its position” on past due or adversely classified loans of more than $1 million.
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