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Current Events - 03/27/2000

Privacy (What, again?) — Yep, I’m afraid we will be discussing this topic in Current Events all year long. Today’s lead story comes courtesy of the sharp observational talents of your Chairman, John Rebelo. It seems that the effects of privacy and banking are turning up everywhere, even in the area of international medicine!  In the United States, liver transplants are an important form of lifesaving surgery. In Mexico, however, the need for livers in their liver transplant program is many times higher than in the U.S. The shortage of donated organs is so acute that there is a proposal to require all citizens to offer their internal organs for transplantation upon their death. Of course, the proposal has an opt-out provision. But note, even in this most personal of decisions, there is serious thought being given to moving away from the current opt-in process for donations. Interesting. And thanks, John, for sharing your insight about this story.

Under the Gramm-Leach-Bliley Act, there is no option for us concerning the new proposed privacy regulations: they are required. Attached to this Current Events is the final version of CBA’s comment letter on the issue. Your own letters are probably even more important than ours. Again, we urge you to shape the arguments made here into the factual situation that is your institution. These specifically tailored responses to the regulators from individual institutions are the most important in effecting needed modifications to the original proposal. Send us a copy of your submission. You can also find copies of our entire range of privacy material on our web site at www.calbankers.com. Give it a look. I know it will help you craft your own comments and begin the compliance process with the statute itself.

Privacy Principles — As part of CBA’s continuing efforts to assist its members with compliance, the Privacy Task Force was charged with the responsibility of reviewing the Privacy Principles that the CBA Board adopted nearly two years ago. In many respects the Task Force found that the consumer privacy protections in Gramm-Leach-Bliley exceed those that were set forth in the old Principles. The provisions of GLB prohibit disclosure of account numbers and access codes to unaffiliated third parties for marketing purposes; require disclosure of a bank’s privacy policy at the time the account is opened and on an annual basis thereafter; and require a bank to provide the customer with the ability to opt-out of information sharing prior to the disclosure of what is termed nonpublic personal information to unaffiliated third parties. The Task Force recommended changes in the CBA’s Privacy Principles to reflect the changes in the law occasioned by the passage of GLB. A copy of these revised CBA Privacy Principles is attached for your use as you begin your own institution’s compliance efforts.

Financial Modernization Conferences — As we have advertized in the Monday Courier, CBA has joined forces with Manatt Phelps and others to present two-all day seminars on the Financial Modernization legislation this coming Wednesday at the Oakland Claremont Hotel and Thursday at the Sheraton Hotel in the City of Industry. Both seminars begin at 8:30 and will conclude at 4:00. Their focus is twofold: how should banks begin the process of complying with the requirements in the law and how can they take advantage of the opportunities made possible in this legislation. If you would like to sign up, call Janet Caggiano in our San Francisco office: 415/284-6999 ext. 227.
 

You Asked For It... and we will deliver. Many bankers have told us that they intend to invite their directors to the Annual Meeting in Hawaii this year, but they are looking for substantive content tailored especially for them from a presenter who knows the ropes. Done. Ray Dezember, a former Director of Wells Fargo Bank (and certainly no stranger to this industry) will lead a special directors’ session: How the Bank Director Can Enhance Shareholder Value. We will also have breakout sessions on Internet banking and e-commerce solutions and technology planning. Clearly, the annual meeting will be a show the whole banking family can enjoy. For more information or to register, check our website at www.calbankers.com or call us at 415/284-6999 and ask for Janet Caggiano (ext 227) or Dorothy Hong (ext 215).

Q-UP: It’s Up and Running — CBA and its for profit subsidiary, CBIS, have entered into a strategic alliance with Q-UP, a unique Internet banking solution for banks that want to offer online services, but don’t want to build a custom solution. The Q-UP solution was developed with community banks in mind and has applications in both consumer and business banking. Simplicity and flexibility are most important. Q-UP’s Internet and e-commerce packages are quick loading and easy to navigate. And you can decide whether to outsource to Q-UPs data center or use Q-UPs in house system, designed to leverage your current technology structure and IT staffing. The Q-UP system even offers revenue opportunities for your institution. For more information, give Paul Allen a call at Banker Benefits. His number is 925-974-5002.

Who’s Minding the Store? — There are two answers to this question. First, your Board is. The CBA Executive Committee met with senior staff for an all day (8:30 — 6:00) strategic planning session earlier this week. They reviewed our current progress toward the goals that were articulated last year and discussed the current landscape in the areas of government relations/advocacy, the trade association environment, and the banking industry’s continued merger activity. This background allowed them to spend the majority of the day talking about the future volunteer leadership of the association and focusing on the strategic issues facing all of us. We appreciated their leadership and efforts in directing our efforts this coming year.

The second answer to the question, who’s minding the store, is all of you. Nationwide, commercial bank profits rose 15.8% to $71.7 billion in 1999, setting the eight annual earnings record and smashing the 1998 record by nearly $10 billion. Congratulations!  At $17.8 billion, fourth quarter earnings were up 20% over the same period in 1998. On the positive side, noninterest income (spurred by a robust gain in fee income) rose to account for 44.1% of net operating revenue. Losses on credit card and other loans and charge-offs declined, some of them to record levels. On the negative side, with four quarter-point rate hikes between June and December, the value of banks’ securities fell significantly. And in a continuing trend, banks with less than $100 million in assets saw their average profitability slip slightly. Declining net interest margin and shortfalls in noninterest income appeared to hurt these banks.

I hope 1999 was a fantastic year for your institution. We look forward to seeing you in Hawaii to celebrate your achievements and prepare you for the challenges that lie ahead. Aloha.
 
 

Chris Chenoweth
CBA COO & General Counsel
On behalf of the entire staff
03/27/00