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These excerpts taken from the OFG 10-K filed Mar 16, 2009. General
The Group is a publicly-owned financial holding company
incorporated on June 14, 1996 under the laws of the
Commonwealth of Puerto Rico, providing a full range of financial
services through its subsidiaries. The Group is subject to the
provisions of the U.S. Bank Holding Company Act of 1956, as
amended, (the “BHC Act”) and, accordingly, subject to
the supervision and regulation of the Board of Governors of the
Federal Reserve System (the “Federal Reserve Board”).
The Group provides comprehensive financial services to its
clients through a complete range of banking and financial
solutions, including mortgage, commercial and consumer lending;
checking and savings accounts; financial planning, insurance,
asset management, and investment brokerage; and corporate and
individual trust and retirement services. The Group operates
through three major business segments: Banking, Financial
Services, and Treasury, and distinguishes itself based on
quality service and marketing efforts focused on mid and high
net worth individuals and families, including professionals and
owners of small and mid-sized businesses, primarily in Puerto
Rico. The Group has 23 financial centers in Puerto Rico and a
subsidiary, Caribbean Pension Consultants Inc.
(“CPC”), based in Boca Raton, Florida. The
Group’s long-term goal is to strengthen its banking and
financial services franchise by expanding its lending
businesses, increasing the level of integration in the marketing
and delivery of banking and financial services, continuing to
maintain effective asset-liability management, growing
non-interest revenues from banking and financial services, and
improving operating efficiencies.
The Group’s strategy involves:
(1) Strengthening its banking and financial services
franchise by expanding its ability to attract deposits and build
relationships with mid net worth individual customers and
professional and mid-market commercial businesses through
aggressive marketing and expansion of its sales force;
(2) Focusing on greater growth in mortgage, commercial and
consumer lending; insurance products, trust and wealth
management services; and increasing the level of integration in
the marketing and delivery of banking and financial services;
Table of Contents
(3) Matching its portfolio of investment securities with
the related funding to better lock-in favorable spreads, and
primarily investing in U.S. government agency obligations.
(4) Opening, expanding or relocating financial centers;
improving operating efficiencies; and continuing to maintain
effective asset-liability management; and
(5) Implementing a broad ranging effort to instill in
employees and make customers aware of the Group’s
determination to effectively serve and advise its customer base
in a responsive and professional manner.
Together with a highly experienced group of senior and mid level
executives, this strategy has generally resulted in sustained
growth in the Group’s mortgage, commercial, consumer
lending and wealth-management activities, allowing the Group to
distinguish itself in a highly competitive industry. The
unstable interest rate environment of recent years has validated
the strategy’s basic premise for greater revenue diversity,
which remains an integral part of the Group’s long-term
goal.
While progress is expected to continue, the Group is not immune
from general and local financial and economic conditions. Past
experience is not necessarily indicative of future performance,
especially given market uncertainties, but based on a reasonable
time horizon of three to five years, the strategy is expected to
maintain its steady progress towards the Group’s long-term
goal.
General The Group is a publicly-owned financial holding company incorporated on June 14, 1996 under the laws of the Commonwealth of Puerto Rico, providing a full range of financial services through its subsidiaries. The Group is subject to the provisions of the U.S. Bank Holding Company Act of 1956, as amended, (the “BHC Act”) and, accordingly, subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Group provides comprehensive financial services to its clients through a complete range of banking and financial solutions, including mortgage, commercial and consumer lending; checking and savings accounts; financial planning, insurance, asset management, and investment brokerage; and corporate and individual trust and retirement services. The Group operates through three major business segments: Banking, Financial Services, and Treasury, and distinguishes itself based on quality service and marketing efforts focused on mid and high net worth individuals and families, including professionals and owners of small and mid-sized businesses, primarily in Puerto Rico. The Group has 23 financial centers in Puerto Rico and a subsidiary, Caribbean Pension Consultants Inc. (“CPC”), based in Boca Raton, Florida. The Group’s long-term goal is to strengthen its banking and financial services franchise by expanding its lending businesses, increasing the level of integration in the marketing and delivery of banking and financial services, continuing to maintain effective asset-liability management, growing non-interest revenues from banking and financial services, and improving operating efficiencies. The Group’s strategy involves: (1) Strengthening its banking and financial services franchise by expanding its ability to attract deposits and build relationships with mid net worth individual customers and professional and mid-market commercial businesses through aggressive marketing and expansion of its sales force; (2) Focusing on greater growth in mortgage, commercial and consumer lending; insurance products, trust and wealth management services; and increasing the level of integration in the marketing and delivery of banking and financial services;
Table of Contents(3) Matching its portfolio of investment securities with the related funding to better lock-in favorable spreads, and primarily investing in U.S. government agency obligations. (4) Opening, expanding or relocating financial centers; improving operating efficiencies; and continuing to maintain effective asset-liability management; and (5) Implementing a broad ranging effort to instill in employees and make customers aware of the Group’s determination to effectively serve and advise its customer base in a responsive and professional manner. Together with a highly experienced group of senior and mid level executives, this strategy has generally resulted in sustained growth in the Group’s mortgage, commercial, consumer lending and wealth-management activities, allowing the Group to distinguish itself in a highly competitive industry. The unstable interest rate environment of recent years has validated the strategy’s basic premise for greater revenue diversity, which remains an integral part of the Group’s long-term goal. While progress is expected to continue, the Group is not immune from general and local financial and economic conditions. Past experience is not necessarily indicative of future performance, especially given market uncertainties, but based on a reasonable time horizon of three to five years, the strategy is expected to maintain its steady progress towards the Group’s long-term goal. General
The Group is a financial holding company subject to supervision
and regulation by the Federal Reserve Board under the BHC Act
and the Gramm-Leach-Bliley Act of 1999. The qualification
requirements and the process for a bank holding company that
elects to be treated as a financial holding company requires
that all of the subsidiary banks controlled by the bank holding
company at the time of election must be and remain at all times
“well capitalized” and “well managed.”
The Group elected to be treated as a financial holding company
as permitted by the Gramm-Leach-Bliley Act. Under the
Gramm-Leach-Bliley Act, if the Group fails to meet the
requirements for being a financial holding company and is unable
to correct such deficiencies within certain prescribed time
periods, the Federal Reserve Board could require the Group to
divest control of its depository institution subsidiary or
alternatively cease conducting activities that are not
permissible for bank holding companies that are not financial
holding companies.
Financial holding companies may engage, directly or indirectly,
in any activity that is determined to be (i) financial in
nature, (ii) incidental to such financial activity, or
(iii) complementary to a financial activity provided it
does not pose a substantial risk to the safety and soundness of
depository institutions or the financial system generally. The
Gramm-Leach-Bliley Act specifically provides that the following
activities have been determined to be “financial in
nature”: (a) lending, trust and other banking
activities; (b) insurance activities; (c) financial,
investment or economic advisory services;
(d) securitization of assets; (e) securities
underwriting and dealing; (f) existing bank holding company
domestic activities; (g) existing bank holding company
foreign activities; and (h) merchant banking activities.
In addition, the Gramm-Leach-Bliley Act specifically gives the
Federal Reserve Board the authority, by regulation or order, to
expand the list of financial or incidental activities but
requires consultation with the U.S. Treasury Department and
gives the Federal Reserve Board authority to allow a financial
holding company to engage in any activity that is complementary
to a financial activity and does not pose a substantial risk to
the safety and soundness of depository institutions or the
financial system.
The Group is required to file with the Federal Reserve Board and
the SEC periodic reports and other information concerning its
own business operations and those of its subsidiaries. In
addition, Federal Reserve Board approval must also be obtained
before a bank holding company acquires all or substantially all
of the assets of another bank or merges or consolidates with
another bank holding company. The Federal Reserve Board also has
the authority to issue cease and desist orders against bank
holding companies and their non-bank subsidiaries.
The Bank is regulated by various agencies in the United States
and the Commonwealth of Puerto Rico. Its main regulators are the
OCFI and the FDIC. The Bank is subject to extensive regulation
and examination by the OCFI and the FDIC, and is subject to
certain Federal Reserve Board regulations of transactions with
Bank affiliates. The federal and Puerto Rico laws and
regulations which are applicable to the Bank regulate, among
other things, the scope of its business, its investments, its
reserves against deposits, the timing of the availability of
deposited funds, and the nature and amount of and collateral for
certain loans. In addition to the impact of such regulations,
commercial banks are affected significantly by the actions of
the Federal Reserve Board as it attempts to control the money
supply and credit availability in order to control inflation in
the economy.
The Group’s mortgage banking business is subject to the
rules and regulations of FHA, VA, RHS, FNMA, FHLMC, HUD and GNMA
with respect to the origination, processing and selling of
mortgage loans and the sale of mortgage-backed securities. Those
rules and regulations, among other things, prohibit
discrimination and establish underwriting guidelines which
include provisions for inspections and appraisal reports,
require credit reports on prospective borrowers and fix maximum
loan amounts, and, with respect to VA loans, fix maximum
interest
Table of Contents
rates. Mortgage origination activities are subject to, among
others, the Equal Credit Opportunity Act, Federal
Truth-in-Lending
Act, the Real Estate Settlement Procedures Act and the
regulations promulgated thereunder which, among other things,
prohibit discrimination and require the disclosure of certain
basic information to mortgagors concerning credit terms and
settlement costs. The Group is also subject to regulation by the
OCFI with respect to, among other things, licensing requirements
and maximum origination fees on certain types of mortgage loan
products.
The Group and its subsidiaries are subject to the rules and
regulations of certain other regulatory agencies. OFSC, as a
registered broker-dealer, is subject to the supervision,
examination and regulation of the FINRA, the SEC, and the OCFI
in matters relating to the conduct of its securities business,
including record keeping and reporting requirements, supervision
and licensing of employees and obligations to customers.
Oriental Insurance is subject to the supervision, examination
and regulation of the Office of the Commissioner of Insurance of
Puerto Rico in matters relating to insurance sales, including
but not limited to, licensing of employees, sales practices,
charging of commissions and reporting requirements.
General The Group is a financial holding company subject to supervision and regulation by the Federal Reserve Board under the BHC Act and the Gramm-Leach-Bliley Act of 1999. The qualification requirements and the process for a bank holding company that elects to be treated as a financial holding company requires that all of the subsidiary banks controlled by the bank holding company at the time of election must be and remain at all times “well capitalized” and “well managed.” The Group elected to be treated as a financial holding company as permitted by the Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, if the Group fails to meet the requirements for being a financial holding company and is unable to correct such deficiencies within certain prescribed time periods, the Federal Reserve Board could require the Group to divest control of its depository institution subsidiary or alternatively cease conducting activities that are not permissible for bank holding companies that are not financial holding companies. Financial holding companies may engage, directly or indirectly, in any activity that is determined to be (i) financial in nature, (ii) incidental to such financial activity, or (iii) complementary to a financial activity provided it does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. The Gramm-Leach-Bliley Act specifically provides that the following activities have been determined to be “financial in nature”: (a) lending, trust and other banking activities; (b) insurance activities; (c) financial, investment or economic advisory services; (d) securitization of assets; (e) securities underwriting and dealing; (f) existing bank holding company domestic activities; (g) existing bank holding company foreign activities; and (h) merchant banking activities. In addition, the Gramm-Leach-Bliley Act specifically gives the Federal Reserve Board the authority, by regulation or order, to expand the list of financial or incidental activities but requires consultation with the U.S. Treasury Department and gives the Federal Reserve Board authority to allow a financial holding company to engage in any activity that is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system. The Group is required to file with the Federal Reserve Board and the SEC periodic reports and other information concerning its own business operations and those of its subsidiaries. In addition, Federal Reserve Board approval must also be obtained before a bank holding company acquires all or substantially all of the assets of another bank or merges or consolidates with another bank holding company. The Federal Reserve Board also has the authority to issue cease and desist orders against bank holding companies and their non-bank subsidiaries. The Bank is regulated by various agencies in the United States and the Commonwealth of Puerto Rico. Its main regulators are the OCFI and the FDIC. The Bank is subject to extensive regulation and examination by the OCFI and the FDIC, and is subject to certain Federal Reserve Board regulations of transactions with Bank affiliates. The federal and Puerto Rico laws and regulations which are applicable to the Bank regulate, among other things, the scope of its business, its investments, its reserves against deposits, the timing of the availability of deposited funds, and the nature and amount of and collateral for certain loans. In addition to the impact of such regulations, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to control inflation in the economy. The Group’s mortgage banking business is subject to the rules and regulations of FHA, VA, RHS, FNMA, FHLMC, HUD and GNMA with respect to the origination, processing and selling of mortgage loans and the sale of mortgage-backed securities. Those rules and regulations, among other things, prohibit discrimination and establish underwriting guidelines which include provisions for inspections and appraisal reports, require credit reports on prospective borrowers and fix maximum loan amounts, and, with respect to VA loans, fix maximum interest
Table of Contentsrates. Mortgage origination activities are subject to, among others, the Equal Credit Opportunity Act, Federal Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the regulations promulgated thereunder which, among other things, prohibit discrimination and require the disclosure of certain basic information to mortgagors concerning credit terms and settlement costs. The Group is also subject to regulation by the OCFI with respect to, among other things, licensing requirements and maximum origination fees on certain types of mortgage loan products. The Group and its subsidiaries are subject to the rules and regulations of certain other regulatory agencies. OFSC, as a registered broker-dealer, is subject to the supervision, examination and regulation of the FINRA, the SEC, and the OCFI in matters relating to the conduct of its securities business, including record keeping and reporting requirements, supervision and licensing of employees and obligations to customers. Oriental Insurance is subject to the supervision, examination and regulation of the Office of the Commissioner of Insurance of Puerto Rico in matters relating to insurance sales, including but not limited to, licensing of employees, sales practices, charging of commissions and reporting requirements. These excerpts taken from the OFG 10-K filed Mar 17, 2008. General
The Group is a financial holding company subject to supervision
and regulation by the Federal Reserve Board under the BHC Act
and the Gramm-Leach-Bliley Act of 1999. The qualification
requirements and the process for a bank holding company that
elects to be treated as a financial holding company requires
that all of the subsidiary banks controlled by the bank holding
company at the time of election must be and remain at all times
“well capitalized” and “well managed.”
The Group elected to be treated as a financial holding company
as permitted by the Gramm-Leach-Bliley Act. Under the
Gramm-Leach-Bliley Act, if the Group fails to meet the
requirements for being a financial holding company and is unable
to correct such deficiencies within certain prescribed time
periods, the Federal Reserve Board could require the Group to
divest control of its depository institution subsidiary or
alternatively cease conducting activities that are not
permissible for bank holding companies that are not financial
holding companies.
Financial holding companies may engage, directly or indirectly,
in any activity that is determined to be (i) financial in
nature, (ii) incidental to such financial activity, or
(iii) complementary to a financial activity provided it
does not pose a substantial risk to the safety and soundness of
depository institutions or the financial system generally. The
Gramm-Leach-Bliley Act specifically provides that the following
activities have been determined to be “financial in
nature”: (a) lending, trust and other banking
activities; (b) insurance activities; (c) financial,
investment or economic advisory services;
(d) securitization of assets; (e) securities
underwriting and dealing; (f) existing bank holding company
domestic activities; (g) existing bank holding company
foreign activities; and (h) merchant banking activities.
In addition, the Gramm-Leach-Bliley Act specifically gives the
Federal Reserve Board the authority, by regulation or order, to
expand the list of financial or incidental activities but
requires consultation with the U.S. Treasury Department and
gives the Federal Reserve Board authority to allow a financial
holding company to engage in any activity that is complementary
to a financial activity and does not pose a substantial risk to
the safety and soundness of depository institutions or the
financial system.
The Group is required to file with the Federal Reserve Board and
the SEC periodic reports and other information concerning its
own business operations and those of its subsidiaries. In
addition, Federal Reserve Board approval must also be obtained
before a bank holding company acquires all or substantially all
of the assets of another bank or merges or consolidates with
another bank holding company. The Federal Reserve Board also has
the authority to issue cease and desist orders against bank
holding companies and their non-bank subsidiaries.
Table of Contents
The Bank is regulated by various agencies in the United States
and the Commonwealth of Puerto Rico. Its main regulators are the
OCFI and the FDIC. The FDIC insures the Bank’s deposits up
to $100,000 per depositor, except for certain retirement
accounts which are insured up to $250,000 per depositor. The
Bank is subject to extensive regulation and examination by the
OCFI and the FDIC, and is subject to certain Federal Reserve
Board regulations of transactions with Bank affiliates. The
federal and Puerto Rico laws and regulations which are
applicable to the Bank regulate, among other things, the scope
of its business, its investments, its reserves against deposits,
the timing of the availability of deposited funds, and the
nature and amount of and collateral for certain loans. In
addition to the impact of such regulations, commercial banks are
affected significantly by the actions of the Federal Reserve
Board as it attempts to control the money supply and credit
availability in order to control inflation in the economy.
The Group’s mortgage banking business is subject to the
rules and regulations of FHA, VA, RHS, FNMA, FHLMC, HUD and GNMA
with respect to the origination, processing and selling of
mortgage loans and the sale of
mortgage-backed
securities. Those rules and regulations, among other things,
prohibit discrimination and establish underwriting guidelines
which include provisions for inspections and appraisal reports,
require credit reports on prospective borrowers and fix maximum
loan amounts, and, with respect to VA loans, fix maximum
interest rates. Mortgage origination activities are subject to,
among others, the Equal Credit Opportunity Act, Federal
Truth-in-Lending
Act, the Real Estate Settlement Procedures Act and the
regulations promulgated thereunder which, among other things,
prohibit discrimination and require the disclosure of certain
basic information to mortgagors concerning credit terms and
settlement costs. The Group is also subject to regulation by the
OCFI with respect to, among other things, licensing requirements
and maximum origination fees on certain types of mortgage loan
products.
The Group and its subsidiaries are subject to the rules and
regulations of certain other regulatory agencies. OFSC, as a
registered broker-dealer, is subject to the supervision,
examination and regulation of the FINRA, the SEC, and the OCFI
in matters relating to the conduct of its securities business,
including record keeping and reporting requirements, supervision
and licensing of employees and obligations to customers.
Oriental Insurance is subject to the supervision, examination
and regulation of the Office of the Commissioner of Insurance of
Puerto Rico in matters relating to insurance sales, including
but not limited to, licensing of employees, sales practices,
charging of commissions and reporting requirements.
General The Group is a financial holding company subject to supervision and regulation by the Federal Reserve Board under the BHC Act and the Gramm-Leach-Bliley Act of 1999. The qualification requirements and the process for a bank holding company that elects to be treated as a financial holding company requires that all of the subsidiary banks controlled by the bank holding company at the time of election must be and remain at all times “well capitalized” and “well managed.” The Group elected to be treated as a financial holding company as permitted by the Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, if the Group fails to meet the requirements for being a financial holding company and is unable to correct such deficiencies within certain prescribed time periods, the Federal Reserve Board could require the Group to divest control of its depository institution subsidiary or alternatively cease conducting activities that are not permissible for bank holding companies that are not financial holding companies. Financial holding companies may engage, directly or indirectly, in any activity that is determined to be (i) financial in nature, (ii) incidental to such financial activity, or (iii) complementary to a financial activity provided it does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. The Gramm-Leach-Bliley Act specifically provides that the following activities have been determined to be “financial in nature”: (a) lending, trust and other banking activities; (b) insurance activities; (c) financial, investment or economic advisory services; (d) securitization of assets; (e) securities underwriting and dealing; (f) existing bank holding company domestic activities; (g) existing bank holding company foreign activities; and (h) merchant banking activities. In addition, the Gramm-Leach-Bliley Act specifically gives the Federal Reserve Board the authority, by regulation or order, to expand the list of financial or incidental activities but requires consultation with the U.S. Treasury Department and gives the Federal Reserve Board authority to allow a financial holding company to engage in any activity that is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system. The Group is required to file with the Federal Reserve Board and the SEC periodic reports and other information concerning its own business operations and those of its subsidiaries. In addition, Federal Reserve Board approval must also be obtained before a bank holding company acquires all or substantially all of the assets of another bank or merges or consolidates with another bank holding company. The Federal Reserve Board also has the authority to issue cease and desist orders against bank holding companies and their non-bank subsidiaries.
Table of ContentsThe Bank is regulated by various agencies in the United States and the Commonwealth of Puerto Rico. Its main regulators are the OCFI and the FDIC. The FDIC insures the Bank’s deposits up to $100,000 per depositor, except for certain retirement accounts which are insured up to $250,000 per depositor. The Bank is subject to extensive regulation and examination by the OCFI and the FDIC, and is subject to certain Federal Reserve Board regulations of transactions with Bank affiliates. The federal and Puerto Rico laws and regulations which are applicable to the Bank regulate, among other things, the scope of its business, its investments, its reserves against deposits, the timing of the availability of deposited funds, and the nature and amount of and collateral for certain loans. In addition to the impact of such regulations, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to control inflation in the economy. The Group’s mortgage banking business is subject to the rules and regulations of FHA, VA, RHS, FNMA, FHLMC, HUD and GNMA with respect to the origination, processing and selling of mortgage loans and the sale of mortgage-backed securities. Those rules and regulations, among other things, prohibit discrimination and establish underwriting guidelines which include provisions for inspections and appraisal reports, require credit reports on prospective borrowers and fix maximum loan amounts, and, with respect to VA loans, fix maximum interest rates. Mortgage origination activities are subject to, among others, the Equal Credit Opportunity Act, Federal Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the regulations promulgated thereunder which, among other things, prohibit discrimination and require the disclosure of certain basic information to mortgagors concerning credit terms and settlement costs. The Group is also subject to regulation by the OCFI with respect to, among other things, licensing requirements and maximum origination fees on certain types of mortgage loan products. The Group and its subsidiaries are subject to the rules and regulations of certain other regulatory agencies. OFSC, as a registered broker-dealer, is subject to the supervision, examination and regulation of the FINRA, the SEC, and the OCFI in matters relating to the conduct of its securities business, including record keeping and reporting requirements, supervision and licensing of employees and obligations to customers. Oriental Insurance is subject to the supervision, examination and regulation of the Office of the Commissioner of Insurance of Puerto Rico in matters relating to insurance sales, including but not limited to, licensing of employees, sales practices, charging of commissions and reporting requirements. This excerpt taken from the OFG 10-K filed Mar 28, 2007. General
The Group is a bank holding company subject to supervision and
regulation by the Federal Reserve Board under the BHC Act. Under
the BHC Act, prior to the adoption of the Gramm-Leach-Bliley Act
in 1999, the activities of bank holding companies and their
banking and non-banking subsidiaries were limited to the
business of banking and activities closely related to banking,
hereunder, no bank holding company could directly or indirectly
acquire ownership or control of more than 5% of any class of
voting shares or substantially all of the assets of any company
in the United States, including a bank, without the prior
approval of the Federal Reserve Board. In addition, bank holding
companies generally have been prohibited under the BHC Act from
engaging in non-banking activities, unless they were found by
the Federal Reserve Board to be closely related to banking. The
Gramm-Leach-Bliley Act authorized bank holding companies that
qualify as “financial holding companies” to engage in
a substantially broader range of non-banking activities, subject
to certain conditions. The qualification requirements and the
process for a bank holding company that elects to be treated as
a financial holding company requires that all of the subsidiary
banks controlled by the bank holding company at the time of
election must be and remain at all times “well
capitalized” and “well managed.”
The Gramm-Leach-Bliley Act further requires that in the event
that the bank holding company elects to become a financial
holding company, the election must be made by filing a written
declaration with the appropriate Federal Reserve Bank that:
(i) states that the bank holding company elects to become a
financial holding company; (ii) provides the name and head
office address of the bank holding company and each depository
institution controlled by the bank holding company;
(iii) certifies that each depository institution controlled
by the bank holding company is “well capitalized” as
of the date the bank holding company submits its declaration;
(iv) provides the capital ratios for all relevant capital
measures as of the close of the previous quarter for each
depository institution controlled by the bank holding company on
the date the bank holding company submits its declaration; and
(v) certifies that each depository institution controlled
by the bank holding company is “well managed” as of
the date the bank holding company submits its declaration. The
bank holding company must have also achieved at least a rating
of “satisfactory record of meeting community credit
needs” under the Community Reinvestment Act during the
institution’s most recent examination. The Group elected to
be treated as a financial holding company as permitted by the
Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, if the
Group fails to meet the requirements for being a financial
holding company and is unable to correct such deficiencies
within certain prescribed time periods, the Federal Reserve
Board could require the Group to divest control of its
depository institution subsidiary or alternatively cease
conducting activities that are not permissible for bank holding
companies that are not financial holding companies.
Financial holding companies may engage, directly or indirectly,
in any activity that is determined to be (i) financial in
nature, (ii) incidental to such financial activity, or
(iii) complementary to a financial activity provided it
does not pose a substantial risk to the safety and soundness of
depository institutions or the financial system generally. The
Gramm-Leach-Bliley Act specifically provides that the following
activities have been determined to be “financial in
nature”: (a) lending, trust and other banking
activities; (b) insurance activities; (c) financial,
investment or economic advisory services;
(d) securitization of assets; (e) securities
underwriting and dealing; (f) existing bank holding company
domestic activities; (g) existing bank holding company
foreign activities; and (h) merchant banking activities.
In addition, the Gramm-Leach-Bliley Act specifically gives the
Federal Reserve Board the authority, by regulation or order, to
expand the list of financial or incidental activities but
requires consultation with the U.S. Treasury Department and
gives the Federal Reserve Board authority to allow a financial
holding company to engage in any activity that is complementary
to a financial activity and does not pose a substantial risk to
the safety and soundness of depository institutions or the
financial system.
The Group is required to file with the Federal Reserve Board and
the SEC periodic reports and other information concerning its
own business operations and those of its subsidiaries. In
addition, Federal Reserve Board approval
Table of Contents
must also be obtained before a bank holding company acquires all
or substantially all of the assets of another bank or merges or
consolidates with another bank holding company. The Federal
Reserve Board also has the authority to issue cease and desist
orders against bank holding companies and their non-bank
subsidiaries.
The Bank is regulated by various agencies in the United States
and the Commonwealth of Puerto Rico. Its main regulators are the
OCFI and the FDIC. The FDIC insures the Bank’s deposits up
to $100,000 per depositor, except for certain retirement
accounts which are insured up to $250,000 per depositor.
The Bank is subject to extensive regulation and examination by
the OCFI and the FDIC, and is subject to certain Federal Reserve
Board regulations of transactions with Bank affiliates. The
federal and Puerto Rico laws and regulations which are
applicable to the Bank regulate, among other things, the scope
of its business, its investments, its reserves against deposits,
the timing of the availability of deposited funds, and the
nature and amount of and collateral for certain loans. In
addition to the impact of such regulations, commercial banks are
affected significantly by the actions of the Federal Reserve
Board as it attempts to control the money supply and credit
availability in order to control inflation in the economy.
The Group’s mortgage banking business is subject to the
rules and regulations of FHA, VA, RHS, FNMA, FHLMC, HUD and GNMA
with respect to the origination, processing and selling of
mortgage loans and the sale of mortgage-backed securities. Those
rules and regulations, among other things, prohibit
discrimination and establish underwriting guidelines which
include provisions for inspections and appraisal reports,
require credit reports on prospective borrowers and fix maximum
loan amounts, and, with respect to VA loans, fix maximum
interest rates. Mortgage origination activities are subject to,
among others, the Equal Credit Opportunity Act, Federal
Truth-in-Lending
Act, the Real Estate Settlement Procedures Act and the
regulations promulgated thereunder which, among other things,
prohibit discrimination and require the disclosure of certain
basic information to mortgagors concerning credit terms and
settlement costs. The Group is also subject to regulation by the
OCFI with respect to, among other things, licensing requirements
and maximum origination fees on certain types of mortgage loan
products.
The Group and its subsidiaries are subject to the rules and
regulations of certain other regulatory agencies. OFSC, as a
registered broker-dealer, is subject to the supervision,
examination and regulation of the NASD, the SEC, and the OCFI in
matters relating to the conduct of its securities business,
including record keeping and reporting requirements, supervision
and licensing of employees and obligations to customers.
Oriental Insurance is subject to the supervision, examination
and regulation of the Office of the Commissioner of Insurance of
Puerto Rico in matters relating to insurance sales, including
but not limited to, licensing of employees, sales practices,
charging of commissions and reporting requirements.
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