Federal bank regulators this week issued supplemental guidance to further clarify supervisory practices for financial institutions and borrowers affected by Hurricane Sandy.

In a joint statement that follows up on guidance on Oct. 30, the agencies – including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency – said that “prudent efforts by institutions to meet customers' cash and financial needs will not generally be subject to examiner criticism, so long as they are consistent with “safe and sound banking and credit union practices.”  

Those efforts may include:

Waiving ATM fees for customers and non-customers

Increasing ATM daily cash withdrawal limits

Waiving overdraft fees 

Waiving early withdrawal penalties on time deposits

Waiving availability restrictions on insurance checks

Easing restrictions on cashing out-of-state and non-customer checks

Easing credit card limits and credit terms for new loans

Waiving late fees for credit card and other loan balances

Offering payment accommodations, such as allowing loan customers to defer or skip some payments, or extending payment due dates, which would avoid delinquencies and negative credit bureau reporting caused by storm-related disruptions

 Loan Adjustments

Efforts to adjust or alter terms on existing loans in affected areas are also not likely to flag examiner criticism.

Financial institutions should perform a comprehensive review of an affected borrower's financial condition in an effort to implement a prudent loan workout arrangement, the guidance says. When conducting examinations and other supervisory activities, examiners will consider “the unusual circumstances institutions are facing in the affected areas.” An institution that implements prudent loan workout arrangements will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse classification or credit risk grade downgrade.

All restructured loans, however, should be evaluated to determine whether a loan should be reported as a troubled debt restructuring (TDR). This evaluation, based on the facts and circumstances of each borrower and loan, “requires judgment since not all modifications are TDRs.”

Community Investment

Financial institutions may receive Community Reinvestment Act consideration for community development loans, investments or services that help revitalize or stabilize federally designated disaster areas. For additional information, institutions should review the Interagency Questions and Answers Regarding Community Reinvestment.

Customer Identification

Because many of those displaced may not have access to their normal identification and personal records, flexibility is being called for in confirming identity.

Under the Customer Identification Program requirements of the Bank Secrecy Act, financial institutions must obtain, at a minimum, an individual's name, address, date of birth, and taxpayer identification number or other acceptable identification number before opening an account.  The requirement, however, may allow the flexibility to use other documents and non-documentary methods to verify a customer's identity.

The regulation also stipulate that identity verification may be completed within a reasonable time after the account is opened.” An institution in an affected area, or dealing with new customers from the affected area, may amend its Customer Identification Program immediately and obtain required board approval for program changes as soon as practicable.

Institutions will need to be alert to indications of fraud or other criminal activities and report suspicious activity. Additional guidance can be found in a hurricane-related Financial Crimes Enforcement Network advisory.