To Federal Reserve, Community Bank System - Oneida Withholds 8 of 9 Responses, As CIT Approved

By Matthew R. Lee

NEW YORK, July 25 -- The lack of responsiveness in US bank regulation extends from large to smaller banks. Last week the Federal Reserve hauled off and approved CIT - One West, with whose executives the Fed met before the deal was even announced a year ago.

  Further down the food chain, Community Bank System of upstate New York filed with the Fed nine answers to questions asked after Inner City Press' challenge -- and is trying to withhold fully eight of the nine responses. More here.

  The largest bank merger recently proposed, that of Royal Bank of Canada and affluent-focused Los Angeles-based City National Bank, has since April been the subject of a Community Reinvestment Act challenge by Fair Finance Watch.

  The LA Times has reported on the "letter from the Fed [which] asks the banks to respond to questions raised in written comments by [FFW]. Spokesmen for the banks declined to comment.... Fair Finance Watch, a New York advocacy group for minorities, questioned a deal between the banks in a June 11 comment letter to the Fed."

  Inner City Press first put that Fed letter online, here; then Canada's National / Financial Post reported without credit it had "obtained" it.

  By contrast, in the pending proposal of Community Bank System - Oneida, the Syracuse Post-Standard disclosed that "Inner City Press forwarded the letter to news outlets. Some of the Fed's questions focus on whether Community could improperly control matters at Oneida in advance of the acquisition. Community is working on Fed's questions, said Hal Wentworth, Community's senior vice president for retail banking."

  One common theme is that non-control (and therefore antitrust) laws are being violated. One difference is that CBSI does comment to the media -- if only to blame the messenger -- while larger RBC and CNB do not. Arrogance?

 On CBSI's blaming the messenger, FFW has commented to the Fed that it will "will comment again when CBSI has provided a copy of its response to the FRS' questions of July 13. Beyond the CRA and impermissible “control” questions raised therein, we wish at this time to raise the issues that, in a public response to ICP's comments, CBSI's SVP for retail banking said the following, in a prepared statement no less:

'In a statement today, Hal Wentworth, Community's senior vice president for retail banking, said that Inner City Press is not a local group and pointed out that letter was the only one filed on the Oneida deal. "This activist does not do business with either Oneida or Community Bank."'

If it would be inappropriate for CBSI to comment on or disclose information about its customers, in this context the same applies to the above-quoted, which, separately, is reminiscent of human rights abusing countries emphasizing where the rights groups who study and report on them are based."

   Now CBSI is trying to withhold eight of its nine responses; Inner City Press is challenging this under the Freedom of Information Act, comparing CBSI's outrageous withholding at the Fed with other banks, and with CBSI's to the OCC, more here.

  On June 6, FFW submitted into the record before the Fed:

"RBC, City National off to friendly start ahead of $5.4B takeover Globe and Mail, May 26, 2015, quoted from below.

  Now the Federal Reserve has asked RBC:

"A commenter alleged that in May 2015 RBC and CNB collaborated to extend credit to a customer of CNB.  Please address this claim. In your response, discuss in detail in detail whether RBC exercises a controlling influence over the management or policies of CNC or CNB without prior approval of the Board. In addition, discuss whether, since entering into the proposed transaction, RBC and CNB have collaborated, or plan to collaborate, on extending credit to any other borrower, and describe the nature and circumstances of those collaborations."

  There are other problems, including RBC's non-compete agreement with PNC Financial Services. But this gun-jumping should be fatal to the proposed merger. FFW put this into the record before the Fed:

“Royal Bank of Canada won’t complete its $5.4-billion (U.S.) purchase of Los Angeles-based City National Bank for months, but the two banks are already getting a jump on doing business together.

City National chief executive officer Russell Goldsmith got a call earlier this month from a long-time customer who wanted speedy approval of a loan worth hundreds of millions of dollars to do an acquisition.

“But he was familiar with RBC, knew about the merger and asked whether RBC could help get this done.”“The client knew it was an amount of money beyond what we would normally lend,” the 65-year-old Harvard-educated lawyer said in an interview.

Working closely with Blair Fleming, head of RBC’s U.S. capital markets unit, the two banks signed off on the loan within 72 hours.

'It’s typical of what we do,” explained Mr. Goldsmith, whose grandfather co-founded City National in 1954 and whose father, Bram, is chairman emeritus. “We have a relationship [with the client]. …We already had the financial information. So we could do what we needed to do. On top of it, having RBC Capital Markets come into it meant we could do it with greater scale.'”

  FFW has told the Fed: This is entirely inappropriate and the FRB must act, publicly.  The Federal Reserve sent the letter.

Royal Bank of Canada Is Asked About Jumping the Gun by Federal Reserve After Fair Finance Watch Complaint by Matthew Russell Lee

 Please note that RBC's belated release of some documents it improperly sought confidential treatment for does not resolve ICP's FOIA request - we are awaiting an FRB ruling in order to, if need be, appeal. The comment period, including for the reasons set forth above, must be extended and on the current record, the application must be denied and enforcement action(s) taken.

   The Federal Reserve Board granted FFW an extension of the comment period on the proposed merger, through June 11, FRB letter here, due to RBC improperly withholding information which was subsequently released after a Freedom of Information Act (FOIA) request by Inner City Press.

   FFW comment on June 11 - but submitted to the Fed an objection dated June 6 noting the two banks admitted they are already working together on transactions, without any authorization.

  This all comes after the M&T - Hudson City merger stalled after similar filings by FFW, NCRC and others. On Royal Bank of Canada / City National, FFW's filing to the Federal Reserve says

City National Bank is known as a bank directed at the (most) affluent. RBC is that as well:

In the New York City MSA in 2013, for conventional home purchase loans, RBC made no loans to African Americans or Latinos. It made one loan to a white applicant (for $1.8 million) and six to “race not available” applicants, for a total of over $36 million.

RBC Bank (Georgia), in the Atlanta MSA in 2013 for conventional home purchase loans made one such loan to an African American, six to whites, and none to Hispanics. In the Raleigh NC MSA in 2013, RBC Bank (Georgia) made two loans to whites, none to African Americans or Latinos.

City National Bank, in the NYC MSA in 2013 for home purchase loans, made no loans to African American or Latino borrowers. It made 10 loans to whites - none denied -- and 35 to “race not available.” By income, there were 36 loans to upper income borrowers, and only one to the other income tranches.

City National Bank, in the Los Angeles MSA in 2013 for home purchase loans, made two loans each to African Americans and Latinos. It made fully 45 loans to whites.

City National Bank, in the Nashville MSA in 2013 for home purchase loans, made no loans to African American or Latino borrowers. It made one loan to a white borrower - none denied -- and six to “race not available.” FFW contests City National Bank's compliance with HMDA.

How is this consistent with the CRA? For the record, RBC previously bumbled in the USA with Centura and Alabama BanCorporation. Now it returns, only for the affluent. Hearings are necessary.

 Under the Freedom of Information Act, Inner City Press / FFW  submitted a

"a formal request under FOIA for the exhibits that Royal Bank of Canada has claimed are confidential and that the Federal Reserve has withheld from Inner City Press on its April 8 response to Inner City Press / Fair Finance Watch's April 4 request, including but not limited to the 'RBC Bank (Georgia), N.A. CRA Plan,' the list of subsidiaries, information pertaining to the U.S. structure of Royal Bank."

The withholding of this CRA plan - hearkening to the Federal Reserve rejected CIT's request to withhold such a plan, and extension of the comment period and holding of public hearing(s) - is outrageous; it must be released sufficiently before any closing of the comment period such that ICP can comment on it. We are therefore requesting all of the withheld exhibits (listed below)

AND all Federal Reserve communication with or about Royal Bank of Canada or City National since July 1, 2014.

Beyond the request for communications, including emails and text messages, these exhibits:

City National Corporation Subsidiaries; Information Pertaining to the U.S. Structure of Royal Bank; Integration Framework; Due Diligence Summary; Royal Bank of Canada Organizational Chart; RBC USA Holdco Corporation Organizational Charts; City National Corporation Organizational Chart; Pro Forma Financial and Related Information; Asset Quality Information; Risk Management Information; Royal Bank of Canada BSA/AML Compliance Program; Information pertaining to BSA/AML Integration; Interconnectedness Analysis; RBC Bank (Georgia), N.A. CRA Plan; Source of Funds; City National Corporation Dividend Information; Principal Information Information Pertaining to Item 3(2) and Item 12 of Form FR Y-3F

None of this information has been provided, even the CRA plan. The comment period must be extended and on the current record, the application must be denied.
 
  Inner City Press previously reported that filing by FFW with the Federal Reserve against M&T's application, that Hudson City in the New York City Metropolitan Statistical Area in 2011 made only five home purchase loans to African Americans, compared to hundreds to whites while denying the applications of African Americans 3.21 times more frequently than whites.

  That 2011 data was quoted by Bloomberg News earlier this month reporting that now the Department of Justice and Consumer Financial Protection Bureau are investigating Hudson City, putting the M&T deal, also challenged by NCRC and others, in doubt. Click here for that, here for the NJ Bergen Record, also citing Inner City Press / Fair Finance Watch.

 But there's more, and its worse. FFW has filed this comparison to 2013 with the Federal Reserve:

"Hudson City's record was even worse in 2013 than in the 2011 data cited above. In the NYC MSA for conventional home purchase loans, while Hudson City made (only) five such loans to African Americans in 2011, this fell to only FOUR such loans to African Americans in 2013, compared in 2013 to 427 such loans to whites: a more than one hundred to one ratio, totally out of step with the demographics and other lenders' records.

"For refinance loans in the NYC MSA, while Hudson City in 2011 made 8 such loans to African Americans in 2011, this fell to only SEVEN such loans to African Americans in 2013, compared in 2013 to 801 such loans to whites: again a more than one hundred to one ratio, totally out of step with the demographics and other lenders' records.

"This is presumptive discrimination and the reported DOJ and CFPB investigations are entirely appropriate and should be deferred to by the FRB. What does this say, as well, about M&T's due diligence and managerial resources?"

  Why has the Federal Reserve not dismissed M&T's application?

  Watch this site.

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