DFI Monthly Bulletin – May 2009

June 08, 2009

Monthly Bulletin

Volume 12, Issue 11 – May 2009

Message from the Commissioner

To:  California State Chartered Financial Institutions
From:  William S. Haraf, Commissioner of Financial Institutions
Re:  On the Occasion of Our 100th Anniversary

Hello Everyone,

In just three weeks time, the California Department of Financial Institutions will celebrate its 100th anniversary. The precursor of today’s DFI, the State Banking Department, was formed by the 1909 Bank Act which became effective July 1.

When the new Superintendent of Banks, Alden Anderson, assumed office on that day, there were 486 State banks with a total of $575 million of assets. In today’s dollars, this translates into approximately $14 billion, but the California economy was much smaller then. During his first year, he closed 13 banks because of capital impairment and/or mismanagement.

In the Department’s first Annual Report, Superintendent Anderson noted that the Bank Act was initially controversial — some bankers “believed the act too drastic and far-reaching in its effects.” However, he went on to say: “with a better acquaintance with the law and a realization on their part that there must be regulation and supervision,…they have generally come to believe that it serves its purpose well.”

Since then, our Department has overseen California’s banks through the Great Depression, the great inflation of the 1970s, the S&L crisis, and the banking problems of the late 1980s and early 1990s. In 1997, the current DFI was created when the regulation of all state licensed deposit-taking institutions was consolidated into one department. We have continued to respond to new challenges, evolving responsibilities, and a changing environment with this broader mandate ever since. But our mission remains the same as it was at the Department’s inception: to protect and serve California’s citizens through the effective regulation and supervision of financial institutions licensed by the Department. And our primary focus remains the same as well: the safety and soundness of financial institutions under our supervision.

Superintendent Anderson took the occasion of the 1910 annual report, the Department’s first, to make a few points about regulation and supervision that still resonate with us in the Department today. “It is not my policy to waste time writing letters to good banks on trivial matters,” he noted. And: “I have endeavored to get away from.the formal proving of book figures.I have endeavored to get at the real condition and status of their assets; to learn and know the facts at all times.The character of the men [men and women today] administering the affairs of banks is noted, and I have insisted upon directors holding frequent meetings, and familiarizing themselves thoroughly with the affairs of their banks.”

The Superintendent commended “those who have been employed in the department for their efficiency, zeal, and general disposition to work hard to accomplish results,” a commendation I take this opportunity to reiterate today.

Finally, he noted with some apparent pride: “I have had the satisfactory moral support of conservative bankers.” This is something all of us at the Department of Financial Institutions aspire to achieve from all of our licensees.

In difficult times like these, with a poor economy, a troubled financial system, a state budget crisis, and regulatory restructuring proposals under consideration at both the state and federal level, it is worth reflecting on this long history. Our Department and California’s state chartered financial institutions have been through difficult periods before. Although institutions have suffered losses, and some have failed, the resiliency of our system is evident. The California economy will bounce back. Our political leaders will find a way through the fiscal crisis. And state chartered financial institutions will continue to support households, businesses and communities across the state in the decades to come under the thoughtful supervision of our Department.

I wish you strength and good fortune in these challenging times. As I have said in prior messages, my door is always open.


William S. Haraf
Department of Financial Institutions
45 Fremont St., Suite 1700
San Francisco, CA 94105-2219

California Financial Institution Commissioner Elected Treasurer of State Bank Regulators Group

William S. Haraf, California Commissioner of Financial Institutions, was elected to a two-year term as treasurer of the Conference of State Bank Supervisors (CSBS) during the organization’s 108th annual business meeting this week.

In his role as treasurer, Haraf also will serve as treasurer for the State Regulatory Registry LLC and for the CSBS Education Foundation. He will also serve on the CSBS Executive Committee.

Read the entire press release at http://www.csbs.org/AM/Template.cfm?Section=Press_Releases&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=22870

2009 Financial Institutions Law Available Now

The Banking Law, Payment Instruments Law, Business and Industrial Development Corporations Law, Savings Association Law, Credit Union Law, and Related Laws as of January 1, 2009 is available in PDF format from the Department of Financial Institutions’ (DFI) Web site at http://www.dfi.ca.gov/Laws_&_Regs/2009_DFI_Banking_Law.pdf

For more information, please contact Patrick Carroll at (415) 263-8559 or by email at pcarroll@dfi.ca.gov.

Notice to Licensees Regarding Information Security

The Department of Financial Institutions (DFI) expects all depositary licensees to comply with the Interagency Guidelines Establishing Information Security Standards (Security Guidelines). The Security Guidelines describe the federal regulatory agencies’ expectations for creating, implementing and maintaining an information security program [Effective July 1, 2001, codified at 12 C.F.R. Part 364, Appendix B (FDIC); 12 C.F.R. Part 208, Appendix D-2 and Part 225, Appendix F (Federal Reserve); and 12 C.F.R. Part 748, Appendix A (NCUA)]. Each information security program must include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. Among other items, the Security Guidelines requires financial institutions to oversee their service provider arrangements in order to protect the security of customer information maintained or processed by service providers.

It has come to our attention that some service providers have not implemented appropriate security measures to safeguard sensitive customer information residing on laptop computers. It is common for service providers like outside auditors engaged to express an opinion on the institution’s financial statement, outside professionals engaged to conduct internal audits, and other financial consultants to download sensitive information from the institutions records onto laptop computers. Often, sensitive information like customer/member names, addresses, account numbers, credit or debit card numbers, account balances and/or tax identification numbers are copied onto laptop computers. While laptop computers make it very convenient, economical and expedient for audit related work to be done remotely, they also pose a critical security threat to a depositary institution that upon the occurrence of a data security breach can result in material financial and reputation losses.

The DFI expects its depositary licensees and their service providers to implement appropriate administrative, technical and physical security measures to safeguard sensitive data residing on laptop computers and other mobile storage devices. At a minimum, a sound risk management program promotes the following:

Understand the risks – Develop policies and procedures that address the risks of mobile computing. Implement management controls that enforce the implementation of approved policies and procedures. Educate users on current risks associated with mobile technologies.

Install encryption, antivirus software, and firewalls – Install full disk encryption to prevent unauthorized access and protect sensitive information.

Install alarm systems (intruder, smoke, and fire) to protect office space contents when not in use.

Use physical locking devices for laptop computers – cable locks, docking stations, and/or lockdown enclosures.

Avoid leaving unsecured laptop computers and other mobile storage devices unattended – Lock laptop computers and any media that data resides on (CDs, USB drives, etc.) in fire-resistant, locking cabinets or other secured locations when not in use.

Back-up valuable data on a scheduled basis – Data back-up needs to happen frequently to minimize the risk to the organization in the event of loss.

Consider the use of computer tracking and recovery software – An asset tracking and recovery tool provides the means to track and recover computers that are lost or stolen and monitor any changes in computer memory, hard drives and peripherals.

The preceding list is not intended to be comprehensive. For a comprehensive discussion of recommended information security practices and related IT topics, please refer to the Federal Financial Institutions Examination Council’s (FFIEC) Information Technology Examination Handbook located at http://www.ffiec.gov/ffiecinfobase/html_pages/it_01.html .

In addition, regulators have issued several guidance documents for managing third-party risk and the outsourcing of technology services in recent years. FDIC Financial Institution Letter (FIL-44-2008) dated June 6, 2008; “Guidance for Managing Third-Party Risk” provides a general framework for the implementation of an effective third-party risk management process. This guidance outlines the potential risks that may arise from the use of third parties and address four basic elements of an effective third-party risk management program: (1) risk assessment, (2) due diligence in selecting a third party, (3) contract structuring and review, and (4) oversight. The use of third parties in no way diminishes the responsibility of the board of directors and management to ensure that the third-party activity is conducted in a safe and sound manner and in compliance with applicable laws, regulations, and internal policies.

If you have any questions about the IT/E-Banking Examination Program for banking institutions, please contact Deputy Commissioner Doug Kirkpatrick at (213) 897-2223; email: dkirkpatrick@dfi.ca.gov; or IT/E-Banking Program Manager Richard Schorr at (213) 897-2225; email: rschorr@dfi.ca.gov. For state-chartered credit unions, please contact Chief Examiner T. Bert McLane at (213) 897-9351; email: bmclane@dfi.ca.gov; or Assistant Chief Examiner Les Thompson at (213) 897-2174; email: lthompson@dfi.ca.gov.

Annual Fee Reminder

Invoices for 2009-10 Fiscal Year due July 1, 2009

The following institution types are reminded that annual fees are due in this office on or before July 1, 2009.

DFI calculated annual fees from its database and mailed invoices based on that calculation to fee payers.

Representative offices of foreign (other nation) banks

The annual representative license fee for fiscal year 2009-10 is due on or before July 1, 2009. The fee, as outlined in Section 1702(i) of the California Financial Code, is $250.00 for each California representative office of a foreign (other nation) bank doing business as of June 1, 2009.

Invoices were mailed June 1 and must be paid on or before July 1. Fee payers that do not concur with the calculated amounts have until Monday, June 15 to request recalculation or adjustment of the amount. DFI will not entertain any requests received after that date. Those foreign (other nation) banks which also maintain agency or branch offices in California are not subject to this fee. For questions about fees, call (415) 263-8552 or e-mail Annie Constantino at rconstantino@dfi.ca.gov.

Business and Industrial Development Corporation (BIDCO)

The annual license fee for fiscal year 2009-10 is due on or before July 1, 2009. The fee, as outlined in Section 31115(a)(6), is $2,000.00 for each BIDCO doing business as of June 1, 2009. Invoices were mailed June 1 and must be paid on or before July 1. For questions about fees, call (415) 263-8552 or email Annie Constantino at rconstantino@dfi.ca.gov.

DFI Consumer Brochures Now Available in Five Languages

The Department of Financial Institutions (DFI) informational brochures are now available in five languages. In addition to its English-language brochure, the consumer brochures are now available in Spanish, Chinese/Cantonese/Mandarin, Russian, Tagalog and Vietnamese. The brochures provide information on financial institution regulators along with contact information. Steps to file a consumer complaint are also provided. The brochures are available on the DFI website at http://www.dfi.ca.gov/consumers/brochures/(now the Department of Business Oversight https://dfpi.ca.gov) .

Bank on Sacramento

On May 26, the Department of Financial Institutions participated in the first partner convening for Bank on Sacramento. Bank on Sacramento is the newest partner to join Bank on California. Financial institutions and community organization were invited to the convening to learn how they can become partners. The Bank on Sacramento Coordinator is Spike Keil. If you are interested in partnering with Bank on Sacramento, please contact Spike by email at spike.keil@opr.ca.gov or by phone at (916) 322-2318.

For additional information on Bank on California, please visit http://www.bankoncalifornia.ca.gov/.

The following is a list of regional coordinators and contact information if you are interested in partnering with other Bank on California partners:

Bank on Fresno: Sevag Tateosian, United Way of Fresno County, stateosian@unitedwayfresno.org
Bank on Los Angeles: Elwood Hopkins, Emerging Markets, ehopkins@emergingmarkets.us
Bank on Oakland: Stacy Towles, United Way of the Bay Area, stowles@uwba.org
Bank on San Francisco: Leigh Phillips, Treasurer’s Office, Leigh.Phillips@sfgov.org
Bank on San Jose: Jim Dale, United Way of the Silicon Valley, jim.dale@uwsv.org

DFI Supports Census 2010 Outreach Effort

The Governor’s Office of Research is sponsoring regional convenings that are designed to bring community based organizations, business, and individuals together to maximize the number of Californians counted in the 2010 Census. The US Census Bureau will be present at each of these convenings.

The Department of Financial Institutions (DFI) supports this effort to count all Californians and encourages licensees and their customers to take part. There is much that financial institutions can do. Add a census message and/or logo to ATM receipts, or kiosk info; put census-related links on the financial institution’s Web site, place posters in branches, place inserts in mailings, newsletters, sponsor events, etc.

With your help, we can all work to make certain California does not lose representation or the valuable federal resources needed to move California forward. The Census is truly a team effort. To find out more about how your institution can become part of the team, go to http://www.cce.csus.edu/conferences/census/agenda.htm.

Commercial Bank Activity

New Bank

El Camino Bank
20946 Devonshire Street, Chatsworth, Los Angeles County
Correspondent: James H. Avery
The Avery Company LLC
P.O. Box 3009
San Luis Obispo, CA 93403
(805) 544-5477
Approved: 5/1/09

Conversion to State Charter

Universal Bank, West Covina, to convert to state-chartered commercial bank
Withdrawn: 5/6/09

Acquisition of Control

Koh-Wilshire, LP to acquire control of Wilshire State Bank
Filed: 4/27/09
Approved: 5/12/09

Purchase of Partial Business Unit

Bay Commercial Bank, Walnut Creek, to acquire the Castro Valley Branch of Community Banks of Northern California, Tracy
Effected: 5/27/09

Industrial Bank Activity

Conversion to State Charter

CapitalSource Bank, Pasadena, to convert to state-chartered commercial bank
Withdrawn: 5/8/09

Silvergate Bank, La Jolla, to convert to state-chartered commercial bank
Effected: 3/4/09

Premium Finance Company Activity

New Premium Finance Company

Ocean View Premium Finance Co., Inc.
8530 La Mesa Boulevard, Suite 208, La Mesa, San Diego County
Opened: 5/26/09

Voluntary Surrender of License

Coastal Premium Finance Corporation
Notified: 5/12/09
Effected: 5/12/09

Credit Union Activity

Field of Membership

One credit union received approval to add one new field of membership during April 2009.

Bylaw Amendment

One credit union received approval for one bylaw amendment during April 2009.


Alisos Credit Union, Norwalk, to merge with and into Camino Federal Credit Union, Montebello
Filed: 5/28/09

American River HealthPro Credit Union, Rancho Cordova, to merge with and into SAFE Credit Union, North Highlands
Filed: 5/6/09
Approved: 5/12/09

Foreign (Other Nation) Bank Activity

New Office

Canadian Imperial Bank of Commerce
6080 Center Drive, City and County of Los Angeles (Downgrade from Nondepositary Agency to Representative Office)
Filed: 6/16/08
Approved: 5/18/09

Woori Bank
3360 W. Olympic Boulevard, City and County of Los Angeles (Upgrade from Nondepositary Agency to Wholesale Branch Office)
Effected: 5/26/09

Voluntary Surrender of License

Nacional Financiera, S.N.C.
633 W. 5th Street, City and County of Los Angeles (Representative Office)
Effected: 5/1/09

1901 Avenue of the Stars, City and County of Los Angeles (Representative Office)
Notified: 5/12/09
Effected: 5/15/09

Transmitter of Money Abroad Activity

New Transmitter

Dahabshil, Inc.
Filed: 5/6/08
Approved: 11/4/08
Opened: 5/19/09

Google Payment Corporation
Opened: 5/21/09

Tempo Financial U.S. Corporation
Opened: 5/19/09

Unidos Financial Services, Inc.
Filed: 5/5/09

Voluntary Surrender of License

Bancomercio de El Salvador, Inc.
Effected: 3/31/09

Payment Instrument Activity

New Payment Instrument

Order Express, Inc.
Filed: 5/4/09

Commissioner of Financial Institutions

Bulletin for Month ended
May 2009, issued pursuant
to Financial Code section 258