Frontier State Bank Oklahoma v. FDIC

During routine examinations, the Federal Deposit Insurance Corporation (FDIC) raised an issue with Frontier State Bank Oklahoma City's use of a "leverage strategy" whereby the bank funded long-term investments with short-term borrowing in order to generate profits from the "spread" between long-term and short-term interest rates. The FDIC's enforcement staff obtained a cease-and-desist order from the FDIC Board which required the Bank mitigate the risks associated with its leverage strategy. Frontier appealed the Board's mitigation order to the Tenth Circuit. The FDIC argued that the Court lacked authority to review the order's leverage capital requirements, and defended the order as a reasonable exercise of the FDIC Board's authority. Upon review, the Tenth Circuit concluded that the Board's order was not arbitrary or capricious, and denied its petition for review. View "Frontier State Bank Oklahoma v. FDIC" on Justia Law