The DFA eliminated the OTS as a regulator of Thrifts Now Fed

The DFA eliminated the OTS as a regulator of Thrifts. Now Federally-chartered Thrifts are regulated by OCC and FDIC. Many of the requirements that were different have been eliminated.

One that remains is the Qualified Thrift Lender (QTL) Test. This requirement moves Thrifts away from being as diversified as Commercial Banks. (See attached data for comparison of Commercial Bank / Thrift percentage breakout of Total Assets in Loans and Leases by loan type and by size.) DFA imposes new sanctions for the failure by a savings association to comply with the QTL Test. The principal change is that the one-year grace period to return to compliance is eliminated. These sanctions took effect the day after the enactment of DFA. There are many reasons pro and con to keep the QTL Test.

The question is whether you think the QTL Test should be continued, providing a more dedicated mortgage lender in Thrifts than in Commercial Banks, or should Thrifts be converted to Commercial Bank charters? Why?

Solution

Commercial banks are those financial institutions which receive the cash deposit and issue loans to individuals as well as to businesses whereas Thrift are those financial institutions which provide mortgage loan or known as mortgage lender. .

The commercial bank offers a variety of services and provides a range of accounts whereas in thrift case, only a few type of accounts they offer. The banks provides its better services for both the individuals as well as to the business but thrift provides or offers its services to the individuals.  

The thrift charges a low rate of interest as compared to the interest charged by the commercial banks as it gers access at a low cost from the Federal Home Loan Banks. Also the thrift have high liquidity as compared to the Banks.  

In conclusion, we conclude that the QTL should be continued as it provides a more dedicated mortgage lender in Thrifts than in Commercial Banks and provides low rate of interest to the individuals. Though not beneficial for the business but for the individual it is best option.