On January 15, the FDIC announced Charles Yi as the agency’s new general counsel. Previously, Yi served as staff director and chief counsel on the Senate Committee on Banking, Housing, and Urban Affairs, as Deputy Assistant Secretary for Banking and Finance at the Department of Treasury, and as Counsel for the Committee on Financial Services of the U.S. House of Representatives. Richard Osterman, who has served as acting General Counsel, will return to his previous position as Deputy General Counsel.
On January 21, the Committee on Financial Services, in a voice vote, agreed to a new oversight plan that identifies the areas that the Committee and its subcommittees plan to oversee during the 114th Congress. Notable sections of the oversight plan include: (i) examining the governance structure and funding mechanism of the CFPB; (ii) reviewing recent rulemakings by the CFPB and other agencies on a variety of mortgage-related issues; (iii) examining the effects of regulations promulgated by Dodd-Frank on community financial institutions; and (iv) examining proposals to modify the GSEs.
On January 15, the Department of Treasury’s Office of Foreign Assets Control (OFAC) announced a final rule amending its Cuban Assets Control Regulations (CACR) to reflect policy changes previously announced by President Obama on December 17. The amendments (i) allow U.S. financial institutions to maintain correspondent accounts at Cuban financial institutions; (ii) allow U.S. financial institutions to enroll merchants and process credit and debit card transactions for travel-related and other transactions consistent with the CACR; (iii) increase the limit of remittances to $2,000 from $500 per quarter; and (iv) under an expanded license, allow U.S. registered brokers or dealers in securities and registered money transmitters to process authorized remittances without having to apply for a specific license. In addition, OFAC released a FAQ sheet to help explain the new amendments, which are effective January 16.
On January 15, the Federal Reserve and the FDIC issued a joint press release making available the public sections of resolution plans of firms with less than $100 billion in qualifying nonbank assets. The Dodd-Frank Act requires that certain banking institutions periodically submit resolution plans to the Federal Reserve and the FDIC describing the bank’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company. The public portions of these “living wills” are available on the Federal Reserve and FDIC websites.
On January 14, the OCC released its schedule of workshops for directors of national community banks and federal savings associations. The OCC examiner-led workshops provide practical training and guidance to directors of national community banks and federal savings associations to support the safe and sound operation of community-based financial institutions. The four workshops planned are (i) “Building Blocks for Directors,” (ii) “Risk Governance,” (iii) “Compliance Risk,” and (iv) “Credit Risk.” Each workshop costs $99.00. Registration is required.
On January 13, the OCC released a paper entitled, “An Opportunity for Community Banks: Working Together Collaboratively.” The paper describes how community banks can pool resources to “obtain cost efficiencies and leverage specialized expertise.” The paper explores the benefits of collaboration and outlines how community banks can structure collaborative arrangements. The paper cites examples of ways that community banks can, and already do collaborate, including: (i) networking, or exchanging information and ideas; (ii) jointly purchasing materials or services; (iii) sharing specialized team or staff members; and (iv) jointly providing and/or developing products and services.
On January 6, President Obama announced his intent to nominate Allan R. Landon to serve on the Board of Governors of the Federal Reserve System. If confirmed by the U.S. Senate, Landon would serve out the remaining term of former Fed Governor Sarah Bloom Raskin, who departed to become Deputy Secretary of Treasury. Previously, Landon was a partner at Ernst & Young LLP and served as Chairman and CEO of Bank of Hawaii Corporation.
On January 7, the Republican members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs elected Sen. Richard Shelby (R-Ala) as its new chairman for the 114th Congress. Sen. Shelby previously served as Committee chairman from 2003 to 2006. Sen. Sherrod Brown (D-OH) will serve as the Committee’s ranking member.
On January 6, the Federal Reserve appointed Thomas Laubach as director of the Division of Monetary Affairs. Mr. Laubach will advise the board and the Federal Open Market Committee on the conduct of monetary policy. Mr. Laubach first joined the Board’s staff officially in 2001, and has also served as a visiting senior economist at both the Bank for International Settlements and the President’s Council of Economic Advisers. Mr. Laubach succeeds William B. English, who was appointed senior special adviser to the Board.
CSBS Issues Policy, Draft Model Regulatory Framework, and Request for Comment Regarding State Regulation of Virtual Currency
As previously reported in our January 8 Digital Commerce & Payments alert and in InfoBytes, the Conference of State Bank Supervisors (“CSBS”) issued a Policy on State Regulation of Virtual Currency (the “Policy”), Draft Model Regulatory Framework, and a request for public comment regarding the regulation of virtual currency on December 16, 2014. The Policy and Draft Model Regulatory Framework were issued through the work of the CSBS Emerging Payments Task Force (the “Task Force”). The Task Force was established to explore the nexus between state supervision and the development of payment systems and is seeking to identify where there are consistent regulatory approaches among states.
On January 6, a large national bank filed a motion to dismiss a suit alleging it charged improper overdraft fees. Filed last year in the Central District of California, the suit claims the bank violated federal and state laws – the EFTA and California’s unfair competition law – by posting customers’ larger debit transactions first, causing customer accounts to deplete faster resulting in more overdraft fees. In its motion, the bank claims it voluntarily stopped charging overdraft fees for one-time debit card transactions and most ATM withdrawals prior to the effective date of the amended regulations. The bank also argues that state law claims regarding good faith practices are preempted by the federal National Banking Act (NBA). The matter is scheduled to be heard on March 3. Stanionis et al v. Bank of America, No. 14-cv-2222
On December 24, a Maryland-based bank entered into an FDIC consent order involving alleged deficiencies in its BSA/AML compliance program. The consent order requires that the bank’s board of directors increase its oversight of the bank’s BSA compliance program. In addition, under the consent order, the bank must (i) appoint a qualified BSA officer and (ii) conduct a retrospective review of currency transaction reports beginning in May 2013 until the effective date of the consent order to determine whether transactions were properly identified and reported.
On December 18, the FDIC announced the release of its Winter 2014 issue of Supervisory Insights, which focuses on effective interest rate risk management at community and mid-size financial institutions. Specific articles included in the publication are (i) “Effective Governance Processes for Managing Interest Rate Risk,” (ii) “Developing the Key Assumptions for Analysis of Interest Rate Risk,” (iii) “Developing an In-House Independent Review of Interest Rate Risk Management Systems,” and (iv) “What to Expect During an Interest Rate Risk Review.”
On December 17, the OCC announced the release of its semiannual report on key risk areas affecting the federal banking system. Specifically regarding community and midsize banks, the report identifies areas where the OCC intends to heighten its supervisory attention including, but not limited to, corporate governance, operational risk, cyber risk, and compliance risk, specifically related to fair lending and BSA/AML. Other notable takeaways from the report include continued improvement in the overall financial condition of community and midsize banks. However, the report also indicated that smaller banks, due to increased competition for loan demand and low investment yields, continue to experience pressure on earnings.
On December 16, the OCC announced the release of their annual survey of credit underwriting practices identifying trends in lending standards and credit risk for the most common types of commercial and retail credit provided by banks. According to the report, leveraged loans, indirect consumer loans, credit cards, large corporate loans, and international loans accounted for the largest easing in underwriting standards. The survey also noted competitive pressures, ample liquidity, and the desire to reach for yield in a low-interest rate environment as contributing factors to the loosened underwriting. As a group, large banks reported the highest share of eased standards. The survey included 91 of the largest banks and thrifts and covered $4.9 trillion of loans representing roughly 94 percent of all loans in the federal banking system.