On July 29, the FDIC issued FIL-50-2016 to request comments on the agency’s proposed Guidance for Third-Party Lending, which aims to “set forth safety and soundness and consumer compliance measures FDIC-supervised institutions should follow when lending through a business relationship with a third party.” Pursuant to the proposed guidance, third-party lending would be defined as “a lending arrangement that relies on a third party to perform a significant aspect of the lending process.” Intended to supplement the FDIC’s 2008 Guidance for Managing Third-Party Risk, the proposed guidance seeks to establish specific expectations for third-party lending arrangements. FIL-50-2016 includes 10 questions related to (i) the proposed definition of third-party lending and the scope of the guidance; (ii) the potential risks arising from the use of third parties, with a particular emphasis on risks associated with third-party lending programs; (iii) the proposed expectations for establishing a third-party lending risk management program, including expectations around strategic planning policy development, risk assessment, due diligence and ongoing oversight, model risk management, vendor oversight, and contract structuring and review; (iv) supervisory considerations, including, but not limited to, credit underwriting and administration, loss recognition practices, and consumer compliance; and (v) the proposed examination procedures, which would establish “a 12-month examination cycle for institutions with significant third-party lending programs, including for those institutions that may otherwise qualify for an 18-month examination cycle.” Comments on the proposed guidance, with a particular emphasis on the questions posed in FIL-50-2016, are due by October 27, 2016.
On August 5, the FFIEC announced that the OCC, the FDIC, and the Federal Reserve are seeking public comment on a proposal for a new Consolidated Reports of Condition and Income for Eligible Small Institutions (FFIEC 051/Call Report). The proposed Call Report is a streamlined version of the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only (FFIEC 041), and would be applicable to financial institutions with domestic offices only and total assets of less than $1 billion. Intended to ease the reporting requirements for smaller institutions, the proposed Call Report would remove approximately 40% of about 2,400 data items in FFIEC 041. FFIEC 041 would remain applicable to institutions with domestic offices only that do not file the proposed Call Report. The banking agencies are also seeking public comment on proposed revisions to the FFIEC 041 and the Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices (FFIEC 031). Comments are due 60 days after Federal Register publication, which has not yet occurred.
On July 29, the FDIC issued FIL-51-2016 to remind and encourage bank management to maintain open communications with FDIC personnel regarding supervisory findings. FIL-51-2016 is a re-issuance of and update to the March 1, 2011 FIL-13-2011, and emphasizes that “open dialogue with bank management is critical to ensuring the supervisory process is effective in promoting an institution’s strong financial condition and safe-and-sound operation.” If an institution has concerns about FDIC examination findings, the letter advises the institution to (i) discuss the issues with the FDIC examiner-in-charge, or contact the field or regional office representative; (ii) utilize the FDIC’s formal appeals process for material supervisory determinations; or (iii) contact the FDIC Office of the Ombudsman for “confidential, neutral, and independent” information and assistance if disagreements were not resolved informally at the Division-level. According to the letter, FDIC policy prohibits any retaliation, abuse, or retribution by any FDIC examiner or other personnel against an institution. The letter further emphasizes that “[s]uch behavior against an institution constitutes unprofessional conduct and will subject the examiner or other personnel to appropriate disciplinary or remedial action.”
On August 2, the Federal Reserve, OCC, and FDIC released FAQs regarding their standards for assessing the diversity policies and practices of regulated entities. Following the June 10, 2015 Federal Register publication titled “Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies” (Policy Statement), the FAQs seek to clarify the agencies’ standards for entities conducting self-assessments of their diversity policies. Although self-assessments are voluntary, the banking agencies strongly encourage financial institutions to disclose their diversity policies, diversity practices, and self-assessment information on their websites and provide the same to their primary federal financial regulator.
On July 15, the OCC, the FDIC, and the Federal Reserve released final revisions to the Interagency Questions and Answers Regarding Community Reinvestment document. The revised Questions and Answers document is based on a September 10, 2014 proposal and addresses questions from bankers, community organizations, and others pertaining to: (i) innovative or flexible lending practices; (ii) responsiveness and innovativeness of an institution’s loans, qualified investments, and community development services; (iii) availability and effectiveness of retail banking services; and (iv) community development-related issues, such as economic development, community development loans and activities, and community development services. According to the Questions and Answers document, the agencies did not adopt one of the revisions in the September 2014 proposal that had addressed “the availability and effectiveness of retail banking services.”