FDIC Releases Report on the Unbanked; Captures Movement to Online Banking

On October 20, the FDIC released a report on the use of the traditional banking system in the United States. According to the FDIC’s executive summary of the report, the percentage of U.S. households in which no one had a checking or savings account (the “unbanked”) dropped to 7.0 in 2015. This is the lowest unbanked percentage since 2009, the year the FDIC began conducting an annual survey of unbanked and underbanked households. The FDIC cited several reasons why some households remain unbanked, the most common of which was the cost of maintaining an account, with an estimated 57.4% of respondents citing it as a factor in their decision not to maintain an account, and 37.8% of respondents citing it as the main reason underlying their decision not to maintain an account. Consistent with past survey results, the report notes that unbanked and underbanked rates are higher among lower-income households, less-educated households, younger households, minority households, and working-age disabled households. Additional findings highlighted in the report include: (i) a 1.9% increase from 2013-2015 in the use of prepaid cards; (ii) rapid growth (31.9% of users in 2015 compared to 23.2% in 2013) in the use of mobile and online banking, reflecting “promising opportunities to use the mobile platform to increase economic inclusion”; and (iii) an opportunity for banks to meet the credit needs of some households with an “unmet demand” for credit by “promoting the importance of building credit history, incorporating nontraditional data into underwriting, and increasing households’ awareness of personal credit products.”


Proposed Rule Issued to Stimulate Robust Marketplace for Private Flood Insurance

On October 20, the FDIC, OCC, Federal Reserve, Farm Credit Administration, and National Credit Union Administration issued a proposed rule intended to develop further the private flood insurance marketplace by implementing certain provisions of the 2012 Biggert-Waters Flood Insurance Reform Act (Biggert-Waters Act). Notably, the proposed rule would “require regulated lending institutions to accept policies that meet the statutory definition of private flood insurance in the Biggert-Waters Act and permit regulated lending institutions to accept flood insurance provided by private insurers that does not meet the statutory definition of ‘private flood insurance’ on a discretionary basis, subject to certain restrictions.” Comments on the proposal are due 60 days after it is published in the Federal Register.


Federal Banking Agencies Consider Joint ANPR to Address Cybersecurity Standards

On October 19, the FDIC, the OCC, and the Federal Reserve, issued an Advanced Notice of Proposed Rulemaking (ANPR) to further the “development of enhanced cyber risk management standards for the largest and most interconnected entities under their respective supervisory jurisdictions, and those entities’ service providers.” These standards, according to the ANPR, are intended to “increase the operational resilience” of supervised entities and their service providers and, based on the interconnectedness of these entities, “reduce the impact on the financial system in case of a cyber event experienced by one of these entities.” The ANPR proposes organizing enhanced cyber standards into the following categories: (i) cyber risk governance; (ii) cyber risk management; (iii) internal dependency management; (iv) external dependency management; and (v) incident response. The ANPR further explains that the banking agencies “are considering implementing the enhanced standards in a tiered manner, imposing more stringent standards on the systems of those entities that are critical to the functioning of the financial sector.” Comments on the ANPR, which would not apply to community banks, are due January 17, 2017.


House Considers Further Narrowing FDIC Scope on Brokered Deposits

On September 27, the House Financial Institutions and Consumer Credit Subcommittee heard testimony on HR 4116, a bill that would affect how the FDIC determines the amount of deposits at insured banks that qualify as “brokered deposits.” The Federal Deposit Insurance Act currently requires larger premiums for banks with higher ratios of brokered deposits as compared to traditional deposits. This bill would exclude reciprocal deposits from the definition of brokered deposits where the condition of the institution at its most recent examination was adjudged either good or outstanding, or where the total reciprocal deposits of the institution do not exceed either $10 billion or 20% of its total liabilities.  This narrowed scope of brokered deposits would come on the heels of the FDIC’s decision to exclude smaller community banks from including reciprocal deposits are brokered deposits announced earlier this year.

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OCC Proposes Framework for Placing Uninsured Banks into Receivership

On September 13, the OCC published a proposed rule under the authority of the National Bank Act, to provide a framework for receiverships for national banks that are not insured by the FDIC. For years the OCC has not placed uninsured banks into receivership, but the agency claims that establishing a clear and efficient process for handling failed uninsured banks would “contribute to the broader stability of the federal banking system.” Intended to “provide clarity to market participants about how they will be treated in receivership,” the OCC’s proposed framework outlines processes parallel to that of the FDIC’s receivership capacities. The proposal describes, among other things, (i) certain powers the receiver would hold, as well as the receiver’s duties in “winding up” an uninsured bank’s affairs; (ii) the process for submitting claims against the uninsured bank in receivership, and the receiver’s responsibilities to review such claims; (iii) the payment of dividends on claims and the distribution to shareholders of residual proceeds; and (iv) the receiver’s powers and duties related to the status of fiduciary and custodial accounts. Comments on the proposal are due November 14, 2016.