On February 18, three federal banking agencies – the Federal Reserve Board, OCC, and FDIC – issued a joint notice seeking public comments on a proposed information collection form and its reporting requirements, FFIEC 102 – “Market Risk Regulatory Report for Institutions Subject to the Market Risk Capital Rule.” If finalized, market risk institutions will be required to file the proposed FFIEC 102 to allow the agencies to, among other things, assess “the reasonableness and accuracy of the institution’s calculation of its minimum capital requirements . . . and . . . the institution’s capital in relation to its risks.” The proposed FFIEC 102 sets forth reporting instructions for financial institutions to which the market risk capital rule applies, and specifies that reporting requirements would take effect starting March 31, 2015. Comments to the proposal must be submitted on or before March 20.
On February 20, the OCC announced that it would be removing the “Deposited-Related Consumer Credit” booklet, originally issued on February 11, from its website. The OCC’s February 11 booklet seemingly required banks to change overdraft protection services, however the agency has since stated that the booklet was not intended to establish new policy. According to the OCC’s website, the agency will “[revise] the booklet to clarify and restate the existing law, rules, and policy.” When the OCC releases its amended version of the booklet, we will update the February 16 Special Alert to reflect the agency’s modifications.
Special Alert: OCC Guidance Applies Consumer Protection Requirements to Overdraft Lines and Protection Services
UPDATE: On February 20, the OCC announced that it would be removing the “Deposited-Related Consumer Credit” booklet, originally issued on February 11, from its website. The OCC’s February 11 booklet seemingly required banks to change overdraft protection services, however the agency has since stated that the booklet was not intended to establish new policy. According to the OCC’s website, the agency will “[revise] the booklet to clarify and restate the existing law, rules, and policy.” When the OCC releases its amended version of the booklet, we will update the February 16 Special Alert to reflect the agency’s modifications.
On February 11, 2015, the OCC issued the “Deposit-Related Consumer Credit” booklet of the Comptroller’s Handbook, which replaced the “Check Credit” booklet. The booklet provides updated guidance and examination procedures that the OCC will use to assess a bank’s deposit-related consumer credit (DRCC) products, which include check credit (overdraft lines of credit, cash reserves, and special drafts), overdraft protection services, and deposit advances. In many respects, it tracks the CFPB’s proposed prepaid rule, which would apply the Truth-in-Lending Act and Regulation Z to a broad range of credit features associated with prepaid products. Read more…
On February 10, officials from federal and state banking authorities – the Fed, FDIC, NCUA, OCC, and the CSBS – testified at a U.S. Senate Banking Committee on ways the agencies can provide “regulatory relief” to community banks and credit unions, which disproportionately incur burdens to implement the rules and provisions of the Dodd-Frank Act. Specifically, officials from each of the federal banking agencies detailed current initiatives and proposals that would provide less burdensome compliance costs.
On January 26, the OCC named Michael Brickman as the Deputy Comptroller for Special Supervision. In his role, Brickman will manage the supervision of the OCC’s most problematic midsize and community banks, and will oversee the “development and implementation of rehabilitation or resolution strategies for assigned banks and savings associations.” Prior to joining the OCC in 2011 as Director for Special Supervision, Brickman held various positions at the Office of Thrift Supervision, including Conglomerate Examiner—Complex and International Organizations, Senior Advisor to the Managing Director of Supervision, and Director for Regional Activities.
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 December 19, the OCC announced the release of its quarterly Mortgage Metrics Report. The report highlights the mortgage performance of first-lien mortgages serviced by seven national banks and one federal savings association through September 30, 2014. Notably, the report showed 93 percent of mortgages were current and performing at the end of the quarter, compared with 92.9 percent at the end of the previous quarter and 91.4 percent a year earlier. Also, the report showed a 41.5 percent decrease in foreclosure activity in the last year. The mortgages included in this portfolio represent 46 percent of all residential mortgages in the U.S., approximately 24 million loans totaling $4.0 trillion in principal balances.
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.
On November 5, the OCC, FDIC, and the Fed announced that they will hold an outreach meeting on December 2 to review regulations under the Economic Growth and Regulatory Paperwork Reduction Acts of 1996 (EGRPRA). This is the first of a series of outreach meetings and will be held at the LA branch of the Federal Reserve Bank of San Francisco. Under the EGRPRA, the FFIEC and the previously mentioned agencies must review their regulations at least every 10 years to identify any unnecessary or outdated regulations. The December 2 meeting will feature panel presentations by industry participants and consumer and community groups.
On October 30, five federal agencies – the FCA, FDIC, NCUA, OCC and the Fed – issued a proposed rule regarding flood insurance. The proposed rule will amend regulations relating to loans secured by property located in special flood hazard areas. Specifically, the proposed rule would (i) establish requirements in connection with the escrow of flood insurance payments; (ii) provide certain borrowers with the option to escrow flood insurance premiums and fees; and (iii) eliminate the HFIAA requirement “to purchase flood insurance for a structure that is part of a residential property located in a special flood hazard area if that structure is detached from the primary residential structure and does not also serve as a residence.” Comments on the proposed rule are due by December 29, 2014.
On October 27, the OCC announced the appointment of Darrin Benhart as Deputy Comptroller for Supervision Risk Management and Bethany Dugan as Deputy Comptroller for Operational Risk. Mr. Benhart will assume the position of full-time chair of the agency’s National Risk Committee, responding to a recommendation from a peer review that the agency create such a role. Mr. Benhart’s position is intended to strengthen the OCC’s ability to address risk in the national banking system. Prior to his appointment, Mr. Benhart served as the Deputy Comptroller for Credit and Market Risk. In her new role, Ms. Dugan will oversee the policy and examination procedures developments, specifically those that address operational risk issues.
On October 22, coordinated by the Department of Treasury, six federal agencies – the Board of Governors, HUD, FDIC, FHFA, OCC, and SEC – approved a final rule requiring sponsors of securitized transactions, such as asset-backed securities (ABS), to retain at least 5 percent of the credit risk of the assets collateralizing the ABS issuance. The final rule, which largely mirrors the proposed rule issued in August 2013, defines a “qualified residential mortgage” (QRM) and exempts securitized QRMs from the new risk retention requirement. Government-controlled Fannie and Freddie are exempt from the rule. Most notably, the final rule’s definition of a QRM parallels with that of a qualified mortgage as defined by the CFPB. Further, initially part of the proposed rule, the final rule does not include down payment provisions for borrowers. The final rule will be effective one year after publication in the Federal Register for residential mortgage-backed securities, and two years after publication for all other types of securitized assets.
On October 3, the OCC appointed Kathy Murry to serve as its Senior Deputy Comptroller for Management and Chief Financial Officer. Ms. Murry had served as the Deputy Comptroller and the Chief Accountant since 2009, and has been serving as the agency’s acting Senior Deputy Comptroller for Management and Chief Financial Officer since June 2014. In her new role, Ms. Murry will serve on the OCC Executive Committee and oversee the OCC’s financial management, human resources, continuing education, information technology, security, workplace services, and performance improvement.