On September 20, the CEO of a major national bank faced questions from the House Financial Services Committee over consumer account practices uncovered during a recent enforcement action by the CFPB. The CEO will return to Capitol Hill on September 29 for additional testimony in front of the Committee. In addition, the Director of the CFPB and the Comptroller of the Currency faced scrutiny from the Senate Committee on Banking, Housing & Urban Affairs on their agencies awareness of, and failure to prohibit, the bank’s alleged actions for more than two years. In prepared testimony, Director Cordray indicated that the civil penalty levied against the bank was the “largest fine by far that the Consumer Bureau has imposed on any financial company to date” calling it a “dramatic amount as compared to the actual financial harm to consumers” but also “justified here by the outrageous and abusive nature of these fraudulent practices on such an enormous scale.” Director Cordray further stated that this enforcement action should help clarify how the CFPB will continue to analyze and enforce the prohibition on “abusive” practices under its mandate. Meanwhile Comptroller Curry explained how this enforcement action demonstrates the complimentary roles played by the OCC and the CFPB in supervising bank practices.
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.
On September 20, U.S. Representative David Schweikert (R-AZ) sent a letter to Comptroller of the Currency Thomas Curry, asking the OCC to consider a more flexible and uniform approach for regulating digital currencies and the use of blockchain technology. Specifically, the letter notes that much of the development of digital currencies does not originate within institutions that are already federally chartered. Representative Schweikert further argues that most institutions active in this area do not wish to engage in traditional lending or deposit-taking activity, and instead seek a more limited scope of regulation. Thus, the letter asks Comptroller Curry to consider the following questions as the OCC continues to formulate its policy on digital currencies: (i) can the OCC create a limited purpose charter for non-bank financial service firms operating in this area? (ii) can the OCC take steps to coordinate with AML/CTF authorities, and state regulators, to develop flexible approaches that would allow U.S. digital currency firms to be competitive in light of various foreign regulatory frameworks? and (iii) how can the OCC help to facilitate relationships between digital currency firms and national banks?
On September 21, the House of Representatives voted to pass the Iranian Leadership Asset Transparency Act. This bill, HR 5461, would require the Treasury Secretary to publish a list of assets held by senior Iranian political and military leaders, including where the assets were acquired, and how they are employed. The Treasury would also be required to identify new methods used to evade anti-money laundering laws and provide recommendations to improve techniques to combat illicit uses of the U.S. financial system by each official. The required report would be posted on the Treasury Department’s website in English, but also in the three major languages spoken within Iran.
The House of Representatives delayed discussion of HR 1309, the Systemic Risk Designation Improvement Act, in an effort to give the bill’s sponsor Blaine Luetkemeyer (R-MO) additional time to propose a method to fund the estimated $115 million cost of implementing the changes in regulatory oversight. The increased oversight costs stem, in part, from provisions in the bill that would require closer involvement by the Financial Stability Oversight Council (FSOC) in determining whether a bank holding company is a Systemically Important Financial Institution (SIFI), and thus subject to enhanced supervision and macro-prudential standards by the Federal Reserve. Under the current law, originating from Title I of the Dodd-Frank Act, the FSOC looks only to whether the bank holding company has $50 billion in assets. Whereas under HR 1309, the FSOC would also factor whether a bank was subject to material financial distress, as well as the nature, scope, size, scale, concentration, interconnectedness or mix of the bank’s activities in making the SIFI designation.