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Financial Services Law Insights and Observations

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  • FDIC announces Tennessee disaster relief

    On January 19, the FDIC issued FIL-06-2022 to provide regulatory relief to financial institutions and facilitate recovery in areas of Tennessee affected by severe storms, straight-line winds, and tornadoes. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the weather and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans, so long as these measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.

    Bank Regulatory Federal Issues FDIC Mortgages Disaster Relief Consumer Finance Tennessee

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  • Fed issues cease and desist order against California bank

    On January 18, the Federal Reserve Board issued a cease and desist order against two California-based bank holding companies (companies) and their jointly-owned bank, due to “additional safety and soundness deficiencies at the Bank, including with respect to unsecured loans,” following the termination of a February 2021 written agreement. According to the Fed’s order, “the Bank is currently operating without a permanent Chief Executive Officer, and Chief Financial Officer, and a sufficient number of board members, which are vital to the safe and sound operations of the Bank in light of the numerous remedial requirements of the Written Agreement.” The order requires, among other things, that the bank, within 60 days, submit written lending and credit administration policies and procedures and retain an independent third party to assess the adequacy of the bank’s compensation governance, policies, procedures, and internal controls. The order imposes no financial penalty.

    Bank Regulatory Federal Reserve Cease and Desist Enforcement California

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  • OCC’s Hsu discusses bank cryptocurrency regulation

    On January 13, acting Comptroller of the Currency Michael J. Hsu spoke before the British American Business Transatlantic Finance Forum’s Executive Roundtable to discuss stablecoins and other crypto-assets regulations. In his remarks, Hsu described stablecoins as “the oxygen of the crypto ecosystem,” noting that they help link cryptocurrencies to fiat currencies. Hsu noted that crypto has “gone mainstream,” providing the example that “[s]ixteen percent of U.S. adults say that they have owned, traded or used some form of cryptocurrency.” In discussing the underbanked and minorities interested in crypto, Hsu quoted a survey finding that “37 percent of the underbanked indicated that they own cryptocurrency, compared to 10 percent of the fully banked.” Hsu argued that banking regulations are designed to mitigate run risks for stablecoins, stating that “[s]tablecoin issuers subject to bank regulation would give holders of those stablecoins confidence that those coins were as reliable and ‘money good’ as bank deposits,” and that “[s]trong, targeted federal regulation of money and banking can help establish a solid foundation for the economy enabling healthy innovation and growth.” While Hsu expressed his excitement for “the pace of innovation in crypto,” he warned that “a careful approach is warranted,” as a result of the “lack of standards and controls in the crypto space.” Hsu also expressed that “bank regulation would give credibility to the ‘stable’ part of stablecoins,” and stressed the need for a coordinated and collaborative regulatory approach “with regards to large crypto intermediaries, which are increasingly operating globally and across a wide range of activities.” 

    Bank Regulatory Federal Issues OCC Cryptocurrency Stablecoins

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  • Biden nominates three for Fed

    Federal Issues

    On January 14, President Biden nominated Sarah Bloom Raskin to serve as Vice Chair for Supervision for the Federal Reserve Board, and Lisa Cook and Philip Jefferson to serve as Board Governors. Earlier on January 4, Biden also submitted new nominations for Jerome Powell to serve a second term as Chair of the Federal Reserve Board and for Fed Governor Lael Brainard to serve as Vice Chair of the Board of Governors, replacing current Vice Chair Richard H. Clarida. (Covered by InfoBytes here.) If all the nominees are confirmed by the Senate, the Board will include the first Black woman and the fourth Black man and will be majority women. Previously, Raskin served as the Deputy Secretary of the U.S. Department of the Treasury where she pursued innovative solutions related to climate risk, cybersecurity, and consumer safeguards in the financial marketplace. Raskin also served as a Fed Governor where she helped conduct the nation’s monetary policy and promoted financial stability. Additionally, Raskin served as the Commissioner of Financial Regulation for the State of Maryland where she and her agency regulated Maryland’s financial institutions, including all state-chartered depository institutions, banks, credit unions, mortgage lenders, mortgage servicers, and trust companies, among others. 

    Earlier on January 10, Clarida announced his intention to resign from the Federal Reserve Board effective January 14. Clarida has been a member of the Board since September 2018, and his statutory term was set to expire on January 31. Clarida’s announcement follows key regulatory nominations sent to the Senate by Biden on January 4 and 7 (see here and here). Among the recent nominations was a resubmission of Alvara Bedoya to serve as a Democratic commissioner at the FTC after the Senate Committee on Commerce, Science, and Transportation failed to report favorably on Bedoya’s 2021 nomination and it expired at the end of the December session of Congress. If confirmed, Bedoya would fill the FTC commissioner seat vacated by current CFPB Director Rohit Chopra. (Covered by InfoBytes here.)

    Federal Issues Bank Regulatory Federal Reserve Biden FTC

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  • FDIC and FinCEN launch Tech Sprint to help digital identity proofing

    Fintech

    On January 11, the FDIC’s technology lab, FDiTech, and FinCEN announced the launch of a Tech Sprint challenging participants “to develop solutions for financial institutions and regulators to help measure the effectiveness of digital identity proofing—the process used to collect, validate, and verify information about a person.” According to the Tech Sprint program, Measuring the Effectiveness of Digital Identity Proofing for Digital Financial Services, solutions developed from this Tech Sprint will inform future FDIC, FinCEN, and industry-led efforts, plans, and programs to: (i) increase efficiency and account security; (ii) decrease fraud and other forms of identity-related crime, money laundering and terrorist financing; and (iii) foster customer confidence in the digital banking environment. According to the agencies, digital identity proofing is “challenged by the proliferation of compromised personally identifiable information, the increasing use of synthetic identities, and the presence of multiple, varied approaches for identity proofing.” The FDIC and FinCEN will open registration in the coming weeks, and stakeholders interested in participating will have approximately two weeks to submit applications.

    Fintech FDIC FDiTech Consumer Finance Bank Regulatory FinCEN Privacy/Cyber Risk & Data Security

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  • FFIEC proposes amendments to temporary waiver proceedings

    On January 13, the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) published a request for comments on proposed amendments to provide greater transparency and clarity to the existing rules of practice and procedure governing temporary waiver proceedings. The existing temporary waiver proceedings, which were promulgated in 1992 under FIRREA, allow temporary waivers to be granted if a state appraiser regulatory agency makes a written determination that a scarcity of state-certified or licensed appraisers in a state or geographical area is causing significant delays in the performance of real estate appraisals utilized in connection with federally related transactions. Temporary waivers terminate once the ASC determines that the significant delays have been eliminated.

    The FFIEC’s notice of proposed rulemaking (NPRM) seeks “to clarify the procedural differences in processing a Request for Temporary Waiver accompanied by a written determination as compared to a Petition requesting the ASC exercise its discretion to initiate a temporary waiver proceeding.” Among other things, the NPRM would allow the ASC to draw a clear distinction between: (i) a state appraiser regulatory agency’s request that is accompanied by a written determination (referred to in the NPRM as a “Request for Temporary Waiver”); and (ii) information received from other persons or entities, which could include a state appraiser regulatory agency (referred to as a “Petition”). As presented in the NPRM’s accompanying flowchart, the procedures will vary depending on whether the ASC has received a Request for Temporary Waiver or a Petition requesting the initiation of a temporary waiver proceeding. Comments on the NPRM must be received by March 14.

    Bank Regulatory Agency Rule-Making & Guidance FFIEC Appraisal FIRREA Temporary Waiver State Issues

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  • Fed streamlines reporting requirements for member banks

    On January 10, the Federal Reserve announced a final rule regarding reporting requirements for member banks related to adjusting subscriptions to Federal Reserve Bank capital stock. Specifically, the Fed noted that the “technical rule” amends Regulation I to decrease the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to Federal Reserve Bank capital stock, except in the context of mergers. Under the new process, Reserve Banks will adjust a member bank’s stock subscription each time the member bank files a Call Report, eliminating the need for member banks to file applications to adjust their stock subscriptions (except in the context of mergers). Additionally, the Fed codified its current practices of requiring a surviving member bank to apply to adjust its stock subscription prior to merging or consolidating with another bank. The final rule is effective 30 days after publication in the Federal Register.

    Bank Regulatory Federal Register Federal Reserve Call Report Agency Rule-Making & Guidance

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  • Agencies adjust civil penalties to account for inflation

    Agency Rule-Making & Guidance

    Recently, the CFPB, CFTC, FDIC, FHFA, and OCC provided notice in the Federal Register regarding adjustments to the maximum civil money penalties due to inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Each notice or final rule (see CFPB here, CFTC here, FDIC here, FHFA here, and OCC here) adjusts the maximum amounts of civil money penalties and provides a chart reflecting the inflation-adjusted maximum amounts associated with the penalty tiers for particular types of violations within each regulator’s jurisdiction. The OCC’s adjusted civil money penalty amounts are applicable to penalties assessed on or after January 12. The new CFPB, CFTC, FDIC, and FHFA civil money penalty amounts are applicable to penalties assessed on or after January 15.

    Agency Rule-Making & Guidance OCC CFPB CFTC FDIC FHFA Bank Regulatory Assessments Fees Civil Money Penalties

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  • FDIC announces Washington, Arkansas, and Colorado disaster relief

    On January 12, the FDIC issued FIL-05-2022 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Washington state affected by flooding and mudslides. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the severe weather events in certain counties of Washington and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” The FDIC noted that it will consider the unusual circumstances when examining efforts to work with borrowers in affected communities and that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements. Earlier on January 5, the FDIC also issued FIL-01-2022 and FIL-02-2022 to provide the same regulatory relief to financial institutions and help facilitate recovery in areas of Arkansas and Colorado affected by severe storms, tornados, winds, and wildfires.

    Bank Regulatory Federal Issues Disaster Relief FDIC Consumer Finance Arkansas Colorado CRA Washington

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  • NYDFS puts CFDL compliance obligations on hold

    State Issues

    On December 31, NYDFS announced that providers’ compliance obligations under the state’s Commercial Finance Disclosure Law (CFDL) will not take effect until the necessary implementing regulations are issued and effective. The CFDL was enacted at the end of December 2020, and amended in February 2021, to expand coverage and delay the effective date to January 1, 2022. (See S5470-B, as amended by S898.) Under the CFDL, providers of commercial financing, which include persons and entities who solicit and present specific offers of commercial financing on behalf of a third party, are required to give consumer-style loan disclosures to potential recipients when a specific offering of finance is extended for certain commercial transactions of $2.5 million or less. In October 2021, NYDFS published a notice announcing a proposed regulation (23 NYCRR 600) to implement the CFDL, which provided that the compliance date for the final regulation will be six months after the final adoption and publication of the regulation in the State Register (covered by InfoBytes here). Comments on the proposed regulation were due December 19. NYDFS noted in its announcement that “[i]n light of the significant feedback received, the Department is carefully considering the comments received and intends to publish a revised proposed regulation for notice-and-comment early in the new year.”

    State Issues Bank Regulatory NYDFS Commercial Finance CFDL Compliance New York Agency Rule-Making & Guidance

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