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OCC’s Director’s Toolkit updates corporate governance responsibilities
On November 5, the OCC released updates to its Director’s Toolkit to assist directors of national banks and federal savings associations fulfill their corporate governance responsibilities. (See also OCC Bulletin 2020-97.) The revised Director’s Book: Role of Directors for National Banks and Federal Savings Associations (Director’s Book), as well as the new Director’s Reference Guide to Board Reports and Information (Director’s Reference Guide), replace and rescind previously issued OCC publications. In addition to including revisions from the “Corporate and Risk Governance” booklet of the Comptroller’s Handbook (covered by InfoBytes here), the Director’s Book also (i) provides an overview of the agency; (ii) outlines responsibilities for directors as well as management’s role; (iii) “explains basic concepts and standards for safe and sound operation of banks”; and (iv) “delineates laws and regulations that apply to banks.” The Director’s Reference Guide focuses on key areas related to planning, operations, and risk management, and is structured to “provide examples of sources of information, measures, questions to consider, red flags, and references to directors.” The OCC notes that the “types, amount, and frequency of information that directors should receive to effectively perform their duties vary at each bank and continually evolve.”
Fed report highlights banks’ Covid-19 responses
On November 6, the Federal Reserve Board (Fed) issued its Supervision and Regulation Report, which summarizes banking system conditions and the Fed’s supervisory and regulatory activities. The current report discusses the safety and soundness of the banking industry, especially with respect to economic and financial stresses resulting from Covid-19 containment measures. The report highlights, among other things, that Fed programs “have helped to preserve the flow of credit” and that banks have taken several actions to maintain financial and operational resiliency. These actions include providing access to substantial lines of credit for corporate borrowers and playing a significant role in supporting small businesses through the Paycheck Protection Program. In addition, the report notes that loan growth has grown slightly since the beginning of the year and that capital positions and liquidity conditions remain strong. However, the report cautions that while “economic indicators have shown marked improvement since the second quarter, a high degree of uncertainty persist.” The report also details the Fed’s current areas of supervisory focus and describes how banks have adapted to a largely remote working environment.
The same day, the Fed also announced updates to the list of firms supervised by its Large Institution Supervision Coordinating Committee Program, which is responsible for supervising the largest and most complex firms. As a result, “certain foreign banks with U.S. operations that have substantially decreased in size and risk over the past decade will move to the Large and Foreign Banking Organization supervision portfolio, where they will be supervised with other banks of similar size and risk.” The Fed stresses that the “portfolio move will have no effect on the regulatory capital or liquidity requirements of any firm.”
OCC exempts certain QFCs from express recognition requirements
On November 2, the OCC issued Bulletin 2020-95, which announced a September 30 order granting an exemption from the express recognition requirements of 12 CFR 47.4 for certain categories of qualified financial contracts (QFC). According to the OCC, the order is intended to relieve the burdens faced by financial institutions and is consistent with the purpose of the express recognition requirements of 12 C.F.R. § 47.4 “in achieving uniform cross-border application of the U.S Special Resolution Regimes to contracts subject to such authorities.” Specifically, the order states that “non-U.S. non-linked contracts” that are entered into by foreign subsidiaries of covered banks—large, systemically important banks—are exempt from the express recognition requirements of 12 C.F.R. § 47.4.
Agencies outline standards for strengthening operational resilience
On October 30, the Federal Reserve Board, OCC, and FDIC (agencies) released an interagency paper describing standards and sound practices for increasing operational resilience. (See also the Fed’s release and FDIC FIL-103-2020). The paper, titled Sound Practices to Strengthen Operational Resilience, does not revise existing agency regulations or guidance, but rather provides a “comprehensive approach” for banks to strengthen and maintain operational resilience. According to the agencies, “[r]obust operational risk and business continuity management anchor the sound practices, which are informed by rigorous scenario analyses and consider third-party risks. Secure and resilient information systems underpin the approach to operational resilience, which is supported by thorough surveillance and reporting.” The paper also includes an appendix focused on sound practices for cyber risk management and cybersecurity preparedness. The appendix is aligned to the National Institute of Standards and Technology Cybersecurity Framework and is “augmented to emphasize governance and third-party risk management.” The standards set forth in the paper are intended for large, domestic banks with more than $250 billion in average total consolidated assets, or banks with more than $100 billion in total assets and other risk characteristics.
CFPB finalizes certain debt collection rules
On October 30, the CFPB issued (along with blog post from Director Kraninger) its final rule amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The final rule does not include several significant provisions from the proposed rule, including those related to consumer disclosures. The Bureau states a second “disclosure-focused” final rule will be released in December 2020. This final rule is expected to address the model debt validation notice and time-barred debt disclosures previously proposed by the Bureau. As previously covered by InfoBytes (here and here) the Bureau issued the proposed rule in May 2019 and a supplemental proposed rule in February 2020, addressing time-barred debt disclosures. The final rule is effective November 30, 2021.
Among other things, the final rule: (i) prohibits a debt collector from calling a consumer about a particular debt more than seven times within seven consecutive days or within seven consecutive days of having had a telephone conversation; (ii) allows consumers to set preferences with debt collectors on certain communications, including communications with third parties and allowing consumers a reasonable way to opt-out of electronic communications; and (iii) clarifies that the FDCPA’s prohibition on harassing, oppressive, or abusive conduct applies to email and text messages. Additionally, the final rule also contains the procedures for state application for exemption from the provisions of the FDCPA.
Agencies propose lowering threshold for certain fund transfers and transmittals of funds under Bank Secrecy Act
On October 23, the Federal Reserve Board and the Financial Crimes Enforcement Network (FinCEN) announced a proposed rule that would, among other things, amend the Recordkeeping Rule and the Travel Rule under the Bank Secrecy Act (BSA) by reducing the data collection threshold from $3,000 to $250 for certain fund transfers that begin or end outside of the U.S. In addition, the proposed rule would set the threshold at $250 for financial institutions “to transmit to other financial institutions in the payment chain information on fund transfers and transmittals of funds that begin or end outside of the [U.S.]” The proposed rule’s $250 threshold for data collection would also apply to digital currency transactions, both for international transfers and those within the U.S. The agencies also propose to clarify the meaning of “money” as used in certain defined terms to ensure the rules apply to domestic and cross-border transactions involving convertible virtual currencies. By proposing to lower the current threshold, the agencies “specifically considered Suspicious Activity Reports filed by money transmitters, which indicate that a substantial volume of potentially illicit funds transfers and transmittals of funds occur below the $3,000 threshold.” The agencies also note that the threshold for domestic transactions would remain unchanged at $3,000. Comments are due 30 days after publication in the Federal Register.
OCC issues Concentrations of Credit booklet updating Comptroller’s Handbook
On October 26, the OCC issued Bulletin 2020-90 announcing the revision of the Concentrations of Credit booklet of the Comptroller’s Handbook. Among other things, the revised booklet (i) changes the supervisory calculation for credit concentration ratios for banks that have implemented the current expected credit loss (CECL) transition rule; (ii) replaces the term “criticized” with “special mention” for consistency with Banking Bulletin (BB) 1993-35, “Interagency Definition of Special Mention Assets”; and (iii) reflects relevant OCC issuances and changes to laws and regulations since the booklet was last published in 2011.
OCC finalizes true lender rule
On October 27, the OCC issued a final rule (see also Bulletin 2020-92) addressing when a national bank or federal savings association (bank) is the “true lender” in the context of a partnership between a bank and a third party to provide certainty about key aspects of the legal framework that applies. The final rule generally adopts the test proposed by the agency in July (see InfoBytes coverage here). Specifically, the final rule amends 12 CFR Part 7 to state that a bank makes a loan when it, as of the date of origination, (i) is named as the lender in the loan agreement or (ii) funds the loan. Additionally, the final rule clarifies that if “one bank is named as the lender in the loan agreement and another bank funds the loan, the bank that is named as the lender in the loan agreement makes the loan.” Lastly, the OCC emphasizes that compliance obligations stay with the “true lender” of the loan and “if a bank fails to satisfy its compliance obligations, the OCC will not hesitate to use its enforcement authority consistent with its longstanding policy and practice.”
The rule is effective 60 days after publication in the Federal Register.
CFPB issues ANPR on consumer access to financial records
On October 22, the CFPB released an advanced notice of proposed rulemaking (ANPR), which seeks comments to assist the Bureau in developing regulations covering consumers’ access to financial records. The Bureau is required to promulgate regulations to implement Section 1033 of the Dodd-Frank Act, which provides, among other things, that consumer financial services providers must make certain product or service information available to consumers. The Bureau’s press release notes that access to this information would allow consumers’ enhanced control of their financial matters. Additionally, should consumers allow third parties to access the information, those parties may “deliver new or improved financial products and services,” such as personal financial management and making or receiving payments. However, the Bureau acknowledges certain risks associated with access to financial records, including risks related to the methods of authorization and risks related to an institution’s collection and use of the records. The ANPR seeks comments on questions grouped into nine categories: (i) costs and benefits of consumer data access; (ii) competitive incentives; (iii) standard-setting; (iv) access scope; (v) consumer control and privacy; (vi) legal requirements outside of Section 1033; (vii) data security; (viii) data accuracy; and (ix) other information. Comments are due 90 days after publication in the Federal Register.
CFPB releases HMDA 2021 reference chart
On October 16, the CFPB published a new reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for Data Collected in 2021.” The chart is designed to be used as a reference tool for required data points to be collected, recorded, and reported under Regulation C, as amended by HMDA rules issued October 15, 2015, August 24, 2017, October 10, 2019, and April 16, 2020 (most recently covered by InfoBytes here). The Bureau noted that this chart does not provide HMDA loan/application register data fields or enumerations.