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Federal banking agencies issue appraisal regulation FAQs
On October 16, the FDIC, Federal Reserve Board, and the OCC issued FAQs to offer additional clarification concerning appraisal and evaluation functions set out in the 2010 Interagency Appraisal and Evaluation Guidelines, the 2016 Interagency Advisory on Use of Evaluations in Real Estate-Related Financial Transactions, and other related regulations, guidance, and advisories. (See FDIC FIL-62-2018 and OCC Bulletin 2018-39.) The FAQs—which do not introduce new policy or guidance—address a range of topics including (i) regulatory and statutory requirements applicable to appraisal and evaluation programs; (ii) financial institutions’ review of appraisal and evaluation programs; (iii) appraisal exemptions; (iv) development of appraisals and evaluations, including relevant policies and procedures; and (v) appraisal independence.
OCC updates Comptroller’s Handbook booklets, addresses trade finance and services activities
On October 15, the OCC issued Bulletin 2018-38, which updates, among other things, the “Trade Finance and Services” booklet of the Comptroller’s Handbook previously issued in April 2015. The booklet provides guidance for OCC examiners to use in connection with the examination and supervision of national banks and federal savings associations that engage in international trade finance and services activites, including “letters of credit, guarantees, acceptances, open account financing, other specialized trade financing, financial supply chain solutions, prepayment, advising, trade collections, bank-to-bank reimbursement services, insourcing/outsourcing trade processing, and hedging services.”
The updated booklet (i) incorporates references to relevant OCC issuances published since April 2015; (ii) reflects the integration of federal savings associations into certain regulations; and (iii) makes “clarifying edits regarding supervisory guidance, sound risk management practices, legal language, or the roles of the bank’s board or management.”
Bulletin 2018-38 also updates the “Agricultural Lending” and “Oil and Gas Exploration and Production Lending” booklets and rescinds previously issued corresponding bulletins.
CFPB solicits comments on proposed rule regarding civil penalty inflation adjustments
On October 12, the CFPB published an amendment to its rule regarding inflation adjustments for the maximum amount of each civil penalty within its jurisdiction, pursuant to the 2015 Inflation Adjustment Act amendments. Under the Bureau’s amendment, adjusted penalty amounts would only apply to assessments with associated violations occurring on, or after, November 2, 2015. The Bureau noted that because the amendment “would limit the civil penalties covered persons may pay, the proposed rule would not impose any additional costs on them. Nor does the rule impose any new, affirmative duty on any small entity or change any existing requirements on small entities, and thus no small entity who is currently complying with the laws that the Bureau enforces will incur any expense from the amended rule.” Comments must be received by November 13.
FDIC FIL provides guidance on HMDA partial exemptions
On October 10, the FDIC issued FIL-58-2018 which summarizes guidance provided by the CFPB on the implementation of partial exemptions from certain of HMDA’s reporting requirements for specific insured depository institutions and insured credit unions pursuant to Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act. On August 31, as previously covered in InfoBytes here, the Bureau issued an interpretive and procedural rule to implement and clarify recent HMDA amendments and outline exemption qualification requirements. FIL-58-2018 reminds FDIC-supervised institutions subject to HMDA and Regulation C of the following clarifications made by the Bureau: (i) there are 26 data points covered by the partial exemptions and 22 other data points that all HMDA reporters must collect, record, and report”; (ii) loans counted towards partial exemption thresholds must otherwise be reportable under Regulation C; (iii) exception based on Community Reinvestment Act examination reports will be determined by the two most recent CRA ratings as of December 31 of the preceding calendar year; (iv) if an institution eligible for a partial exemption chooses not to report a universal loan identifier, it must report a non-universal loan identifier unique within the institution; and (v) institutions exempt from certain reporting requirements may still report exempt data fields so long as they “report all data fields associated with that data point.”
VA provides status update to address 2014 loan guaranty interim final rule
On October 9, the Department of Veterans Affairs (VA) published a status update in the Federal Register to inform the public that it will not publish a final rule to adopt provisions outlined in its May 2014 interim final rule (IFR). The IFR was issued to implement provisions of Dodd-Frank concerning ability-to-repay standards and qualified mortgages (QM) as defined under TILA. According to the status update, section 309 of Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) superseded certain elements of the IFR. Specifically, the EGRRCPA’s “seasoning and recoupment requirements for [Interest Rate Reduction Refinance Loans] effectively eliminated the category of rebuttable presumption QM.” The VA reminded program participates to refer to Circular 26-18-13, previously issued in May and covered by InfoBytes, which addressed “loan churning” of VA-guaranteed refinance loans and set out new requirements for VA eligibility as addressed by EGRRCPA. The VA commented that it will publish future rulemaking to supersede the IFR, but that in the meantime, the IFR remains in effect to the extent the provisions do not conflict, or are not superseded by, EGRRCPA.
Federal Reserve releases eligibility criteria for 18-month on-site examination cycles
On October 1, the Federal Reserve Board (Board) issued SR 18-7 to qualifying state member banks and U.S. branches and agencies of foreign banks outlining updated 18-month on-site examination eligibility criteria. As previously covered in InfoBytes, the Board, OCC, and FDIC issued an interim final rule effective August 29—as authorized by the Economic Growth, Regulatory Reform, and Consumer Protection Act—which qualifies banks with less than $3 billion in total assets (an increase from the previous threshold of $1 billion), provided they satisfy additional criteria. SR 18-7 separately lists the relevant eligibility criteria for state member banks and for U.S. branches or agencies of foreign banks, and requires that qualifying banks (i) not be subject to a federal banking agency’s formal enforcement proceeding or order; and (ii) not have experienced a change of control during the previous 12 months that would have required a full-scope examination. Additional eligibility criteria address component and composite examination ratings and risk-based capital ratios.
Agencies permit bank resource sharing for Bank Secrecy Act compliance
On October 3, the Financial Crimes Enforcement Network, Federal Reserve Board, FDIC, NCUA, and OCC (together, the agencies) issued an interagency statement outlining instances where banks and credit unions may choose to enter into collaborative arrangements to share resources in order to more efficiently and effectively manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations. The statement noted that collaborative arrangements are most suitable for “banks with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing.” The agencies described several examples in which collaboration between banks may be beneficial, such as (i) conducting internal control functions, including reviewing and drafting BSA/AML policies and procedures and risk-based customer identification and account monitoring processes; (ii) sharing resources for BSA/AML independent testing; and (iii) conducting BSA/AML training on regulatory requirements and internal policies, procedures, and processes. Other potential benefits include cost reductions, increases in operational efficiencies, and the availability to leverage specialized expertise.
However, the agencies cautioned that banks who choose to enter into collaborative agreements should carefully consider the associated risks “in relation to the bank’s risk profile, adequate documentation, consideration of legal restrictions, and the establishment of appropriate oversight mechanisms.” Moreover, banks should ensure that the collaborative arrangement is consistent with sound principles of corporate governance, have in place a contractual agreement, conduct periodic performance reviews, and consult their regulator’s guidance concerning third-party relationship to ensure compliance. The agencies further noted that “each bank is responsible for ensuring compliance with BSA requirements. Sharing resources in no way relieves a bank of this responsibility.” The interagency statement emphasizes that it is not applicable “to collaborative arrangements or consortia formed for the purpose of sharing information under Section 314(b) of the USA PATRIOT Act,” and “banks that form collaborative arrangements as described in this interagency statement are not an association for purposes of Section 314(b) of the USA PATRIOT Act.”
(See also Federal Reserve Board press release, FDIC press release, NCUA press release, and OCC press release and Bulletin 2018-36.)
Federal Reserve seeks comments on proposals to facilitate faster payments
On October 3, the Federal Reserve Board (Board) issued a request for comments on “potential actions the Federal Reserve could take to promote ubiquitous, safe, and efficient faster payments . . . by facilitating real-time interbank settlement of faster payments.” The Board indicated it would consider any alternative approaches to the specified potential actions that will achieve its goals. As previously covered in InfoBytes, the Board’s Faster Payments Task Force issued a report in 2017 making several recommendations, including the development of a round-the-clock settlement service to support faster payments. Among the potential actions that the Board is seeking feedback on is whether the Reserve Banks should consider developing such a 24/7/365 real-time gross settlement service, which would use banks’ balances in accounts at the Reserve Banks to facilitate interbank settlement of faster payments. The Board also seeks comments on the potential use of a liquidity management tool, which would support services for real-time interbank settlements by enabling transfers between Federal Reserve accounts on a 24/7/365 basis.
Comments must be received by December 14.
FDIC announces transparency initiative, publication of performance metrics
On October 3, the FDIC announced the “Trust through Transparency” initiative, an agency-wide program designed to “strengthen the trust between the agency, other regulators, the public, and banks.” The FDIC chairman’s remarks at the 2018 Community Banking in the 21st Century Research and Policy Conference emphasized the importance of trust through transparency to the FDIC’s core mission of “maintaining stability and public confidence in the nation's financial system.”
According to the announcement, the FDIC has launched a new section of its website, which will publish and regularly update key performance metrics such as (i) examination turnaround times; (ii) application processing times, including for de novo banks; and (iii) call center usage and response rates. Within the same section of the website, users will be able to access (i) FDIC policies and procedures; (ii) decisions and guidance related to material supervisory determination and deposit insurance assessment appeals; and (iii) information related to the process for implementing the risk-focused supervision program. As part of this initiative, the chairman noted, the agency is undertaking a review of information it has deemed confidential and its FOIA process, including, specifically, the application of exemptions.
As previously covered in InfoBytes, the FDIC issued a request for information seeking comments and information on how the agency can more effectively streamline its communications and transparency efforts.
Federal banking agencies request comments on proposal to revise and extend various information collection procedures
On September 28, the Federal Reserve Board, FDIC, and OCC (the Agencies)—with the approval of the Federal Financial Institutions Examination Council (FFIEC)—published a joint notice and request for comment proposing to extend and revise currently approved collections of information for: (i) Consolidated Reports of Condition and Income (Call Reports) for certain banks (FFIEC 031, 041, 051); (ii) Reports of Assets and Liabilities for branches and agencies of foreign banks (FFIEC 002, 002S); (iii) Foreign Branch Reports of Condition (FFIEC 030, 030S); and (iv) the Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101). Among other things, the proposed revisions generally address the revised accounting for credit losses described within Accounting Standards Update No. 2016-13, and include reporting changes for regulatory capital related to the Agencies’ current expected credit losses methodology.
The revisions would begin taking effect March 31, 2019, for quarterly report date respondents; December 31, 2022, for annual report date respondents; and on later dates for certain respondents. Comments must be submitted by November 27.