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  • CFPB publishes final rule relating to disclosure of confidential records and information

    Agency Rule-Making & Guidance

    On September 12, the CFPB published a final rule to modify its procedures for the disclosure of records and information. As previously covered in InfoBytes, the notice of proposed rulemaking—published August 2016—sought to amend procedures used to obtain information from the Bureau under the Freedom of Information Act (FOIA), the Privacy Act of 1974, and in legal proceedings. In response to comments on its proposal, the final rule revises the following subparts under section 1070 of title 12 of the Code of Federal Regulations: (i) Subpart A: “procedures related to the certification of authenticity of Bureau records and the service of summonses or complaints on the Bureau”; (ii) Subpart B: practices to provide requesters additional flexibility under FOIA; and (iii) Subpart C: “procedures for requests for information from the Bureau in connection with legal proceedings.” Subpart E, which implements the Privacy Act of 1974, received no comments and has been finalized without modification. The Bureau noted that the final rule does not revise Subpart D, which relates to the “confidential treatment of information obtained from persons in connection with the exercise of its authorities under federal consumer financial law.” The final rule takes effect October 12.

    Agency Rule-Making & Guidance CFPB FOIA Disclosures

  • Agencies say supervisory guidance does not have the “force and effect” of law

    Agency Rule-Making & Guidance

    On September 11, five federal agencies (the Federal Reserve Board, CFPB, FDIC, NCUA, and OCC) issued a joint statement confirming that supervisory guidance “does not have the force and effect of law, and [that] the agencies do not take enforcement actions based on supervisory guidance.” The statement distinguishes the various types of supervisory guidance—interagency statements, advisories, bulletins, policy statements, questions and answers, and frequently asked questions—from laws or regulations and emphasizes that the intention of supervisory guidance is to outline agencies’ expectations or priorities. The statement highlights five policies and practices related to supervisory guidance: (i) limit the use of numerical thresholds or other “bright-line” requirements; (ii) examiners will not cite to “violations” of supervisory guidance; (iii) request for public comment does not mean the guidance has the force and effect of law; (iv) limit multiple issuances of guidance on the same topic; and (v) continue to emphasize the role of supervisory guidance to examiners and to supervised institutions.

    Agency Rule-Making & Guidance Federal Reserve CFPB FDIC NCUA OCC Supervision Examination Enforcement

  • OCC seeks comments on notice of proposed rulemaking to enhance business flexibility for federal savings associations

    Agency Rule-Making & Guidance

    On September 10, the OCC issued a notice of proposed rulemaking to implement section 206 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously Senate bill S. 2155), which amended the Home Owners’ Loan Act to permit federal savings associations (covered savings associations) with total consolidated assets of $20 billion or less, as of December 31, 2017, to elect to operate with national bank powers. Among other things, the proposed rule would require covered savings associations to divest, conform, or discontinue nonconforming subsidiaries, assets, and activities so as not operate in a manner that would be impermissible for national banks. Covered savings associations would also be subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to a similarly located national bank without requiring a charter conversion. The OCC further noted that even if a covered savings association’s assets exceed $20 billion after it makes the election, it will continue to receive covered savings association treatment. In addition, to reduce unnecessary burdens, covered savings associations are able to using federal savings association procedures, as opposed to national bank procedures, if the application of those procedures would not result in substantively different outcomes. Comments will be accepted for 60 days following publication in the Federal Register.

    Agency Rule-Making & Guidance OCC S. 2155 Bank Charter EGRRCPA

  • OCC notifies banks of 18-month on-site examination qualifications

    Agency Rule-Making & Guidance

    On September 10, the OCC notified national banks, federal savings associations, and federal branches and agencies of the interim final rule issued jointly by the OCC, Federal Reserve, and FDIC allowing qualified insured depository institutions with less than $3 billion in total assets to be eligible for an 18-month on-site examination cycle. (See previous InfoBytes coverage here.) In addition to meeting the asset threshold, qualifying banks must also (i) have a rating of one or two; (ii) be well capitalized and well managed; (iii) not be subject to a federal banking agency’s formal enforcement proceeding or order; and (iv) not have experienced a change of control within the previous 12 months. The OCC further noted that it reserves the authority to maintain more frequent examinations for banks if necessary or appropriate. The interim final rule, issued pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously Senate bill S. 2155), took effect August 29. Comments on the interim final rule must be received by October 29.

    Agency Rule-Making & Guidance OCC Examination S. 2155 Federal Reserve FDIC EGRRCPA

  • FDIC issues summer 2018 Supervisory Insights

    Agency Rule-Making & Guidance

    On September 5, the FDIC released its summer 2018 issue of Supervisory Insights (see FIL-44-2018), which contains articles discussing bank lending to the oil and gas sector and an overview of bank credit risk grading systems. Information and analysis from examiner observations is presented in the article, “Credit Risk Grading Systems: Observations from a Horizontal Assessment.” Sixteen large state nonmember banks’ credit risk grading programs are analyzed for (i) their use of expert judgment based systems and/or quantitative scorecards and models to assign credit grades; (ii) data usage and retention needs; and (iii) governance and risk management frameworks established by grade definitions. The article advises that “a bank’s credit risk grading system should align with the bank’s size and complexity to facilitate accurate risk identification, measurement, monitoring, and reporting,” and should include internal systems to allow for effective risk assessment, timely and accurate reporting, and procedures for safeguarding and managing assets. In addition, the issue includes an overview of recently released regulations and supervisory guidance in its Regulatory and Supervisory Roundup.

    Agency Rule-Making & Guidance FDIC Supervision Credit Risk Risk Management

  • OCC updates Comptroller’s Handbook, issues guidance on “other real estate owned”

    Agency Rule-Making & Guidance

    On August 31, the OCC issued Bulletin 2018-26, which updates the “Other Real Estate Owned” booklet of the Comptroller’s Handbook and provides guidance for examiners on the acquisition, reporting, management, and disposition of other real estate owned (OREO) held by supervised banks and federal savings associations. The OCC commented that while the booklet’s focus is on foreclosed real property, the guidance may also “apply to other types of foreclosed (repossessed) property, such as consumer and commercial goods, financial instruments, and intangible assets.” Foreclosed assets for reporting purposes include “loans where a bank has received physical possession of a borrower’s assets, regardless of whether formal proceedings take place.” Additional updates include (i) accounting changes for OREO sales by public and non-public business entities; (ii) interim guidance for federal savings associations on the OREO holding period; and (iii) clarifications concerning supervisory guidance and risk management practices, including third-party risk management guidance issued since the booklet was last published in 2013.

    Agency Rule-Making & Guidance OCC Comptroller's Handbook Examination

  • Agencies extend comment deadline for Volcker Rule revisions

    Agency Rule-Making & Guidance

    On September 4, the OCC, Federal Reserve Board, FDIC, SEC, and CFTC (the Agencies) announced a 30-day extension to the public comment period for the Agencies’ joint revisions to the Volcker Rule. The comment period, which was previously scheduled to end on September 17, is now extended until October 17. The joint release notes that the extension will give interested parties “approximately four and a half months from the date the proposal was released to the public to submit comments,” as the Agencies’ first released the text of the proposal on May 30 (it was not published in the Federal Register until July 17). As previously covered by InfoBytes, the Agencies’ joint revisions are designed to simplify and tailor obligations for compliance with Section 13 of the Bank Holding Company Act, known as the Volcker Rule, which restricts a bank’s ability to engage in proprietary trading and own certain funds. Specifically, according to a Federal Reserve Board memo, the proposed amendments will better align Volcker rule requirements with a bank’s level of trading activity and risks.

    Agency Rule-Making & Guidance FDIC Federal Reserve OCC CFTC SEC Bank Holding Company Act Volcker Rule

  • CFPB issues HMDA interpretive rule to implement EGRRCPA amendments

    Agency Rule-Making & Guidance

    On August 31, the CFPB issued an interpretive and procedural rule to implement and clarify the HMDA amendments included in Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) (previously Senate bill S. 2155). Section 104(a) of the Act amends section 304(i) of HMDA by adding partial exemptions from some of HMDA’s reporting requirements for certain insured depository institutions and insured credit unions. Specifically, banks and credit unions that originate fewer than 500 open-end lines of credit in each of the two preceding calendar years and/or 500 closed-end mortgages in each of the two preceding calendar years are exempt from HMDA’s expanded data disclosures. The exemption does not apply to nonbanks and does not exempt institutions from HMDA reporting altogether. Notwithstanding the new partial exemptions, the insured institution must comply with HMDA’s expanded data disclosures if it received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent CRA examinations or a rating of “substantial noncompliance in meeting community credit needs” on its most recent CRA examination. These partial exemptions to HMDA took effect when the Act became law on May 24, 2018.

    In response to industry questions on the application of the exemptions, the Bureau released an interpretive and procedural rule. The following are key highlights of the rule:

    • Institutions exempt from certain reporting requirements may still report exempt data fields so long as they “report all data fields within any exempt data point for which they report data.” For example, if a partially exempt institution reports a data field that is part of the property address, the institution must report all other data fields that are part of the property address (e.g., city, state, zip code). The Bureau notes that institution may be particularly inclined to report exempt data fields with their 2019 submissions, as 2018 data collection was already in process when the Act took effect;
    • To count towards the 500 loan or line of credit threshold, loans and lines of credit must be otherwise HMDA-reportable loans;
    • The partial exemption applies to new data points that were implemented by the Bureau’s 2015 HMDA Final Rule, but institutions covered by the partial exemption are still required to report the 22 data points previously established by the Federal Reserve Board;
    • The rule provides requirements for a non-universal loan identifier for any partially exempt loan or application; and
    • The CRA ratings used to determine whether the CRA reporting exception applies are the two most recent CRA ratings as of December 31 of the preceding calendar year.

    The Bureau notes that it intends to initiate a notice-and-comment rulemaking to incorporate these interpretations and procedures into Regulation C at a later date.

    Additionally, the Bureau also released updates to the Filing Instructions Guide (FIG) for HMDA data collected in 2018 to incorporate the Act as implemented and clarified by the interpretive rule.

    Agency Rule-Making & Guidance CFPB HMDA S. 2155 Mortgages EGRRCPA

  • Federal Reserve issues interim final rule providing relief for small bank holding companies

    Agency Rule-Making & Guidance

    On August 28, the Federal Reserve Board issued an interim final rule to raise the asset threshold from $1 billion to $3 billion under the agency’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement. The interim final rule implements a provision in the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously Senate bill S.2155), and applies to savings and loan holding companies with total consolidated assets of less than $3 billion. Under the interim final rule, small bank holding companies will be permitted to operate with higher levels of debt, making it easier to facilitate ownership transfers. However, the Fed noted that exempt holding companies’ depository institutions will still be required to meet minimum capital requirements. Comments are due by October 29.

     

    Agency Rule-Making & Guidance Federal Reserve S. 2155 Bank Holding Companies EGRRCPA

  • OCC seeks stakeholder feedback on modernizing the Community Reinvestment Act

    Agency Rule-Making & Guidance

    On August 28, the OCC issued an advance notice of proposed rulemaking (ANPR) seeking input from stakeholders on ways to transform or modernize the Community Reinvestment Act (CRA) regulatory framework. According to OCC Bulletin 2018-24, the ANPR seeks comments on several issues including:

    • encouraging more lending and services in areas where there is the most need, such as low- and moderate-income areas;
    • clarifying and expanding the types of activities eligible for CRA consideration;
    • reviewing and updating how assessment areas are delineated and used;
    • establishing measurable CRA rating metric-based thresholds;
    • increasing the transparency of a bank’s CRA performance;
    • improving the timeliness of CRA regulatory decisions; and
    • reducing the cost and regulatory burden associated with CRA evaluations.

    In its press release, the OCC stated that modernizing CRA regulations will “better achieve the statute’s original purpose, increase lending and investment where it is needed most, and reduce the burden associated with reporting and assessing CRA performance.” Additionally, the OCC noted in the ANPR that many stakeholders believe that aspects of current CRA regulations may only be “sufficient for certain locally focused and less complex banks,” as banking practices and the financial services industry continue to evolve.

    As previously covered by InfoBytes, in April the Treasury Department released a memorandum of recommendations addressing findings from Treasury’s comprehensive assessment of the CRA framework. The memorandum focused on four key areas: assessment areas, examination clarity and flexibility, the examination process, and bank performance. According to the OCC, comments on the ANPR “may inform the development of more specific policy proposals or future rulemakings.” The OCC will accept comments for 75 days following publication in the Federal Register.
     

    Agency Rule-Making & Guidance OCC CRA Department of Treasury

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