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OCC releases additional guidance on state loan-to-deposit ratios
On July 25, the OCC issued Bulletin 2018-21 to provide additional guidance for covered national banks on how state loan-to-deposit ratios are used to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. On June 21, the Federal Reserve, the FDIC, and the OCC released the host state loan-to-deposit ratios for each state or U.S. territory. Section 109, which prohibits banks from establishing or acquiring interstate branches for the primary purpose of deposit production, requires a comparison of a bank’s statewide loan-to-deposit ratio to the yearly host state loan-to-deposit ratios. If a bank’s statewide ratio is less than one-half the yearly published host state ratio, an additional review is required by the appropriate agency.
OCC issues update to Comptroller’s Handbook
On July 23, the OCC issued Bulletin 2018-20, which announced revisions to the “Capital and Dividends” booklet of the Comptroller’s Handbook as mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The revised booklet—which applies to all OCC-supervised bank examinations—includes changes to the regulatory capital rule, reflects the integration of the OTS into the OCC, and includes expanded examination procedures for capital, dividends, and capital adequacy.
FHFA pauses credit score initiative, will use formal rulemaking to create new credit score model
On July 23, the Federal Housing Finance Agency (FHFA) announced that it will not decide this year whether to update the credit score model used by Fannie Mae and Freddie Mac (the Enterprises), as previously announced. Instead, FHFA will focus on implementing Section 310: Credit Score Competition, of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Public Law 115-174) (the Act). Section 310 requires FHFA to establish, through the rulemaking process, standards and criteria to govern the verification and validation of credit score models used by the Enterprises. According to the press release, prior to Section 310 becoming law, FHFA and the Enterprises had been engaged in an ongoing initiative to evaluate a new credit score model’s potential impact on “access to credit, safety and soundness, operations in the mortgage finance industry, and competition in the credit score market.” However, after Section 310 was enacted in May, FHFA “determined that proceeding with efforts to reach a decision based on our [initiative] and timetable would be duplicative of, and in some respects inconsistent with, the work we are mandated to do under Section 310 of the Act. In light of that, we are communicating to Congress that we are transferring our full efforts to working with the Enterprises to implement the steps required under Section 310.” FHFA will release a proposed rule open for public comment in the future to govern the verification of credit score models.
FDIC's FILs address Call Report burden reductions, EGRRCPA statutory amendment changes
On July 17, the FDIC issued Financial Institution Letter FIL-40-2018 reminding FDIC-supervised banks, savings associations, and community institutions that revisions to all three versions of the Consolidated Reports of Condition and Income (Call Reports) are effective as of the June 30 reporting date. The finalized changes modified Call Reports FFIEC 031, FFIEC 041, and FFIEC 051. Starting this quarter, institutions with consolidated total assets of at least $100 billion with no foreign offices are now required to use FFIEC 031 instead of FFIEC 041. In addition, the FDIC released supplemental submission instructions for institutions (see FIL-39-2018) and also addressed two reporting requirement changes made by the enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act S.2155/P.L. 115-174 that took effect immediately: (i) acquisition, development, or construction loans considered high volatility commercial real estate loans are subject to risk weighting with certain exemptions; and (ii) qualifying institutions may exclude a capped amount of reciprocal deposits from being treated as brokered deposits. Second quarter Call Reports are due July 30.
Agencies publish proposed joint revisions to Volcker rule
On July 17, the OCC, Federal Reserve Board, FDIC, SEC, and CFTC (the Agencies) published their joint notice of proposed rulemaking designed to simplify and tailor compliance with Section 13 of the Bank Holding Company Act’s restrictions on a bank’s ability to engage in proprietary trading and own certain funds (the Volcker rule). As previously covered in InfoBytes, the Agencies’ announced the proposal on May 30, noting that the amendments would reduce compliance costs for banks and tailor Volcker rule requirements to better align with a bank’s size and level of trading activity and risks. Comments on the proposal are due by September 17.
FDIC implements updated interagency forms
On July 11, the FDIC issued Financial Institution Letter FIL-38-2018 announcing the implementation of revisions to several interagency forms. The updates, based upon recommendations from representatives from the FDIC, Federal Reserve, and the OCC, reflect new laws, regulations, capital requirements, and accounting rules. The changes are intended to improve the clarity of the requests, delete unnecessary information requests, and add transparency for filers concerning information required to consider a proposal.
The following revised forms may be used going forward for all applicable applications filed with the FDIC and are effective immediately:
SEC requests comments on proposed amendments to whistleblower program
On June 28, the SEC voted to propose for public comment several rule amendments that seek to clarify certain existing rules and make technical amendments to its whistleblower program under Section 21F of the Securities Exchange Act. Among other things, the proposed changes would (i) allow awards based on money collected under deferred prosecution agreements and non-prosecution agreements entered into by the DOJ or a state attorney general in a criminal case, or settlement agreements entered into by the SEC outside of a judicial or administrative proceeding that address securities law violations; (ii) eliminate the potential double recovery under the definition of “related action”; (iii) authorize the SEC to adjust an award’s percentage as appropriate to advance the goals of rewarding and incentivizing whistleblowers; (iv) establish a uniform definition of “whistleblower” in response to the Supreme Court's decision in Digital Realty Trust, Inc. v. Somers (as previously covered in a Buckley Sandler Special Alert); and (v) clarify anti-retaliation protection requirements. The SEC also has included interpretative guidance on the terms “unreasonable delay” and “independent analysis.” Comments will be accepted for 60 days following publication in the Federal Register.
Federal Reserve issues final rules reflecting credit and interest rate increases
On June 20, the Federal Reserve issued a final rule amending Regulation A (Extensions of Credit by Federal Reserve Banks) to reflect its June 14 approval of a one-quarter percent increase in the primary credit rate at each Federal Reserve Bank. Because the formula for the secondary credit rate references the primary rate, the secondary credit rate also increased by one-quarter percentage point.
The same day, the Federal Reserve also issued a final rule amending Regulation D (Reserve Requirements of Depository Institutions) to reflect its June 14 approval of a one-quarter percent increase to the “rate of interest paid on balances maintained to satisfy reserve balance requirements (IORR) and the rate of interest paid on excess balances (IOER) maintained at Federal Reserve Banks by or on behalf of eligible institutions.”
HUD publishes ANPR on Disparate Impact Regulation
On June 20, HUD published an advance notice of proposed rulemaking (ANPR) in the Federal Register seeking comment on potential amendments to its the 2013 Disparate Impact Regulation, which implements the Fair Housing Act’s disparate impact standard, as well as the 2016 Application of the Fair Housing Act’s Discriminatory Effects Standard to Insurance (supplement). The notice requests comments on whether the 2013 regulation and the 2016 supplement are consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.) While HUD is seeking feedback on any potential changes to the regulation, the agency is particularly interested in, among other things, (i) whether the burden-shifting framework appropriately assigns burdens of production and persuasion; and (ii) whether the regulation should provide defenses or safe harbors to claims of liability. Comments on the notice are due by August 20.
Federal Reserve Board approves final rule setting single counterparty credit limit
On June 14, the Federal Reserve Board approved a rule to establish single-counterparty credit limits for U.S. bank holding companies with at least $250 billion in total consolidated assets, foreign banking organizations operating in the U.S. with at least $250 billion in total global consolidated assets (as well as their intermediate holding companies with $50 billion or more in total U.S. consolidated assets), and global systemically important bank holding companies (GSIBs).
The rule, which implements section 165(e) of the Dodd-Frank Act, requires the Board to limit a bank holding company’s or foreign banking organization’s credit exposure to an unaffiliated company. Under the rule, a GSIB’s credit exposure is limited to 15 percent of its tier 1 capital to another systemically important firm. A U.S. bank holding company and other applicable foreign institution is limited to a credit exposure of 25% of its tier 1 capital to a counterparty.
GSIBs will be required to comply with the final rule on January 1, 2020, while other covered entities will have through July 1, 2020 to comply. The final rule was published in the Federal Register on August 6 and will take effect October 5.