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OCC issues bulletin on supervisory policy and processes for CRA performance evaluations
On June 15, the OCC issued Bulletin 2018-17, which clarifies the agency’s supervisory policies and processes regarding how examiners evaluate and communicate the performance of national banks, federal savings associations, and federal branches and agencies under the Community Reinvestment Act (CRA). The OCC issued these clarifications as part of its ongoing modernization efforts and explained that they are intended to promote the consistency and effectiveness of CRA performance evaluations. The Bulletin addresses policy clarifications for several areas of CRA evaluations, which are effective immediately, such as (i) implementation of full-scope and limited-scope reviews; (ii) consideration of activities that promote economic development; (iii) use of demographic, aggregate, and market share data; and (iv) evaluation frequency and timing. The Bulletin also provides clarifications on standard processes which became effective in May 2017, including, among other things, (i) factors considered when evaluating bank performance under small- and large-bank lending tests; and (ii) information considered and included in the written performance evaluation. The OCC noted that “[t]hese policies and processes apply to the evaluations of all OCC-supervised banks subject to the CRA, regardless of the bank’s asset size or CRA evaluation type.”
NCUA proposes additional payday loan alternative option
On June 4, the National Credit Union Administration (NCUA) published in the Federal Register a proposal to create a new payday alternative loan product (PAL II) in addition to the current payday alternative loan product (PAL I), which has been available since 2010. According to the NCUA announcement, the goal of PAL II is to expand access to safe and affordable short-term, small-dollar loans for consumers of modest means. PAL II would include most features of PAL I, with four changes: (i) eliminating a loan minimum while setting the maximum at $2,000; (ii) setting a term maximum of 12 months; (iii) eliminating the requirement for membership minimum length; and (iv) as long as the consumer only has one outstanding loan at the time, eliminating the time restriction on the number of loans a credit union can make to the borrower in a six month period.
The proposal also requests input on the potential features of a possible third option, PAL III, including lending restrictions, associated fees, and underwriting guidelines.
As previously covered by InfoBytes, the OCC recently issued a bulletin encouraging banks to offer short-term, small dollar installment lending.
FDIC FIL addendum: Federal banking agencies will not enforce Volcker rule for financial institutions exempt under S.2155
On June 4, the FDIC issued FIL-31-2018, which contains an addendum describing legislative changes to Section 13 of the Bank Holding Company Act (Volcker rule) under the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155/P.L. 115-174) that are applicable to FDIC-insured depository institutions with total assets under $10 billion. (See previous InfoBytes coverage on S.2155 here.) Effective immediately, any financial institution that “‘does not have and is not controlled by a company that has (i) more than $10,000,000,000 in total consolidated assets; and (ii) total trading assets and trading liabilities as reported on the most recent applicable regulatory filing filed by the institution, that are more than 5 percent of total consolidated assets’” is exempt from the rule. As result, the federal banking agencies will no longer enforce the Volcker rule for qualifying financial institutions in a manner inconsistent with the statutory amendments to the Volcker rule, and announced plans “to address these statutory amendments outside of the current notice of proposed rulemaking.”
The federal banking agencies responsible for developing the proposal (the Federal Reserve Board, CFTC, FDIC, OCC, and SEC) also formally announced on June 5 a joint notice and request for public comment on the proposed revisions. Comments will be accepted for 60 days following publication in the Federal Register.
Visit here for InfoBytes coverage on the federal banking agencies’ proposed revisions to the Volcker rule announced May 30.
Federal Reserve meeting to consider proposed overhaul of Volcker Rule set for May 30
On May 23, the Federal Reserve Board issued a notice announcing it will meet on May 30 to consider a proposal to modify the Volcker Rule. Section 13 of the Bank Holding Company Act currently restricts banks from engaging in proprietary trading and restricts their ownership of certain funds. As previously discussed in InfoBytes, last month the House passed the “Volcker Rule Regulatory Harmonization Act,” which, among other things, would provide clear exemptions for banking entities with $10 billion or less in consolidated assets or those comprised of five percent or less of trading assets and liabilities. A similar exemption is also included in the bipartisan Senate financial regulatory reform bill, S.2155, which was signed by President Trump on May 24. (See InfoBytes coverage on S.2155 here.)
CFPB updates TRID Small Entity Compliance Guide and Guide to Forms
On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.
Federal banking agencies seek comments on proposal to revise regulatory capital rules
On May 14, the Federal Reserve Board, FDIC, and OCC published a joint notice and request for comment on a proposal to revise regulatory capital rules to, among other things, identify which credit loss allowances are “eligible for inclusion in regulatory capital” under changes made to U.S. generally accepted accounting principles (U.S. GAAP), described within Accounting Standards Update No. 2016-13 (ASU 2016-13). The proposed rulemaking would provide (i) banking organizations subject to the agencies’ regulatory capital rules with “the option to phase in the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard;” (ii) amendments to certain regulatory disclosure requirements to reflect applicable changes to U.S. GAAP covered under ASU 2016-13; (iii) amendments to stress testing regulations, which would grant covered banking organizations that have adopted ASU 2016-13 an extension until the 2020 stress test cycle to “include the effect of ASU 2016-13 on their provisioning for purposes of stress testing;” and (iv) conforming amendments to other regulations referencing credit loss allowances. Comments must be submitted by July 13.
OCC updates Comptroller’s Handbook to include Military Lending Act booklet
On May 11, the OCC issued the “Military Lending Act” (MLA) booklet of the Comptroller’s Handbook. According to the announcement, the booklet reflects the 2015 Department of Defense amendments, as well as the interpretive guidance published in 2016 and updated in 2017 (covered by InfoBytes here and here), and applies to the examinations of OCC-supervised institutions that establish consumer credit products covered by the MLA. The booklet includes, among other things, (i) rules for determining fees and charges included in the calculation of the military annual percentage rate (MAPR); (ii) rules for calculating the MAPR; (iii) required disclosures to be provided to covered borrowers; and (iv) consumer credit limitations for covered borrowers.
FDIC issues regulatory relief guidance for financial institutions in areas of Alabama affected by severe storms
On May 4, the FDIC issued a Financial Institution Letter, FIL-24-2018, to provide regulatory relief to financial institutions and facilitate recovery in areas of Alabama affected by severe storms and tornados. The FDIC is encouraging institutions to consider, among other things, extending repayment terms and restructure existing loans that may be affected by the natural disasters. Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act (CRA) consideration for certain development loans, investments, and services in support of disaster recovery. The FDIC letter also contemplates regulatory relief for banks located in the affected areas.
Find continuing InfoBytes coverage on Disaster Relief here.
FDIC proposes information collection renewal for appraisal management companies
On May 2, the FDIC published a notice and request for comment in the Federal Register regarding the renewal of an existing information collection on the minimum requirements for appraisal management companies (AMCs). According to the notice, there is no significant change in the methodology or substance of the information collection; however, burden estimates for states and AMCs have been revised to include (i) “AMC Written Notice of Appraiser Removal from Network or Panel;” (ii) “Develop and Maintain a State Licensing Program;” (iii) “AMC Reporting Requirements (State and Federal AMCs);” and (iv) “State Reporting Requirements to the Appraisal Subcommittee.” The notice requests comment on, among other things, whether the information collection is necessary and ways to minimize the burden of the information collection on the respondents. Comments are due by July 2.
FHFA issues guidance for assessing mortgage asset credit risk
On April 25, the Federal Housing Finance Agency (FHFA) issued advisory bulletin AB 2018-02 to provide guidance for Federal Home Loan Banks (FHL Banks) on the use of models and methodologies when assessing mortgage asset credit risk. The advisory bulletin applies to FHL Banks that acquire Acquired Member Asset loans, mortgage-backed securities (MBS), and collateralized mortgage obligations. Exclusions from application of the guidance include certain mortgage-related assets that are guaranteed by, or operating with the capital support of, the U.S. government, including Fannie Mae and Freddie Mac. When selecting a credit risk model that is “sufficiently robust to produce meaningful loss estimates,” FHFA advises FHL Banks to consider the following when complying with regulatory requirements: (i) mortgage asset credit risk model selection; (ii) macroeconomic stress scenarios; (iii) stress scenario determinations; and (iv) credit enhancements. The guidance permits the exclusion of legacy private label MBS from application of the guidance where the stress loss estimates would be de minimis, and provides methods for determining estimated credit losses associated with securities that cannot be modeled.
The new guidance supplements general FHFA guidance on model risk management and takes effect January 1, 2019.