InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
FDIC Issues List of Banks Examined for CRA Compliance
On February 3, the FDIC released its February 2017 list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress mandated the public disclosure of an evaluation and rating for each bank or thrift that undergoes a CRA examination on or after July 1, 1990. A monthly list of banks examined for CRA compliance dating back to 1996 can be accessed here. The February 2017 list covers evaluation ratings that the FDIC assigned to institutions in November 2016. Of the 49 banks evaluated, five were rated Outstanding, 43 received a Satisfactory rating, and one was rated Needs to Improve.
OCC, FDIC, and Fed Release Stress Test Scenarios for 2017
On February 3, the Fed announced the release of the “Supervisory Scenarios” to be used by banks and supervisors for the 2017 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress test exercises and also issued instructions to firms participating in CCAR. The Fed also published three letters that provide additional information on its stress-testing program. The three letters describe: (i) the Horizontal Capital Review for large, noncomplex companies; (ii) the CCAR qualitative assessment for U.S. intermediate holding companies of foreign banks, which are submitting capital plans for the first time; and (iii) improvements to how the Fed will estimate post-stress capital ratios.
On February 3, the OCC similarly released economic and financial market scenarios for 2017 that are to be used by national banks and federal savings associations (with total consolidated assets of more than $10 billion) in their annual Dodd-Frank Act-mandated stress test. On February 6, the FDIC released its stress test scenarios, working in consultation with the Fed and OCC.
The three sets of supervisory scenarios provide each agency with forward-looking information for use in bank supervision and will assist the agencies in assessing the covered institutions’ risk profile and capital adequacy.
Fed Survey: CRE Tightening Trend Continues
On February 6, the Fed released its January 2017 senior loan officer survey, addressing changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. The January survey results indicated that over the fourth quarter of 2016, on balance, lenders left their standards on commercial and industrial (“C&I”) loans unchanged, while tightening credit for commercial real estate (“CRE”) loans. Banks reported that they expect to ease standards on C&I loans and for the asset quality of such loans to improve somewhat this year. In contrast, banks expect to tighten standards on CRE loans, while they expect the asset quality of most CRE loan categories to remain unchanged. As to loans to households, banks reported that demand for most types of home-purchase loans weakened over the fourth quarter. On balance, banks reported that they expect to ease standards and to see asset quality improve somewhat for most residential home-purchase loans in 2017.
For additional details see:
- Table 1 – Opinion Survey on Bank Lending Practices at Selected Large Banks in the U.S.
- Table 2 – Opinion Survey on Bank Lending Practices at Selected Branches & Agencies of Foreign Banks
- Charts – Measures of Supply and Demand for Commercial & Industrial Loans
DOJ Declines FCPA Action Against Oil Company
Houston-based oil company announced in a February 9, 2017 press release that the DOJ had formally closed its FCPA investigation into the company’s oil exploration operations in Angola and would not prosecute the company. The press release noted that the DOJ’s investigation “was the last remaining FCPA investigation by any U.S. regulatory agency into [the company’s Angolan operations.” The DOJ’s declination letter came more than two years after the SEC closed its own FCPA investigation and declined to bring an enforcement action.
As detailed in a previous FCPA Scorecard post, the parallel investigations began in 2011, and were prompted by allegations concerning the connection between senior Angolan government officials and a local partner in the company-led deepwater oil venture. According to the company’s 10-K filing for FY 2012, the company had voluntarily contacted the DOJ when the SEC launched its initial inquiry and “offered to respond to any requests the DOJ may have.”
Fired General Counsel Wins $10.9 Million in FCPA Whistleblower-Retaliation Case
On February 6, 2017, a federal jury in San Francisco awarded the former general counsel of a life sciences company $10.9 million in a landmark FCPA whistleblower-retaliation case brought under the Sarbanes-Oxley Act (SOX), the Dodd-Frank Act, and California state law. After three hours of deliberation, the jury found that the company’s former general counsel of nearly 25 years, was fired for reporting suspected FCPA violations to the company’s audit committee in February 2013, a protected activity under SOX’s anti-retaliation provisions. Although the former general counsel did not report his concerns to the SEC, the court held in 2015 that internal whistleblowing under SOX was also protected by the Dodd-Frank Act’s anti-retaliation provisions, opening the door to Dodd-Frank’s double back-pay remedy. The company’s last-minute motion to block purported attorney-client privileged information from trial –“virtually all of the evidence and testimony Plaintiff might rely upon to prove his case” – was denied by the court in December 2016.
The jury ultimately awarded the former general counsel $2.96 million in back-pay – to be doubled under Dodd-Frank – plus $5 million in punitive damages. As detailed in a previous FCPA Scorecard post, the company paid $55 million in November 2014 to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. The former general counsel’s report to the audit committee had involved separate allegations that the company violated the FCPA in China.
President Issues Executive Order to Study the DOL's Fiduciary Rule
On February 3, President Trump issued an Executive Memorandum directing the Department of Labor (DOL) to examine the Fiduciary Rule—an April 2016 DOL rule that expands the circumstances in which a person will be treated as a fiduciary under both ERISA and Section 4975 of the Internal Revenue Code by reason of providing investment advice to retirement plans and IRAs. In the memorandum, President Trump calls for an examination of the Fiduciary Rule to determine whether it (i) has harmed or is likely to harm investors; (ii) has resulted in dislocations or disruptions within the retirement services industry; and (iii) is likely to cause an increase in litigation and an increase in the prices that investors and retirees must pay to gain access to retirement services. If the Secretary of Labor makes any of these findings, the memorandum directs the Secretary of Labor to publish a proposed rule rescinding or revising the Fiduciary Rule. Initial compliance with the Fiduciary Rule is currently required by April 10, but the DOL has announced that it “will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”
Special Alert: President Signs Executive Order Calling For Review of Financial Regulations
On February 3, President Trump signed an executive order (the Executive Order) directing the Treasury Secretary and the heads of the member agencies of the Financial Stability Oversight Council (FSOC) to review financial laws and regulations—including the Dodd-Frank Act and regulations implementing that law—thereby setting into motion a process by which the 2010 financial law could be significantly scaled back.
Under the Executive Order, the Secretary of the Treasury – who has yet to be confirmed – has 120 days to review and report to the President which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements promote the “core principles” listed below and those that do not. The core principles include:
- restoring public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework
- fostering economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry
- enabling American companies to be competitive with foreign firms in domestic and foreign markets
- advancing American interests in international financial regulatory negotiations and meetings
- preventing taxpayer-funded bailouts, and
- empowering Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth
Click here to read full special alert
* * *
If you have questions about the order or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
OFAC Sanctions More than Two Dozen Firms and Individuals in Connection with Iran's Ballistic Missile Program
On February 3, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was imposing new sanctions against several entities and individuals involved in procuring technology and/or materials to support Iran’s ballistic missile program, as well as for acting for or on behalf of, or providing support to, Iran’s Islamic Revolutionary Guard Corps-Qods Force. The sanctions block “all property and interests in property of those designated today subject to U.S. jurisdiction are blocked, U.S. persons are generally prohibited from engaging in transactions with” the identified firms and individuals.
Senators Unveil Bill to Replace CFPB Director with Committee
On January 31, Senators Deb Fischer, R-Nebraska, John Barrasso (R-Wyo.) and Ron Johnson (R-Wisc.), reintroduced legislation that would replace the single director of the CFPB with a five-member bipartisan committee. Specifically, the proposed legislation provides that: (i) each board member would be appointed by the president and confirmed by the Senate; (ii) the president would appoint one of the five members of the board to serve as chairperson of the board; (iii) board members would each serve staggered five-year terms, and no more than three members would be from the same political party; and (iv) the legislation would take effect on the date on which not less than three persons have been confirmed by the Senate to serve as members of the board of directors.
Senator Fischer introduced similar legislation in both the 113th Congress and the 114th Congress.
Senators Introduce Joint Resolution to Overturn CFPB's Prepaid Rule; CFPB Releases Prepaid Rule Compliance Guide on Same Day
On February 1, Sen. David Perdue (R-Ga.), and six fellow GOP lawmakers introduced a joint resolution proposing to overturn the CFPB’s final rule on prepaid accounts (Prepaid Rule) before it goes into effect on October 1. The proposed resolution calls for applying the Congressional Review Act to set aside the regulation—which, procedurally, would require only a simple majority vote in the Senate and House and approval by President Trump.
As previously covered by InfoBytes, the Prepaid Rule amends Regulations E and Z to extend disclosure requirements and consumer protections to certain government benefit cards and mobile wallet accounts, payroll cards, Visa- or MasterCard-branded cards sold in retail outlets for general use, and other types of prepaid products. Generally, the Prepaid Rule becomes effective October 1, 2017. The Prepaid Rule does, however, contain certain exceptions and accommodations related to the October 1 effective date.
Earlier that same day, the CFPB issued a small entity compliance guide, which provides a summary of the Prepaid Rule and highlighting information that may be helpful when implementing its various provisions. Among other things, the compliance guide covers: definitions of various prepaid accounts, exclusions in the rule, entities subject to the rule, required disclosures, change-in-terms notices, limited liability and error resolution, periodic statements, receipts at electronic terminals, access devices, compulsory use, account agreements, overdraft credit features, remittances, and record retention. The compliance guide also discusses the exceptions and accommodations related to the effective date noted above, which are also listed in the Prepaid Rule’s Effective Dates Factsheet.