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Financial Services Law Insights and Observations


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  • OCC releases enforcement actions for April 2024

    On April 18, the OCC released a list of recent enforcement actions against national banks, federal savings associations, and individuals affiliated with such entities (defined as institution-affiliated parties, or IAPs). The actions against banks include two formal agreements and one cease and desist order against three individual banks. In each instance, the OCC alleged that the banks engaged in unsafe or unsound practices related to some combination of board oversight, liquidity management, capital requirements, or credit risk. With respect to IAPs, the announcement included four enforcement actions against IAPs to “deter, encourage correction, or prevent violations, unsafe or unsound practices, or breaches of fiduciary duty.” The OCC issued prohibition orders, which prohibit the IAP from any participation in the affairs of a bank or other institution, for all four IAPs and assessed civil money penalties ranging from $40,000 to $400,000 against three of them. The announcement also included two more prohibition orders against two additional IAPs for criminal activities. More information on the OCC’s enforcement action types can be found here.

    Bank Regulatory Enforcement OCC Cease and Desist

  • Fed’s Bowman discusses risk management and bank supervision

    On April 18, Fed governor Michelle Bowman delivered opening remarks at the Regional and Community Banking Conference in New York. During her speech, Bowman acknowledged the recent challenges that have impacted the U.S. banking system. She pointed out that recent events, including the pandemic, a rapid rise in inflation and interest rates, market uncertainties, and bank failures, have brought traditional risks, such as liquidity and interest rate risks, to the forefront, while other risks, like cybersecurity and third-party risks, “continue to evolve and pose new challenges.”

    Bowman emphasized the importance of banks having robust risk management frameworks to identify and control both existing and emerging risks. She also stressed the need for banks to innovate responsibly and adapt their risk management as new products and services are introduced, while cautioning that regulators must balance supervision and regulation so as not to stifle responsible innovation. In light of the recent bank failures, Bowman also underscored the need for banks to have of contingency funding plans in place, which may include borrowing from the Federal Home Loan Banks or the Fed’s discount window. While regulators can encourage banks to maintain and test these plans, she noted that they should not overstep their role and interfere with management decisions.

    Highlighting that these evolving risks can be exacerbated by inadequate bank supervision and acknowledging the need for a review and potential adjustments in supervision following the recent bank failures, Bowman stressed that supervision should remain commensurate to a bank’s size, complexity, and risk profile, and should focus on core and emerging risks so as not to impair the long-term viability of the banking system, including mid-sized and smaller banks.

    Bank Regulatory Federal Issues Risk Management Bank Supervision Liquidity Federal Reserve

  • OCC seeks input on LCR and NSFR reporting and recordkeeping requirements

    On April 16, the OCC released a request for comment on proposed revisions to its “Reporting and Recordkeeping Requirements Associated with Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring” to account for three new recordkeeping requirements to be included in 12 CFR part 50, which applies to large national banks and Federal savings associations. The notice outlined steps that such institutions should take to ensure they properly document compliance with the “liquidity coverage ratio” (LCR), which is designed to “promote the short-term resilience” of a bank’s liquidity risk profile, and the “net stable funding ratio” (NSFR), which is designed to reduce disruptions to a bank’s funding sources. The revised reporting obligations require covered institutions to self-report when LCR falls below the minimum threshold or when there is an NSFR shortfall and, in some cases, to submit a liquidity or remediation plan, including estimated time frame for resuming compliance with LCR or NSFR requirements. The recordkeeping revisions require covered entities to, among other things, establish and maintain written policies and procedures for a number of processes, including monitoring changes in relevant laws related to master netting agreements, determine the composition of its eligible high-quality liquid assets (HQLA), and ensure consistent treatment for determining eligible HQLA. Comments must be received by June 17.

    Bank Regulatory OCC Recordkeeping Liquidity Compliance FDIC

  • OCC’s Hsu discusses creating economic opportunity for “new Americans”

    On April 10, Acting Comptroller of the Currency, Michael J. Hsu, delivered prepared remarks, during a public meeting of the Financial Literacy and Education Commission (FLEC).  During his remarks, Hsu underscored the significance of financial literacy and inclusion for “new Americans,” drawing from his own experience as a child of immigrants. Acknowledging the substantial contributions of immigrant communities to the U.S. economy, including through entrepreneurship and innovation, Hsu urged financial institutions to support a system that is inclusive and equitable. Hsu called for banks to expand services offered in languages other than English and to explore innovative means of accepting diverse forms of identification within the regulatory framework to facilitate greater access to financial services for foreign-born individuals who are more likely to be unbanked. The speech also highlighted the need for mortgage financing options that cater to the unique requirements of immigrant populations, including extending access to credit for individuals without traditional credit scores. Hsu specifically emphasized special purpose credit programs and community partnerships as a means to extend credit to new Americans. Hsu concluded by pointing to the OCC's resources aimed at bolstering the efforts of banks and their community partners in enhancing financial capability among immigrant populations. 

    Bank Regulatory Federal Issues OCC

  • OCC extends comment period on proposed rules for the Bank Merger Act

    On April 10, the OCC announced a notice published in the Federal Register extending the comment period for the OCC’s proposed rule on bank mergers. The NPRM titled, “Business Combinations under the Bank Merger Act,” was originally published on February 14. As previously covered by InfoBytes, the rule would amend procedures to include a policy statement that “summarizes the principles the OCC uses when it reviews proposed bank merger transactions under the Bank Merger Act.” Under the typical 60-day comment period, the comment period for the original NPRM would have closed on April 15. The OCC extended the comment period in response to a request to do so, to allow interested parties additional time to prepare and submit their comments. The notice will not not indicate who made the request. The new deadline for parties to submit comments is June 15.

    Bank Regulatory OCC Rulemaking Agenda Bank Merger Act

  • FSB report outlines eight recommendations for bank liquidity preparedness

    On April 17, the Financial Stability Board (FSB) released a consultation report titled “Liquidity Preparedness for Margin and Collateral Calls,” which laid out eight policy recommendations intended to enhance the liquidity preparedness of nonbank market participants in certain markets. These policy recommendations came from several reviews by the Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructures, and the International Organization of Securities Commissions analyzing recent incidents of liquidity stress. The eight recommendations comprised liquidity risk management, liquidity stress testing, and collateral management practices.

    The first three recommendations focused on liquidity risk management practices. The first recommendation would amend liquidity risk management and governance frameworks to protect against spikes in margin and collateral calls in liquidity risk management; the second recommendation would ensure liquidity needs by establishing liquidity risk appetites and a contingency funding plan; and the third recommendation outlined the need for regular reviews of liquidity risk frameworks.

    The next two recommendations were on liquidity stress testing and scenario design. The fourth recommendation set out the need for conducting liquidity stress tests with respect to margin and collateral calls to identify the sources of liquidity strains. The fifth called for stress tests to cover a range of “extreme but plausible” scenarios.

    The last three recommendations focused on collateral management practices. The sixth recommendation called for resilient and effective operational processes and collateral management practices; the seventh set out the need for sufficient cash and readily available diverse liquid assets and collateral arrangements; and the eighth called for active, transparent and regular interactions with counterparties and third-party service providers. The FSB will welcome comments on this report submitted before June 18.

    Bank Regulatory FSB Liquidity Liquidity Standards Of Interest to Non-US Persons

  • FDIC releases comprehensive report on international, systemically important banks

    On April 10, the FDIC released a report on the FDIC’s plans and readiness to step in as a receiver for a financial company under Title II of the Dodd-Frank Act. The FDIC Chairman said this report was the “most detailed description to date of the FDIC’s preparedness to use its Title II resolution authority.”

    The report provided background on resolution-related authorities under Dodd-Frank, highlighted key measures that provided readiness of resolution under Title II authority, reviewed strategic decision-making for the use of such authority, and explained how the Commission expects to undertake a Title II resolution of a Global Systematically Important U.S. Bank (GSIB) using a Single Point of Entry (SPOE) resolution strategy. FDIC Chairman Martin Gruenberg said that such a resolution “will be a challenging process under any circumstance, with a number of steps that need to be taken quickly and in close coordination with a range of stakeholders.”

    Under the SPOE resolution strategy, the FDIC would place only the holding company of the GSIB into receivership. The FDIC then would establish a bridge financial company under its control and would transfer the operating subsidiaries to the bridge institution. The bridge institution and its subsidiaries would remain operating while the FDIC performed its receivership duties, including the claims process. The final stage of GSIB receivership would be the implementation of a restructuring and wind-down plan that would aim to maintain value, address the causes of the failure, and transition operations. Chairman Gruenberg also noted that orderly resolution of a GSIB has not been executed before, “so there will be questions on whether it can be done.”

    Bank Regulatory Federal Issues FDIC Liquidity

  • FDIC releases report on bank's past discriminatory lending practices

    On April 3, the FDIC made public for the first time its Community Reinvestment Act Performance Evaluation for a bank from September 2022. The bank focused on residential and commercial lending and had $1.15 billion in assets at the time of the review. During its supervision window from 2019 to 2022, the FDIC rated the bank’s CRA rating as “Needs to Improve,” which was a downgrade from its previous rating of “Satisfactory.” Although the FDIC found that the bank “demonstrated satisfactory performance” under the Lending and Community Development Tests, it was found to have violated ECOA and FHFA. Specifically, the FDIC found that the bank engaged in discriminatory lending through alleged redlining practices, the FDIC deemed. The FDIC noted that these violations occurred due to a lack of sufficient oversight and appropriate policies and procedures. 

    Bank Regulatory Discrimination Fair Lending Supervision ECOA FHFA CRA

  • Fed releases enforcement action against Wyoming-based bank holding company

    On April 4, the Federal Reserve released an enforcement action against a Wyoming-based bank holding company as part of a September 2023 inspection that found alleged deficiencies related to the “fintech business strategy, board oversight, capital, earnings, liquidity, risk management, and compliance.” The consent order with the bank holding company requires the holding company to: (i) serve as a source of strength to its bank subsidiary; (ii) submit a written plan to strengthen board oversight, including a staffing assessment and succession plan; (iii) submit a written plan to strengthen its risk management program, including adopting written policies and procedures to manage compliance and fraud risks; (iv) submit an enhanced liquidity risk management program, a capital plan, and a written business plan to improve earnings; and (v) ensure compliance with regulations governing affiliate transactions. The consent order additionally placed limits on the holding company’s fintech activities and required the holding company to submit a wind-down plan for fintech-related business. According to the consent order, following the September 2023 inspection, the holding company had voluntarily stopped pursuing its fintech business strategy and had been winding down all related activities.

    Bank Regulatory Federal Reserve Enforcement Wyoming Liquidity

  • FDIC’s Gruenberg speaks on plans for economic inclusion

    On April 4, Federal Deposit Insurance Corp. Chairman, Martin J. Gruenberg, delivered a speech on the FDIC’s economic inclusion strategy. The speech highlighted the FDIC’s commitment to economic inclusion, efforts to understand the size and characteristics of the unbanked market, and past FDIC economic inclusion efforts.

    When Chairman Gruenberg highlighted previous FDIC inclusion efforts, he noted that the unbanked rate fell from 8.2 to 4.5 percent during the decade ending in 2021, with even steeper decreases for some minority populations. He also announced a new economic inclusion strategic plan to expand customers’ participation in the banking system and help households achieve greater financial security. The plan would intend to help customers build credit, including through small-dollar lending programs with affordable rates, and calls for specific steps to encourage bank lending and investments in low- and moderate-income neighborhoods.

    Bank Regulatory FDIC CRA


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