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OCC to host risk management workshops
On February 7, the OCC released its lineup of free, virtual workshops for boards of directors of community national banks and federal savings associations. Included as part of the workshops to be held this spring is a risk management series focusing on credit risk, operational risk, compliance risk, and risk governance. Another workshop will present guidance for directors and senior managers on building blocks for success. A schedule of the upcoming workshops and registration information is available here.
McWilliams discusses her tenure at FDIC
On February 3, outgoing-FDIC Chairman Jelena McWilliams spoke at the Bipartisan Policy Center on both her tenure and technology’s role in facilitating a more inclusive financial system. In reflecting upon her time as Chairman, McWilliams opined that the “story of how financial regulators, central banks, and the global financial system responded to the pandemic is one of great success. Only three banks failed since the start of the pandemic, and none due to the pandemic itself.” She also pointed out that during the Covid-19 pandemic, the FDIC prioritized “improving supervision and resolution planning” and “the importance of strong capital levels,” particularly for large banks. McWilliams listed some of her accomplishments as Chairman, including “implement[ing] a recordkeeping rule,” “simplify[ng] the deposit insurance rules for trust accounts,” and “enhancing the FDIC’s readiness if it is ever called upon to resolve non-bank firms, such as central counterparties.” Central counterparties, McWilliams explained, play a critical role in the financial system as their clearing services are central to U.S. financial markets. McWilliams discussed the ways in which the FDIC enhanced competition, fostered innovation, and “supported third-party partnerships,” extolling these virtues as “the guiding principles of my chairmanship that helped forge the most vibrant financial market in the world.”
McWilliams also stated that a “key aspect of our pro-competition agenda” was to “moderniz[e] a broad range of our rules while maintaining our core safety and soundness focus.” In connection with “crypto assets,” McWilliams opined that her personal “view is that generally bank-issued stablecoins closely resemble digital representations of deposits.” She urged the FDIC to “to build off the work we have done and provide clarity to the public as soon as practicable, which could include promulgating amendments to the deposit insurance rules.” McWilliams said that she hopes regulators will be more welcoming of the “endless possibilities” that digital assets and blockchain technology have in enhancing the efficiency of payments.
OCC hosts virtual Innovation Hours
On February 3, the OCC announced it will host virtual Innovation Office Hours on March 16 through 17, to promote responsible innovation in the federal banking system. As previously covered by InfoBytes, the OCC established the Office of Innovation in 2016 to implement certain aspects of the OCC’s responsible innovation framework, including, among other things: (i) creating an outreach and technical assistance program; (ii) conducting awareness and training activities for OCC staff, such as implementing an internal web page that provides OCC staff a ‘one-stop-shop’ to access information on industry trends and innovative products, services, and processes; and (iii) encouraging coordination and facilitation among the regulatory community and industry stakeholders. According to the OCC’s recent announcement, office hours are one-on-one meetings with representatives from the OCC Office of Innovation to discuss fintech, new products or services, partnering with a bank or fintech company, or other matters. Each meeting will last no longer than one hour. Interested parties should request a virtual office hours session by February 18.
Agencies emphasize illegality of appraisal discrimination
On February 4, CFPB Fair Lending Director Patrice Ficklin, along with senior staff from the Federal Reserve Board, OCC, FDIC, NCUA, HUD, FHFA, and DOJ, sent a joint letter to The Appraisal Foundation (TAF) emphasizing that discrimination prohibitions under the Fair Housing Act (FHA) and ECOA extend to appraisals. The joint letter, sent in response to a request for comments on proposed changes to the 2023 Appraisal Standards Board Ethics Rule (Ethics Rule) and Advisory Opinion 16, noted that while provisions prohibit an appraiser from relying on “unsupported conclusions relating to characteristics such as race, color, religion, national origin, sex, sexual orientation, gender, marital status, familial status, age, receipt of public assistance income, disability, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value,’” the “provisions do not prohibit an appraiser from relying on ‘supported conclusions’ based on such characteristics and, therefore, suggest that such reliance may be permissible.” The letter noted that the federal ban on discrimination under the FHA and ECOA is not limited only to “unsupported” conclusions, and any discussions related to potential appraisal bias should be consistent with all applicable nondiscrimination laws. The joint letter encouraged TAF to present the nondiscrimination requirements as “an essential part of any guidance provided in the Ethics Rule or Advisory Opinion 16 to ensure compliance with fair housing and fair lending laws.”
In a blog post, Ficklin noted that despite the fact that federal law prohibits racial, religious, and other discrimination in home appraisals, there are still reports of appraisers making “value judgments on biased, unfounded assumptions about borrowers and the neighborhoods in which they live.” Additionally, Ficklin noted that the Bureau is carefully reviewing findings presented in a report funded by the Federal Financial Institutions Examination Council's Appraisal Subcommittee, which raised serious concerns related to existing appraisal standards and provided recommendations with respect to fairness, equity, objectivity, and diversity in appraisals and the training and credentialing of appraisers.
Acting FDIC Chairman Gruenberg outlines priorities
On February 7, acting FDIC Chairman Martin J. Gruenberg released a statement and summary of the FDIC’s priorities for the coming year. According to Gruenberg, the federal banking agencies intend to act on a notice of proposed rulemaking to strengthen and enhance the Community Reinvestment Act which is the FDIC’s “top priority.” For evaluating crypto-asset risks, Gruenberg noted the need for “robust guidance to the banking industry on the management of prudential and consumer protection risks raised by crypto-asset activities.” Additionally, Gruenberg stated that the financial risks of climate change to the financial system will also be a top priority of the FDIC, and that the FDIC’s actions “will include seeking public comment on guidance designed to help banks prudently manage these risks, establishing an FDIC interdivisional, interdisciplinary working group on climate-related financial risks, and joining the international Network of Central Banks and Supervisors for Greening the Financial System.” Other priorities include reviewing the bank merger process and finalizing the Basel III Capital Rule.
OCC looks at compliance with state laws in CRA evaluations
On February 2, the OCC issued Bulletin 2022-2 addressing the agency’s processes for considering state banking commissioner input related to the performance of national banks under state community reinvestment laws, as well as state consumer complaint referrals. Among other things, the Bulletin outlines OCC policy and procedures for considering state input on the community reinvestment performance of OCC-supervised banks, including the implementation of Riegle–Neal Interstate Banking and Branching Efficiency Act community reinvestment-related provisions. Noting that several states and the District of Columbia have adopted community reinvestment laws that are similar to the federal Community Reinvestment Act (CRA), the OCC states that it will consider input from state banking commissioners regarding a national bank’s performance under applicable state community reinvestment laws when evaluating the bank’s CRA performance. The Bulletin also provides general guidance related to the OCC’s expectations concerning the handling of consumer complaints that state officials refer to national banks and federal savings associations, as well as state referrals of complaints to the OCC. The Bulletin “reminds banks that the OCC’s exclusive visitorial authority is not a basis for declining to address consumer complaints referred by state or local officials,” and “encourages banks to explain to state officials how complaints were resolved but without compromising consumers’ privacy interests or other confidential information.” Additionally, state officials are encouraged to refer to the OCC complaints alleging violations of federal fair lending laws or illegal, predatory, unfair, or deceptive acts or practices.
Bulletin 2022-2 rescinds OCC Advisory Letters 99-1 and 2004-2.
FDIC expands #GetBanked campaign
On February 2, the FDIC announced the expansion of its #GetBanked public awareness campaign into the Los Angeles, Dallas, and Detroit metropolitan areas in continuation of the agency’s efforts to increase financial inclusion to the unbanked population. The FDIC stated that the campaign “is focused on areas where research finds that a significant number of Black and Hispanic households are unbanked,” with the goal of “encourag[ing] unbanked consumers to consider opening a checking account.” With a series of English- and Spanish-language digital, audio, and video advertisements, the FDIC intends to reach unbanked consumers, specifically during the tax filing season. The campaign also includes resources to help consumers choose the best account to meet their needs and identify low-cost bank accounts.
FDIC discusses post-financial crisis legal claims and enforcement proceedings
Recently, the FDIC reported on legal claims and enforcement proceedings taken by the agency during the financial crisis in the years from 2008 to 2013. During this time period, the FDIC stated it “pursued and defended more legal claims in both its receivership and corporate capacities than during the savings and loan and banking crisis of the 1980s and early 1990s.” In its receivership capacity, the FDIC investigated and litigated many professional liability claims and sought to enter and collect on criminal restitution and forfeiture orders related to failed banks. The agency also pursued many enforcement claims and other actions related to both open and failed banks in its corporate capacity. The report discussed numerous topics, including the FDIC’s investigation into the residential mortgage-backed security (RMBS) portfolios of failed insured depository institutions (IDIs), which often “revealed that RMBS portfolios suffered heavy losses because the credit quality of loans collateralizing the RMBS was much lower than the credit quality represented in the RMBS offering documents.” Ultimately, 19 lawsuits were filed by the FDIC on behalf of eight receiverships seeking damages based on the IDIs’ purchases of RMBS. Other significant topics discussed within the report focus on LIBOR suppression claims, residential mortgage malpractice and/or mortgage fraud, criminal claims and recovery, income tax refund litigation, and administrative enforcement proceedings, among others.
OCC seeks comments on compliance risk for reverse mortgages
On January 28, the OCC published a notice and request for comment in the Federal Register seeking feedback on the renewal of its guidance for managing compliance and reputation risks for reverse mortgage products. The OCC, along with the FDIC, Federal Reserve Board, and the NCUA issued final guidance in 2010 focusing on the need for institutions “to provide adequate information to consumers about reverse mortgage products, to provide qualified independent counseling to consumers considering these products, and to avoid potential conflicts of interest.” The 2010 guidance also addressed related policies, procedures, internal controls, third party risk management, training, and program maintenance. The current notice seeks feedback on (i) whether the collection of the information is necessary and carries a practical utility; (ii) the accuracy of the estimates of the information collection burden; (iii) methods for enhancing the quality, utility and clarity of the information to be collected; (iv) ways to minimize the information collection burden for respondents; and (v) “[e]stimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.” Comments are due March 29.
FDIC releases December enforcement actions
On January 28, the FDIC released a list of administrative enforcement actions taken against banks and individuals in December. During the month, the FDIC made public eight orders, including one order issued in October 2021, and one notice. The administrative enforcement actions in the orders and notice consisted of “two Orders to Pay Civil Money Penalty, one Consent Order, one order terminating consent order, one voluntary termination of deposit insurance, two Section 19 Orders, one adjudicated cease and desist order, and one Notice of Charges.” Among the actions is an order to pay a civil money penalty imposed against a North Dakota-based bank related to alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank: (i) “made, increased, extended, or renewed loans secured by a building or mobile home located or to be located in a special flood hazard area without requiring that the collateral be covered by flood insurance”; and (ii) “made, increased, extended or renewed a loan secured by a building or mobile home located or to be located in a special flood hazard area without providing timely notice to the borrower and/or the servicer as to whether flood insurance was available for the collateral.” The order requires the payment of a $4,500 civil money penalty.