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Financial Services Law Insights and Observations


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  • OCC announces enforcement actions for June 2024

    On June 17, 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). In its enforcement actions against national banks, the OCC alleged that one bank had deficient anti-money laundering (AML) and BSA controls; another pertained to a bank’s alleged unsafe or unsound practices related to the bank’s board and management oversight, including strategic planning, liquidity and interest risk management, and audit management, among other issues identified.

    The announcement included two other enforcement actions against IAPs, which were generally used to “deter, encourage correction of, or prevent violations, unsafe or unsound practices, or breaches of fiduciary duty.” One was for accessing customer accounts improperly and providing information on those accounts to a third-party individual; the other was for embezzlement. Lastly, the release reported the termination of an enforcement action against a bank for unsafe or unsound practices since the bank demonstrated compliance with “all articles of an enforcement action.” More information on the OCC’s enforcement action types can be found here.

    Bank Regulatory OCC Enforcement Federal Issues Cease and Desist

  • Senator Warren urges Fed vote on Basel III requirements

    On June 17, in a letter to Fed Chair, Jerome Powell, Senator Elizabeth Warren (D-MA) requested information regarding discussions of potentially cutting the Basel III capital requirements in half.

    Warren highlighted reports that Powell was considering reducing Basel III capital requirements and was allegedly influenced by lobbying efforts. Warren also referenced Powell's public comments suggesting significant changes or elimination of these requirements. She cited a news article detailing the Fed's alleged plan to lessen the mandated capital increase for major U.S. banks and reports of lobbying efforts, bypassing the Fed's Vice Chair for Banking Supervision, Michael Barr.

    Warren expressed concern that such a move could compromise the financial stability and security of middle-class and working families, while benefiting wealthy investors and CEOs. She argued that this contradicted the purpose of the Basel III rules, which were designed to prevent financial crises.

    Warren also discussed ongoing risks in the banking and financial sector, including reports of potential regional bank failures due to troubled commercial real estate loans. She challenged the arguments made by large banks against increasing capital reserves and accused Powell of taking lucrative deals following bank failures, suggesting that Powell's actions undermined the role of the Vice Chair for Banking Supervision.

    Bank Regulatory Federal Issues Federal Reserve Congress Basel

  • Acting Comptroller Hsu addresses AI integration risks and advocates for consumer financial health measures

    On June 6, Acting Comptroller of the Currency, Michael J. Hsu, delivered two statements addressing distinct concerns regarding both artificial intelligence (AI) and consumer financial health.

    In the first statement at the 2024 Conference on Artificial Intelligence and Financial Stability, Hsu said that AI was capable of being a tool for innovation or a weapon that could undermine the financial system. Hsu detailed potential risks arising from AI’s deployment, such as rapid adoption without adequate controls. He advocated taking a cautious approach, with “risk management control gates” at different stages of AI integration to ensure innovations are beneficial rather than harmful. Hsu stressed the need for a shared responsibility model for AI, where accountability would be defined clearly across different stakeholders, particularly in cases of AI-enabled fraud and cyberattacks.

    In the second statement, made at the Financial Health Network Emerge Conference, Hsu discussed the OCC’s engagement in enhancing consumer financial health as part of its broader goal to foster a fair and inclusive economy. Comptroller Hsu described three possible results given “clear and objective measures of consumers’ financial health”: (i) product offerings could better align with consumer needs; (ii) banks that support their customers’ efforts to improve their financial health would have better customer relationships and build trust; and (iii) improvements in mental well-being for individuals and communities.

    Hsu presented the concept of Financial Health Vital Signs (FHVS) as a set of metrics—positive cash flow, liquidity buffers, and on-time payments—that could indicate consumer financial health. The OCC’s report, “Community Development Insights: How Banks Can Measure and Support Customer Financial Health Outcomes,” was introduced as a resource for banks to understand and improve their customers’ financial well-being. Hsu encouraged banks to pilot these metrics, which could lead to better product alignment with customer needs, improved financial decision-making, and reduced financial stress among consumers.

    Bank Regulatory OCC Artificial Intelligence Financial Institutions Financial Stability

  • Fed seeks to renew TILA, Regulation Z information collection

    On June 4, the Fed published a request for comment on a proposal to extend the “Recordkeeping and Disclosure Requirements Associated with CFPB’s Regulation Z” for three years without revision. According to the notice, the Fed’s request would support the CFPB’s Regulation Z by ensuring consumers receive detailed information about credit terms and costs, particularly in the context of residential real estate transactions, to promote informed credit use. As part of this request, the Fed will invite public comments to address the efficacy of the information collection requirements and seek ways to enhance the quality of collected information, among other things. Comments must be received by August 6. 

    Bank Regulatory Federal Issues Federal Reserve CFPB TILA Regulation Z

  • OCC releases May CRA evaluations for 19 institutions

    On June 3, the OCC released its Community Reinvestment Act (CRA) performance evaluations for May. The OCC evaluated 19 entities including national banks, federal savings associations, and insured federal branches of foreign banks. The assessment framework incorporated four possible ratings: Outstanding, Satisfactory, Needs to Improve, and Substantial Noncompliance. Of the 19 evaluations reported by the OCC, eleven entities were rated “Satisfactory,” and eight entities were rated “Outstanding.” There were no institutions that received a rating of “Needs to Improve.” A full list of the bank evaluations is available here. In the FAQ section regarding the implementation of the CRA, the OCC detailed how it evaluated and rated financial institutions both on an institutional level and a community level. This explanation included an examination of institutional factors such as capacity, constraints, business strategies, competitors, and peers, as well as an analysis of the characteristics of the communities served by these institutions, which covered demographic particulars, economic data, and the availability of lending, investment, and service opportunities.

    Bank Regulatory OCC CRA Bank Supervision Supervision FAQs

  • Agencies issue host state loan-to-deposit ratios

    On May 31, the FDIC, Fed, and OCC (the agencies) released the current host state loan-to-deposit ratios for each state or territory, which the agencies used to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act). Under the Interstate Act, banks were prohibited from establishing or acquiring branches outside of their home state for the primary purpose of deposit production. Branches of banks controlled by out-of-state bank holding companies were also subject to the same restriction. Determining compliance with Section 109 required a comparison of a bank’s estimated statewide loan-to-deposit ratio to the annual host state loan-to-deposit ratios. If a bank’s statewide ratio was less than one-half of the published state ratio, an additional review would be undertaken by the appropriate agency, which would involve a determination on whether the bank’s interstate branches were reasonably helping to meet the credit needs of the communities. A bank that failed in both the ratio and assessment would violate Section 109 and subjected to sanctions by the appropriate agency.

    Bank Regulatory OCC FDIC Federal Reserve Bank Compliance

  • FDIC publishes its 2024 Risk Review

    On May 22, the FDIC published its 2024 Risk Review which summarized emerging risks in the U.S. banking system in 2023 across five broad categories: credit risk, market risk, operational and cyber risks, climate-related financial risk, and crypto-asset risk. The risk review paid particular attention to risks that may affect community banks. Among other issues to be aware of, the report noted banks continue to be targeted by ransomware threat actors. These cyber threats require banks to continuously improve cybersecurity and other internal controls to effectively combat cyber threats and mitigate the risk of a significant service disruption. The FDIC also reported that economic conditions were strong, and despite a period of stress in early 2023, the banking industry demonstrated resilience. By the end of the year, “overall asset quality metrics were favorable, and liquidity stabilized.” The report also noted that credit risk differed across loan categories, with commercial real estate and consumer loans seeing more asset quality decline. While the commercial real estate sector stayed strong overall, office and retail mall markets struggled. The FDIC remarked that the ability to refinance commercial real estate loans remained a challenge to the industry due to high interest rates, softening property values, and emerging credit weakness.

    Bank Regulatory Federal Issues FDIC Risk Management

  • OCC releases enforcement actions for May 2024

    On May 23, 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 two individual banks include two formal agreements in which the OCC alleged that the banks engaged in unsafe or unsound practices related to risk governance and internal controls for one bank; and capital planning, strategic and succession planning, and liquidity risk management for the other bank. The announcement also included five enforcement actions against IAPs to “deter, encourage correction of, or prevent violations, unsafe or unsound practices, or breaches of fiduciary duty.” Specifically, the announcement included four prohibition orders and one notice of charges against IAPs, mainly individuals, for criminal activity. More information on the OCC’s enforcement action types can be found here.

    Bank Regulatory Federal Issues OCC Enforcement Cease and Desist

  • Maryland banking regulators release settlement agreement with bank

    On May 16, the Maryland Office of Financial Regulation (OFR) publicized an April 30 settlement agreement pursuant to which the Maryland banking agencies will withdraw its four counts against the bank and dismiss the case with prejudice. The OFR alleged the bank violated certain of the state’s credit provisions by making loans without a license, and that its fintech partners allegedly violating the Maryland Collection Agency Licensing Act (MCALA) and the Maryland Credit Services Business Act (MCSBA). Under the settlement agreement, the respondents agreed to clearly and conspicuously provide the bank’s name and contact information in all advertisements and other communications related to credit issuance to Maryland consumers, and the fintech company agreed to get licensed as a debt collection agency under MCALA and otherwise comply with the MCSBA (without explicitly agreeing to obtain a license or not); the fintech will pay the OFR a $50,000 investigative fee and a $225,000 administrative payment. 

    Bank Regulatory Licensing Maryland Debt Collection

  • FFIEC releases its revisions to call reports during open comment period

    On May 22, members of the FFIEC, comprising the FDIC, Fed, and OCC, released their changes to how banks report their financial information through all three versions of the Call Report (FFIEC 031, FFIEC 041, and FFIEC 051) and the FFIEC 002 report. These revisions are intended to improve data accuracy and promote reporting consistency across institutions.

    The first wave of updates will affect all three versions of the Call Report, as well as the FFIEC 002, and will go into effect on June 30. The primary focus will be on the alignment of reporting language with recent changes in accounting standards. Changes will include replacing references to “troubled debt restructurings” and will be replaced with “modifications to borrowers experiencing financial difficulty.” Additionally, the revisions will include new standards for electronic signatures. In addition, the agencies are implementing revisions related to the reporting of loans to nondepository financial institutions and government-backed structured financial products.

    The agencies will still consider public comments on other proposed changes, including revisions to reporting requirements for loan modifications for struggling borrowers, past-due loans, and long-term debt. These potential future revisions aim to further enhance bank financial reporting clarity. Comments on these revisions must be submitted by June 21.

    Bank Regulatory FFIEC Federal Reserve FDIC Call Report


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