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Financial Services Law Insights and Observations

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  • FFIEC updates BSA/AML examination manual

    Agency Rule-Making & Guidance

    On February 25, the FFIEC published updated versions of four sections of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual), which provides examiners with instructions for assessing a bank’s or credit union’s BSA/AML compliance program and compliance with BSA regulatory requirements. The revisions can be identified by a 2021 date on the FFIEC BSA/AML InfoBase and include the following updated sections: Assessing Compliance with Bank Secrecy Act Regulatory Requirements, Customer Identification Program, Currency Transaction Reporting, and Transactions of Exempt Persons. The FFIEC notes that the “updates should not be interpreted as new instructions or as a new or increased focus on certain areas,” but are intended to “offer further transparency into the examination process and support risk-focused examination work.” In addition, the Manual itself does not establish requirements for financial institutions as these requirements are found in applicable statutes and regulations. (See also FDIC FIL-12-2021 and OCC Bulletin 2021-10.)

    Agency Rule-Making & Guidance FDIC Federal Reserve OCC FFIEC NCUA Bank Secrecy Act Anti-Money Laundering Of Interest to Non-US Persons Financial Crimes

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  • Agencies provide Texas winter storm guidance

    Federal Issues

    On February 22, the Federal Reserve Board, OCC, FDIC, NCUA, and the Conference of State Bank Supervisors issued a joint statement covering supervisory practices for financial institutions affected by winter storms in Texas. Among other things, the agencies called on financial institutions to “work constructively” with affected borrowers, noting that “prudent efforts” to adjust or alter loan terms in affected areas “should not be subject to examiner criticism.” Institutions facing difficulties in complying with any publishing and reporting requirements should contact their primary federal and/or state regulator. Additionally, the agencies noted that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize federally designated disaster areas. Institutions are also encouraged to monitor municipal securities and loans impacted by the winter storms.

    Additionally, HUD announced it will make disaster assistance available to Texas by providing foreclosure relief and other assistance to homeowners living in counties affected by the severe winter storms. Specifically, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties in the affected counties and is making mortgage insurance available to those victims whose homes were destroyed or severely damaged. Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house along with the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes.

    Federal Issues FDIC Federal Reserve CSBS NCUA OCC Disaster Relief HUD Mortgages FHA

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  • Agencies propose Call Report asset threshold relief

    Agency Rule-Making & Guidance

    On February 18, the FDIC, Federal Reserve Board, and the OCC published a joint notice and request for comments on changes to three versions of the Call Report—FFIEC 031, FFIEC 041, and FFIEC 051. The reporting changes, first proposed by the agencies last year, will provide relief to financial institutions with under $10 billion in total assets as of December 31, 2019, by allowing them “to use the lesser of the total consolidated assets reported in its Call Report as of December 31, 2019, or June 30, 2020, when determining whether the institution has crossed certain total asset thresholds to report additional data items in its Call Reports for report dates in calendar year 2021.” The agencies also outline specific thresholds that limit certain eligibility for streamlined Call Reports or that require the reporting of certain additional data items. This relief will only be allowed for calendar year 2021. The agencies will also allow financial institutions that temporarily exceed the $10 billion total asset threshold to use the community bank leverage ratio framework in Call Report Schedule RC R from December 31, 2020, through December 31, 2021, provided the institution meets the other qualifying criteria for this framework. Comments on the proposed changes are due March 22.

    Agency Rule-Making & Guidance FDIC Federal Reserve OCC Call Report FFIEC

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  • OCC releases recent enforcement actions

    Federal Issues

    On February 18, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is a January 8 civil money penalty order against an Illinois-based bank, which requires the payment of $193,105 for an alleged pattern or practice of violations of the Flood Disaster Protection Act and its implementing regulations.

    Federal Issues OCC Enforcement Flood Disaster Protection Act

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  • OCC says storm-affected banks may close

    Federal Issues

    On February 16, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by Winter Storm Uri “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the 2012 Bulletin, only bank offices directly affected by potentially unsafe conditions should close and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues OCC Disaster Relief

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  • OCC issues LIBOR self-assessment tool

    Federal Issues

    On February 10, the OCC issued Bulletin 2021-7, which provides a self-assessment tool for banks to evaluate their preparedness for the LIBOR cessation. The Bulletin reminds banks that they should “develop and implement risk management plans to identify and control risks related to expected [LIBOR] cessation,” and that banks are expected to cease entering into new contracts using LIBOR as a reference rate by December 31, 2021. The self-assessment tool may be used by banks to identify and mitigate the bank’s transition risks, and management should use the tool to “consider all applicable risks (e.g., operational, compliance, strategic, and reputation) when scoping and completing [LIBOR] cessation preparedness assessments.” Not all sections of the tool will apply to all banks, based on the size and complexity of the bank’s LIBOR exposure.

    Continuing InfoBytes coverage on the LIBOR transition available here.

    Federal Issues OCC LIBOR

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  • OCC conditionally approves conversion of cryptocurrency trust company

    Federal Issues

    On February 5, the OCC announced that it conditionally approved a Washington state-chartered trust company’s application to convert to a national trust bank. According to the OCC, the trust company—which will provide cryptocurrency custody services for clients in a fiduciary capacity—“is currently in the organizational phase of development and will have up to 18 months to meet the terms of its conditional approval before it converts to a national trust bank and begins to operate.” By receiving a national trust bank charter, the trust company will be allowed to provide nationwide services to customers through offices in Seattle, Boston, and New York, and over the internet. The trust company also intends to expand its custody services to support additional types of digital assets beyond cryptocurrencies, including certain tokens and stable coins, and plans to eventually offer, among other things, client-to-client trading and lending platforms. The OCC notes that approval of the conversion is subject to several conditions, including that the trust company “not engage in activities that would cause it to be a ‘bank’ as defined in section 2(c) of the Bank Holding Company Act.”

    Federal Issues OCC Fintech Cryptocurrency Bank Charter Bank Holding Company Act

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  • Court denies dismissal of OCC CRA rule challenge

    Courts

    On January 29, the U.S. District Court for the Northern District of California denied dismissal of an action brought against the OCC by two community coalitions, requesting the court block the agency’s final rule to revise the regulatory framework implementing the Community Reinvestment Act (CRA). As previously covered by InfoBytes, in June 2020, the groups filed a complaint alleging that, among other things, the OCC failed to provide for meaningful public input on key revisions to the agency’s final rule, and that the May 20 rule (covered by a Buckley Special Alert) failed to consider the impact of the Covid-19 pandemic and is in violation of the Administrative Procedures Act. The OCC moved to dismiss the action, arguing that the community groups lack standing, or in the alternative, that they do not fall within the CRA’s “zone of interests.” The district court disagreed. Specifically, the court concluded that the community groups adequately alleged standing because the members of their organizations “compete for OCC-regulated banks’ CRA dollars,” and their members “will now have to compete with investment opportunities that could not previously receive CRA credit.” Moreover, among other things, the court concluded that the community groups satisfy the “the zone-of-interests test, because they receive grants and loans for which banks obtain CRA credit, making them direct beneficiaries of the statute.”

    Courts Federal Issues OCC CRA Administrative Procedures Act

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  • OCC releases CRA determinations, distressed and underserved areas

    Federal Issues

    On January 29, the OCC published Bulletin 2021-5, containing lists of bank type determinations and distressed and underserved areas for 2021, and its computation of the banking industry’s median hourly compensation value. The information is applicable to national banks, federal and state savings associations, and federal branches of foreign banks subject to the agency’s 2020 final rule to modernize the regulatory framework implementing the Community Reinvestment Act rule (CRA). As previously covered by a Buckley Special Alert, the 2020 final rule, among other things (i) updated deposit-based assessment areas; (ii) mandated the inclusion of consumer loans in CRA evaluations; and (iii) included a non-exhaustive illustrative list of activities that qualify for CRA consideration. The 2021 list of bank type determinations identifies banks based on asset size or business model. According to the OCC, a bank’s type will “generally determine[] the performance standards and related examination procedures used to evaluate that bank’s CRA performance.” The agency’s list of distressed or underserved areas identifies tracts where banks participating in qualifying activities may receive CRA consideration under the final rule’s community development definition. Finally, the OCC states that the banking industry median hourly compensation value applicable to qualifying community development service activities will be $39.03. This figure, the agency explains, will be “used to quantify the value of a bank’s community development services” performed from October 1, 2020 through December 31, 2021.

    Federal Issues OCC CRA Of Interest to Non-US Persons

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  • OCC delays fair access rule

    Agency Rule-Making & Guidance

    On January 28, the OCC announced it has paused publication of a final rule that would ensure covered national banks, federal savings associations, and federal branches and agencies of foreign bank organizations provide all customers fair access to financial services. Delaying publication in the Federal Register “will allow the next confirmed Comptroller of the Currency to review the final rule and the public comments the OCC received, as part of an orderly transition,” the agency explained. Under the final rule (covered by InfoBytes here), banks would be required to grant fair access to financial services, capital, and credit based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers. The OCC confirmed, however, that its “long-standing supervisory guidance stating that banks should avoid termination of broad categories of customers without assessing individual customer risk remains in effect.”

    As previously covered by InfoBytes, on January 20, the Biden administration broadly directed the heads of executive departments and agencies across the federal government (without specifying which departments or agencies are covered) to “immediately withdraw” or delay action on any pending regulations not yet published in the Federal Register.

    Agency Rule-Making & Guidance OCC Dodd-Frank Bank Compliance Of Interest to Non-US Persons

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