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Financial Services Law Insights and Observations


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  • Federal regulators discuss national bank’s remediation progress

    Federal Issues

    On April 9, Senators Elizabeth Warren (D-Mass) and Sherrod Brown (D-Ohio) released responses to inquiries sent last month to the Federal Reserve Board, the OCC, and the CFPB, which expressed, among other things, concern about the level of response taken by a national bank regarding its auto-lending practices, as well as the bank’s remediation plans and compliance risk management efforts. In response, the regulators individually discussed the bank’s progress to satisfy its obligations under existing consent orders.

    Federal Reserve Chairman Jerome Powell wrote that the asset cap imposed on the bank will remain in place until the bank has implemented—to the Board’s satisfaction—remedies to address risk management breakdowns. Powell noted that the bank and the Board are comprehensively addressing the progress.

    OCC Comptroller Joseph Otting emphasized that the agency continues “to monitor the bank’s work to remediate deficiencies” identified in previously issued orders, and commented that while the OCC is disappointed with the bank’s current corporate governance and risk management programs, it “is fully engaged and prepared to bring [the bank’s] matters to resolution.”

    CFPB Director Kathy Kraninger stated that “while the Bureau is working with [the bank] to ensure its compliance with the consent order, I am not satisfied with the [b]ank’s progress to date and have instructed staff to take all appropriate actions to ensure the [b]ank complies with the consent order and [f]ederal consumer financial law.”

    Federal Issues U.S. Senate Federal Reserve OCC CFPB Compliance Risk Management

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  • Federal Reserve seeks comments on capital framework for U.S. subsidiaries of foreign banks

    Agency Rule-Making & Guidance

    On April 8, the Federal Reserve Board announced a notice of proposed rulemaking and request for comment (NPRM) seeking to modify its regulation of the regulatory capital requirements for U.S. subsidiaries of foreign banking organizations. Chairman Jerome Powell referred to a proposal issued last fall for refining regulations for domestic banking firms based on risk profiles (previously covered by InfoBytes here), and noted that “because the U.S. operations of most foreign banks tend to have a larger cross-border profile, greater capital markets activities, and higher levels of short-term funding, they often present greater risk than a simpler, more traditional domestic bank.”

    The NPRM builds upon the Federal Reserve’s framework for U.S. firms announced last fall, and states that foreign banking organizations with $100 billion or more in U.S. assets would be assigned to one of three categories based on the size of their U.S. operations as well as the following risk-based indicators: “cross-jurisdictional activity, nonbank assets, off-balance sheet exposure, and weighted short-term wholesale funding.” Under the proposal, foreign banking organizations would be classified into the following three categories: (i) Category II: foreign banking organizations with U.S. assets exceeding $700 billion or $75 billion in cross-border activity; (ii) Category III: foreign banking organizations with more than $250 billion in U.S. assets that also exceed certain risk thresholds; and (iii) Category IV: foreign banking organizations with U.S. assets between $100 billion and $250 billion and minimal risk factors. Category I would be reserved for U.S.-based global systemically important banks.

    A second proposal issued the same day by the Federal Reserve Board, the FDIC, and the OCC (collectively, the “Agencies”) requests comment on, among other things, whether the Agencies should extend standardized liquidity requirements to foreign banking organizations’ U.S.-based branches and agency networks as well as approaches for doing so.

    Comments on both proposals are due June 21.

    Agency Rule-Making & Guidance Federal Reserve FDIC OCC Of Interest to Non-US Persons

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  • Federal agencies propose rule to reduce impact of large bank failures

    Agency Rule-Making & Guidance

    On April 2, the FDIC, Federal Reserve Board, and the OCC (together, the “Agencies”) released a joint statement announcing a notice of proposed rulemaking (NPR) to limit the “interconnectedness” of large banking organizations and reduce systemic risk resulting from the failure of global systemically important bank holding companies (GSIBs), certain intermediate holding companies, and GSIB foreign banking organizations. Among other measures, the NPR proposes that, to discourage GSIBs and advanced approaches banking organizations (generally firms with total consolidated assets of $250 billion or more or at least $10 billion in on-balance sheet foreign exposure) from purchasing large amounts of unsecured debt issued by GSIBs, the Agencies propose to subject these investments “to deduction from the . . . organization’s own regulatory capital.” This debt, the Agencies note in the statement, is used to recapitalize the GSIB during bankruptcy or resolution as a result of failure, and the proposal is intended to reduce both interconnectedness within the financial system and systemic risk. Comments on the NPR are due 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Reserve FDIC OCC Supervision Of Interest to Non-US Persons

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  • OCC announces interagency examination procedures for prepaid accounts rule

    Agency Rule-Making & Guidance

    On March 26, the OCC released Bulletin 2019-16, which announces that the FFIEC Task Force on Consumer Compliance developed new interagency examination procedures to reflect the amendments to Regulations Z and E under the CFPB’s Prepaid Accounts Rule (covered by InfoBytes here), which go into effect on April 1. Specifically, the examination procedures reflect (i) Regulation E requirements covering disclosures, limited liability and error resolution, periodic statement, and posting of account agreements; and (ii) Regulation Z requirements covering overdraft credit features with prepaid accounts.

    Agency Rule-Making & Guidance OCC Supervision FFIEC Examination Prepaid Rule CFPB

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  • Agencies issue joint statement on Midwest flood disaster relief

    Federal Issues

    On March 25, the OCC, Federal Reserve Board, FDIC, NCUA, and the Conference of State Bank Supervisors (collectively, the “agencies”) issued a joint statement providing guidance to financial institutions impacted by flooding in the Midwest. In the statement, the agencies encourage lenders to work with borrowers in impacted communities and to consider, among other things (i) modifying existing loans based on the facts and circumstances; and (ii) requesting expedited approval to operate temporary bank facilities if faced with operational difficulties. The agencies ask institutions to contact their appropriate federal and/or state regulator if they experience disaster-related difficulties complying with publishing or regulatory reporting requirements. The agencies further note that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The statement also provides links to previously issued examiner guidance for institutions affected by major disasters.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues OCC Federal Reserve FDIC NCUA CSBS Consumer Finance Disaster Relief

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  • OCC allows institutions affected by severe weather in Central Plains and Midwest to close

    Federal Issues

    On March 19, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by severe weather in the Central Plains and Midwest regions of the U.S. “for as long as deemed necessary for bank operation or public safety.” In issuing the proclamation, the OCC noted that only bank offices directly affected by potentially unsafe conditions should close, and that institutions should make every effort to reopen as quickly as possible to address customers’ banking needs. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on natural disasters and other emergency conditions.

    Federal Issues OCC Disaster Relief

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  • OCC fines national bank $25 million for violating Fair Housing Act


    On March 19, the OCC announced that a national bank has agreed to pay a $25 million civil money penalty to resolve alleged violations of the Fair Housing Act. According to the OCC’s consent order, (i) from August 2011 to April 2015, the bank did not properly train loan officers about available mortgage discounts under its Relationship Loan Program (RLP); (ii) from August 2011 to November 2014, the bank failed to provide explicit instructions within their written guidelines that employees should offer those discounts to all eligible customers; and (iii) from August 2011 to November 2014, the bank did not require loan officers to document the reason for a customer’s rejection. Moreover, according to the OCC, the bank did not require loan officers to inform customers about potential mortgage discounts from August 2011 to January 2015. As a result, the OCC stated that certain borrowers allegedly did not receive RLP benefits for which they were eligible and were adversely affected on the basis of their race, color, national origin, and/or sex. The bank—which did not admit nor deny the allegations and self-reported the problems in 2015—initiated and has nearly completed a reimbursement plan, which will deliver roughly $24 million in restitution to the approximately 24,000 borrowers who may have missed out on the appropriate RLP benefit.

    Lending OCC Fair Lending Fair Housing Act Enforcement

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  • OCC proposes partial assessment fee refunds

    Agency Rule-Making & Guidance

    On March 20, the OCC published in the Federal Register proposed revisions to its assessment rules to provide partial assessment refunds to banks under OCC jurisdiction that exit OCC jurisdiction within the prescribed timeframe by the rule. In addition to technical and conforming changes, the proposed rule would maintain semiannual assessment fee payments, but would provide refunds equal to the prospective half of the assessment to banks that leave the OCC’s jurisdiction between the date of the applicable Call Report and the date of collection. Comments on the proposal are due by April 19, 2019.

    Agency Rule-Making & Guidance OCC Assessments

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  • OCC updates recovery planning threshold in Comptroller’s Handbook

    Agency Rule-Making & Guidance

    On March 15, the OCC announced an update to the Recovery Planning booklet of the Comptroller’s Handbook. Among other things, the revised booklet explains the purpose of effective recovery planning and provides guidance for OCC examiners to use when assessing the “appropriateness and adequacy of [a] covered bank’s recovery planning process and the integration of that process into the covered bank’s overall risk governance framework.” The updates reflect revisions made to the agency’s rule on enforceable guidelines, published December 27, 2018, which increased the average total consolidated assets threshold from $50 billion to $250 billion for covered insured national banks, federal savings associations, and federal branches that are required to comply, unless determined otherwise. Additionally, a bank must now comply with the guidelines within 12 months after it first becomes subject to the guidelines.

    Agency Rule-Making & Guidance OCC Comptroller's Handbook Examination

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  • Agencies adopt interim final rule facilitating transfers of legacy swaps

    Agency Rule-Making & Guidance

    On March 15, five federal agencies—the FDIC, FHFA, Federal Reserve Board, OCC, and Farm Credit Administration (collectively, the “Agencies”)—adopted an interim final rule amending the agencies’ regulations that require swap dealers and security-based swap dealers under the Agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margins Rule). The interim final rule seeks to address the situation where the United Kingdom withdraws from the European Union without a negotiated agreement and entities located in the U.K. transfer existing swap portfolios that face counterparties located in the E.U. over to affiliates located in the U.S. or the E.U. Specifically, the interim final rule provides that certain swaps under this situation will not lose their “legacy” status—will not trigger the application of the Swap Margin Rule—if carried out in accordance with the conditions of the rule. The interim final rule is effective immediately and the Agencies are accepting comments for 30 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Of Interest to Non-US Persons FDIC FHFA OCC Federal Reserve Farm Credit Administration UK

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