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On May 25, the Nebraska governor approved LB 649, the Nebraska Financial Innovation Act, which creates a bank charter for companies that hold cryptocurrencies. The new act defines “digital asset depository institutions” as banks or financial institutions that hold certain digital assets, and will allow existing state-chartered banks to establish areas focused on cryptocurrency services. New businesses will also be able to gain a state banking charter as digital asset depositories. The act provides, among other things, that “at all times, a digital asset depository shall maintain unencumbered liquid assets denominated in United States dollars valued at not less than one hundred percent of the digital assets in custody” and that “compliance with federal and state laws, including, but not limited to, know-your-customer and anti-money-laundering rules and the federal Bank Secrecy Act, is critical to ensuring the future growth and reputation of the blockchain and technology industries as a whole.”
On May 26, the OCC announced a series of examiner-led virtual workshops for the boards of directors of community national banks and federal savings associations. The workshops will focus on emerging issues regarding compliance risk, and will provide training and guidance on implementing effective compliance risk management programs, as well as guidance on regulations such as the Bank Secrecy Act and ECOA. A schedule of the upcoming workshops is available here.
On May 24, the FDIC, Federal Reserve Board, and the OCC published a joint notice and request for comments on information collections published last December and this February (covered by InfoBytes here). The proposed reporting changes would revise and extend three versions of the Call Report—FFIEC 031, FFIEC 041, and FFIEC 051—as well as FFIEC 002, “Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,” and FFIEC 002S, “Report of Assets and Liabilities of a Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank.” After considering comments received on the information collections, the agencies announced their intention to proceed with the proposed revisions and will submit a request to Office of Management and Budget for approval. The proposed revisions to the reporting forms, along with revised instructions related to FDIC amendments to the deposit insurance assessment system, will be effective with the June 30, 2021, report date. Additionally, the agencies noted that the exclusion of sweep deposits and certain other deposits from reporting as brokered deposits will be effective with the September 30, 2021, report date. Comments on the joint notice must be received by June 23.
On May 21, the FDIC, the Federal Reserve Board, and the OCC released the current host state loan-to-deposit ratios for each state or U.S. territory, which the agencies use 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 are 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 are also subject to the same restriction. Determining compliance with Section 109 requires a comparison of a bank’s estimated statewide loan-to-deposit ratio to the estimated host state loan-to-deposit ratio. If a bank’s statewide ratio is less than one-half of the published host state ratio, an additional review is required by the appropriate agency, which involves a determination of whether a bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.
On May 20, 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 in the release is a formal agreement entered into with a Pennsylvania-based bank on April 20 in connection with alleged unsafe or unsound practices relating to oversight, internal controls, audit, and information technology controls. The agreement requires the bank to (i) establish a compliance committee to monitor the bank’s progress in complying with the agreement’s provisions; (ii) report such progress to the bank’s board on a quarterly basis; and (iii) develop, implement, and adhere to a written risk-based, internal information, technology audit program. The agreement further provides that the technology audit program must be performed by an independent and qualified party and must include fundamental elements of a sound audit program.
On May 18, the OCC announced it will reconsider its 2020 final rule overhauling the Community Reinvestment Act (CRA). As previously covered by a Buckley Special Alert, the 2020 final rule, finalized last year, was intended to modernize the regulatory framework implementing the CRA by, among other things: (i) updating deposit-based assessment areas; (ii) mandating the inclusion of consumer loans in CRA evaluations; (iii) including quantitative metric-based benchmarks for determining a bank’s CRA rating; and (iv) including a non-exhaustive illustrative list of activities that qualify for CRA consideration.
“While this reconsideration is ongoing, the OCC will not object to the suspension of the development of systems for, or other implementation of, provisions with a compliance date of January 1, 2023, or January 1, 2024, under the 2020 CRA rule,” the OCC stated. The agency further stressed that its decision to suspend compliance deadlines for the 2020 final rule “will provide for an orderly reconsideration of the June 2020 rule” and “provide the OCC with the opportunity to consider additional stakeholder input, to evaluate issues and questions that have been raised, to reassess the necessary data, and to take additional regulatory action, as appropriate.” The OCC also added that it does not plan to finalize a December 2020 proposed rule covering evaluation measure benchmarks, retail lending distribution test thresholds, and community development minimums under the new general performance standards outlined in the 2020 final rule (covered by InfoBytes here). Moreover, the agency will discontinue the CRA information collection published in the Federal Register last December.
However, the OCC noted that it will continue to implement certain provisions of the 2020 final rule with a compliance date of October 1, 2020, as outlined in OCC Bulletin 2020-99 (covered by InfoBytes here), and reminded banks to “maintain appropriate documentation for CRA examination purposes” as specified in the bulletin.
On March 15, the Michigan Department of Insurance and Financial Services issued a bulletin “strongly” encouraging financial institutions to protect payments made to customers under the American Rescue Plan from overdrafts and fees. The bulletin further instructs that if a financial institution’s system automatically applies such a payment to a preexisting overdraft, the institution should reverse the application of the direct payment as promptly as possible.
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.
On January 19, the Financial Crimes Enforcement Network (FinCEN), Federal Reserve Board, FDIC, NCUA, and the OCC, in consultation with staff at certain other federal functional regulators, published answers to frequently asked questions concerning suspicious activity reporting (SAR) and other anti-money laundering (AML) considerations. The answers clarify financial institutions’ commonly asked questions about SARs/AML regulatory requirements and are provided to assist financial institutions with their Bank Secrecy Act (BSA)/AML compliance obligations in order to enable them “to focus resources on activities that produce the greatest value to law enforcement agencies and other government users of [BSA] reporting.” Topics discussed include (i) law enforcement requests for financial institutions to maintain accounts; (ii) receipt of grand jury subpoenas and law enforcement inquiries and SAR filings; (iii) maintaining customer relationships following the filing of SARs; (iv) filing SARs based on negative news identified in media searches; (v) information provided in SAR data and narrative fields; and (vi) SAR character limits. The agencies note that the FAQs do not alter existing BSA/AML requirements or establish new supervisory expectations, but have been developed in response to recent recommendations as described more thoroughly in FinCEN’s Advance Notice or Proposed Rulemaking issued last September on AML program effectiveness (covered by InfoBytes here).
On January 14, the OCC released a final rule to ensure that covered national banks, federal savings associations, and federal branches and agencies of foreign bank organizations provide fair access to financial services. The final rule is largely unchanged from the notice of proposed rulemaking (NPRM) issued last November (covered by InfoBytes here). Among other things, the final rule codifies more than a decade of OCC guidance stating that fair access to financial services, capital, and credit should be based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers. Building upon the principle of nondiscrimination and implementing language included in Title III of Dodd-Frank—“which charged the OCC with ‘assuring the safety and soundness of, and compliance with laws and regulations, fair access to financial services, and fair treatment of customers by, the institutions and other persons subject to its jurisdiction’”—the OCC stressed that the final rule establishes that “a covered bank’s decision to deny services based on an objective assessment would not violate the bank’s obligation to provide fair access.” While banks are still free to make “legitimate business decisions about what and whom to serve” and may still determine their product lines and geographic markets, they are required to make the “products and services they choose to offer available to all customers in the communities they serve, based on consideration of quantitative, impartial, risk-based standards established by the bank.”
In finalizing the rule, the OCC considered stakeholder comments received in response to the NPRM. In response, the OCC stated that the final rule will not prevent banks from denying or limiting services in an effort to (i) prevent a person from entering or competing in a particular market; or (ii) disadvantage a person in order to benefit another person in which the bank has a financial interest. According to the OCC, this requirement would have created a regulatory burden outside of the primary objectives of the final rule. The final rule affects banks with more than $100 billion in assets and will take effect April 1.
Separately, the OCC announced the departure of Acting Comptroller of the Currency Brian P. Brooks. Brooks stepped down on January 14, and was replaced by Chief Operating Officer Blake Paulson.
- Buckley Webcast: Best practices for incident-response planning in a dangerous and regulated world
- Jonice Gray Tucker to discuss “Government investigations, and compliance 2021 trends” at the Corporate Counsel Women of Color Career Strategies Conference
- APPROVED Webcast: California debt collection license requirement: Overview and analysis
- Max Bonici to discuss “BSA/AML trends: What to expect with the implementation of the AML Act of 2020” at the American Bar Association Banking Law Fall Meeting
- Jeffrey P. Naimon to discuss “Regulators are gearing up: Are you ready?” at HousingWire Annual
- Amanda R. Lawrence and Elizabeth E. McGinn discuss “U.S. state privacy legislation – Are you compliant?” at the Privacy+Security Forum
- H Joshua Kotin to discuss “Modifications and exiting forbearance” at the National Association of Federal Credit Unions Regulatory Compliance Seminar
- Jonice Gray Tucker to discuss “Fintech trends” at the BIHC Network Elevating Black Excellence Regional Summit
- Jeffrey P. Naimon to discuss "Truth in lending” at the American Bar Association National Institute on Consumer Financial Services Basics
- John R. Coleman and Amanda R. Lawrence to discuss “Consumer financial services government enforcement actions – The CFPB and beyond” at the Government Investigations & Civil Litigation Institute Annual Meeting
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek