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Financial Services Law Insights and Observations

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  • OCC releases enforcement actions

    Federal Issues

    On December 16, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently or formerly affiliated with such entities. Included in the release is a cease and desist order issued against an Oklahoma-based bank for alleged “unsafe or unsound practices” related “to management and board supervision, strategic and capital planning, risk ratings and loan review, credit administration, and the allowance for loan and lease losses.” Without admitting or denying the claims, the bank is required by the order to, among other things, maintain capital ratios, as defined in and as calculated in accordance with 12 C.F.R. Part 3: (i) “a total capital ratio at least equal to thirteen percent”; and (ii) “a leverage ratio at least equal to nine percent.” The order also provides that the bank must establish a Compliance Committee “to monitor and oversee the Bank’s compliance with the provisions of this [o]rder,” and “will meet at least monthly and maintain minutes of its meetings.”

    Federal Issues Bank Regulatory OCC Enforcement Bank Compliance

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  • OCC revises the Comptroller’s Licensing Manual

    On December 10, the OCC announced an updated version of its “Background Investigations,” “Capital and Dividends,” “Charters,” “Conversions to Federal Charter,” and “National Bank Director Waivers” booklets of the Comptroller’s Licensing Manual. According to Bulletin 2021-60, the revised booklets: (i) replace booklets with the same titles issued between April 2017 and October 2019; (ii) reflect recent changes to 12 CFR 5 and other applicable regulations; (iii) eliminate references to outdated guidance and provide current references; and (iv) make other minor modifications and corrections.

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance Licensing OCC Comptroller's Licensing Manual Bank Compliance

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  • Nebraska law establishes a cryptocurrency bank charter

    State Issues

    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.”

    State Issues State Legislation Nebraska Cryptocurrency Bank Charter Bank Compliance Bank Secrecy Act

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  • OCC to host compliance risk management workshops

    Federal Issues

    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.

    Federal Issues OCC Bank Compliance Risk Management Bank Secrecy Act ECOA Bank Regulatory

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  • Agencies to proceed with Call Report revisions

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance Federal Issues OCC CRA Bank Compliance Call Report FFIEC Of Interest to Non-US Persons Federal Reserve FDIC Bank Regulatory

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  • Federal agencies release host state loan-to-deposit ratios

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance OCC Federal Reserve FDIC Bank Compliance Bank Regulatory

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  • OCC releases enforcement actions and terminations

    Federal Issues

    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.

    Federal Issues Agency Rule-Making & Guidance Bank Compliance Enforcement OCC Bank Regulatory

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  • OCC reconsiders CRA final rule

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance Federal Issues OCC CRA Bank Compliance Bank Regulatory

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  • Michigan regulator urges institutions to protect stimulus payments from overdrafts, fees

    State Issues

    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.

    State Issues Covid-19 Michigan Bank Compliance Overdraft Financial Institutions

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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 Bank Regulatory

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