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OCC releases enforcement actions data
On August 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 in the release is a formal agreement between the OCC and a New York-based bank from July 13 in connection with alleged unsafe or unsound practices relating to information technology security and controls and information technology risk governance. 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 IT assurance and testing program.
Agencies release host state loan-to-deposit ratios
On June 28, the FDIC, Federal Reserve Board, and OCC (collectively, "the agencies") released the current host state loan-to-deposit ratios for each state or 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.
Special Alert: Fed finalizes rule for FedNow platform
The Federal Reserve Board recently issued a final rule for its FedNow instant-payments platform that offers more clarity on how the new service will work while essentially adopting the proposed rule. FedNow will stand alongside private sector initiatives and, like more modern payments systems, will feature credit payments to push funds rather than debit payments to pull funds, offering faster processing.
Highlights of the new rule and FedNow
- Not yet open for business. The Fed continues to target release of FedNow for sometime in 2023. It will implement the 24x7x365 real-time payments service in stages, each with additional features and enhancements.
- Not a consumer or business app or service. Depository institutions that are eligible to hold Reserve Bank accounts will be able to use FedNow, which will be administered by the 12 Reserve Banks. Consumers and businesses may not participate in FedNow directly, and therefore, could not send payment orders to a Reserve Bank through it. They would instead send instant payments through their depository institution accounts.
- Bank v. nonbank direct participation in FedNow. Eligible institutions include banks, savings associations, credit unions, U.S. branches and agencies of non-U.S. banks, Edge or agreement corporations, some systemically important financial market utilities, and government-sponsored entities (including Fannie Mae and Freddie Mac). We use the term “banks” throughout to simplify the discussion.
- Not yet open for business. The Fed continues to target release of FedNow for sometime in 2023. It will implement the 24x7x365 real-time payments service in stages, each with additional features and enhancements.
OCC releases lineup of risk management workshops
On April 27, the OCC released its lineup of virtual workshops for board directors of national community banks and federal savings associations for the second half of 2022. Included as part of the workshops to be held later this year is a risk management series focusing on risk governance, credit risk, operational risk, and compliance risk. Another workshop will present guidance for directors and senior managers on building blocks for success. A schedule of the upcoming workshops and registration information is available here.
OCC issues consent order against digital asset bank for AML deficiencies
On April 21, the OCC issued a consent order against the first federally-chartered bank focused on cryptocurrencies, just 15 months after granting the institution a national bank charter for purposes of taking custody of cryptocurrency. The consent order alleged failure to adopt and implement a compliance program that adequately covers required BSA/AML program elements. In January 2021, the OCC granted conditional approval to convert the bank’s charter to a national association with the “enforceable condition of approval” that the bank would, among other things, meet BSA/AML requirements.
OCC issues final rule on authority for SAR requirements
On April 14, the OCC issued a bulletin reminding regulated banks of a final rule amending the agency’s suspicious activity report (SAR) regulations. The final rule takes effect May 1 (covered by InfoBytes here). Generally, the final rule clarifies the processes by which the OCC may issue exemptions from the requirements of the SAR regulations “based on a request … [for an exemption] that meets the criteria specified in the final rule.” The bulletin notes, however, that the final rule does not itself create any exemptions from the SAR regulations.
OCC issues final rule for granting exemptions to SAR requirements
On March 16, the OCC issued a final rule amending its suspicious activity report (SAR) regulations. The rule sets out a process for national banks and federal savings associations to request exemptions from the OCC’s SAR requirements. To request exemption under the final rule, national banks or federal savings associations, including federal branches and agencies of foreign banks, must submit a request in writing to the OCC. The agency “will consider whether the exemption is consistent with the purposes of the [Bank Secrecy Act] and with safe and sound banking and may consider any other appropriate factors.” Where required, institutions must separately seek an exemption from FinCEN, and the OCC intends to coordinate with FinCEN on such requests. The final rule will also allow “the OCC to facilitate changes required by the Anti-Money Laundering Act of 2020" and “will make it possible for the OCC to grant relief to national banks or federal savings associations that develop innovative solutions intended to meet Bank Secrecy Act requirements more efficiently and effectively.”
OCC releases enforcement actions
On February 17, 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 between OCC and an Alabama-based bank on January 31 in connection with alleged unsafe or unsound practices relating to strategic planning, loan portfolio management, and internal audits. 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 audit program.
OCC releases enforcement actions
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.”
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.