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Financial Services Law Insights and Observations

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  • OCC Releases Bank Accounting Advisory Series Update

    Consumer Finance

    On July 25, the OCC released an update to its Bank Accounting Advisory Series, which provides accounting guidance for financial institutions. The updates are intended to address industry questions related to acquired loans, other real estate owned, troubled debt restructurings, nonaccrual, allowance for loan and lease losses, insurance claims, and debt discharged in bankruptcy.

    OCC Bank Compliance

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  • NCUA Reorganizes Examination and Supervision Offices

    Consumer Finance

    On July 26, the NCUA announced the creation of the Office of National Examinations and Supervision, effective January 1, 2013. The new office will focus on consumer credit unions with more than $10 billion in assets. The NCUA is making the change to alter what it identifies as an imbalance in its current examination and supervision program by shifting resources from examination of smaller credit unions to the largest credit unions.

    Examination NCUA Bank Compliance

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  • Senate Subcommittee Explores Money Laundering Vulnerabilities at Global Institutions

    Financial Crimes

    On July 17, the Senate Homeland Security and Government Affairs Committee, Permanent Subcommittee on Investigations, held a hearing to review money laundering and terrorist financing vulnerabilities that can emerge from certain international banking activities. In connection with the hearing, the Subcommittee released a report about its investigation into past money laundering and terrorist financing compliance failures at one multinational financial institution. The report notes that despite congressional efforts to strengthen anti-money laundering laws (AML), and financial institutions’ diligence in bolstering AML controls, money laundering risks associated with correspondent banking persist. Using the investigation and its findings as a case study, the report reiterates that effective AML compliance programs at U.S. banks should include written standards, sufficient and knowledgeable staff, effective training, and a positive compliance culture. With regard to specific issues that U.S. banks might face with regard to correspondent banking, the report recommends that U.S. banks implement programs that effectively (i) screen high-risk affiliates, (ii) prevent circumvention of OFAC prohibitions, (iii) avoid providing U.S. correspondent services to banks with links to terrorism, (iv) ensure traveler check controls restrict acceptance of suspicious bulk travelers checks, and (v) eliminate bearer share accounts. The report also identifies regulatory gaps and recommends that the OCC (i) treat AML deficiencies as a safety and soundness matter, (ii) develop a policy to coordinate internal divisions conducting AML examinations, (iii) consider the use of formal or informal enforcement actions to address mounting AML failures, and (iv) strengthen AML examinations by citing violations and focusing on specific business units and a bank’s AML program as a whole.

    Anti-Money Laundering Bank Secrecy Act Bank Compliance

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  • CFPB Releases Semiannual Regulatory Agenda

    Consumer Finance

    On July 16, the CFPB announced the release of its spring 2012 rulemaking agenda. The agenda lists the regulatory matters that the CFPB anticipates pursuing during the period June 1, 2012 through May 31, 2013. It also updates the CFPB’s first-ever such agenda, published as part of the fall 2011 Unified Agenda. For example, the updated agenda indicates that the CFPB expects to issue by January 2013, an Advance Notice of Proposed Rulemaking regarding the registration of certain nonbank entities, whereas the fall 2011 agenda anticipated a Notice of Proposed Rulemaking on this topic by March 2012. Similarly, the new rulemaking agenda updates the date by which the CFPB expects to take further action on developing regulations concerning the expanded HMDA data collection required by the Dodd-Frank Act from October 2012 to April 2013.

    CFPB Dodd-Frank Nonbank Supervision Bank Compliance

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  • Federal Reserve Board Initiates Acquisition Guidance Program

    Consumer Finance

    On July 12, the Federal Reserve Board issued supervisory guidance outlining a new optional process for a supervised institution to request feedback on a potential bank and nonbank acquisition or other transactional proposal prior to the submission of a formal application or notice. The supervision and regulation letter explains that under the new optional process, supervised institutions may submit “pre-filings” to the appropriate Reserve Bank. Pre-filings can include inquiries seeking (i) advice about a specific aspect of a proposal, business plans or pro forma financial information related to a potential filing, or presentations outlining specific potential proposals, (ii) feedback on draft transactional and structural documents, and (iii) guidance regarding the type of filing required or the individuals or entities that would need to join a filing. In most cases, pre-filing and submitted information will be reviewed within 60 days. The guidance cautions that Federal Reserve staff review will focus on the specific request, and a review is not intended to identify or resolve all issues or concerns related to a possible future application or notice. The Federal Reserve also notes that it is not inviting negotiations on the structure of a potential proposal or for resolving significant issues of policy or law as part of this advance guidance program.

    Federal Reserve Bank Compliance

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  • FDIC Reveals Banks' Living Wills

    Consumer Finance

    On July 3, the Federal Deposit Insurance Corporation (FDIC) posted the public sections of the initial resolution plans submitted by sixteen large bank holding companies.  The resolution plans were required by the Dodd-Frank Act.  The documents are meant to act as living wills that spell out how the banks could wind themselves down in the event of their failure.  Generally, the public portions of these plans contain an outline of the bank’s organization, assets and capital ratios, and describe in high-level detail the mechanisms that each would employ to wind up its operations in the event of failure.  The plans are subject to revisions following review by the FDIC and the Federal Reserve.

    FDIC Bank Compliance Bank Resolution Living Wills

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  • House Committee Approves Legislation to Alter ATM Fee Disclosure Requirement

    Fintech

    On June 27, the House Financial Services Committee unanimously approved H.R. 4367, which would amend the Electronic Fund Transfer Act to remove the requirement that ATMs attach a placard disclosing fees. Instead, the bill would require only that fees be disclosed on the ATM screen.

    Bank Compliance

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  • State Law Update: North Carolina Overhauls Banking Statute

    State Issues

    On June 21, North Carolina Governor Bev Perdue signed Senate Bill 816, which rewrites substantial portions of the state’s banking laws. The bill derives from a Joint Legislative Study Commission report, which found several deficiencies in the state’s existing state banking laws. In particular, the report found that the state’s banking laws (i) needed to be modernized in the wake of the Dodd-Frank Act and other changes in federal law, (ii) encouraged banks to avoid the burden of the banking law by forming holding companies under the more liberal standards of the North Carolina Business Corporation Act, and (iii) failed to address changes in banks’ capital needs. To remedy these and other issues, the bill revises several parts of the existing law, including: (i) the size and composition of the Banking Commission, (ii) the rules regarding bank governance, powers, and operations, and (iii) the framework for bank supervision and liquidation.

    Examination Bank Compliance

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  • State Law Update: North Carolina, Connecticut, Ohio Update Banking, Mortgage Laws

    Lending

    North Carolina Alters Mortgage Regulation Funding Mechanism. On June 20, North Carolina enacted Senate Bill 806, which creates a new funding mechanism for mortgage regulation. The new law replaces the current licensing fee, which offsets the state’s regulatory costs, with an assessment structure similar to the one currently applicable to banks. The change takes effect October 1, 2012.

    Connecticut Enacts Bill to Update State Banking Laws. On June 8, Connecticut enacted Senate Bill 67, which makes numerous revisions to the state banking laws. Among the changes, the law (i) alters mortgage licensing requirements to exempt “housing finance agencies” and nonprofit groups, (ii) requires certain lender and broker employees to be licensed as mortgage loan originators, (iii) requires banks to review a mortgage loan before excusing the borrower from amortization of the principal, (iv) requires that banks consider an obligor’s credit exposure arising from a derivative transaction when determining the obligor’s liability limitations, (v) exempts from certain requirements “loan production offices.” The law also gives new investigatory powers to the state banking commissioner and allows the commissioner to require, without seeking a court order, restitution and disgorgement for banking law violations. Most of the law’s provisions take effect October 1, 2012.

    Ohio Levels Playing Field for State Banks. Recently, Ohio Governor John Kasich signed House Bill 322, permits Ohio-chartered banks, savings banks, savings and loan associations, and credit unions to charge the same or lower rates or amounts of interest, fees, and other charges under a revolving credit agreement that their out-of-state counterparts may charge Ohio customers. The change does not apply to residential mortgages.  It takes effect September 4, 2012.

    Mortgage Licensing Bank Compliance

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  • OCC Adopts Interim Final Lending Limit Rule

    Consumer Finance

    On June 20, the OCC adopted an Interim Final Rule that applies the OCC’s existing lending limit rule to certain credit exposures arising from derivative transactions and securities financing transactions. The Dodd-Frank Act added credit exposures arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction to the definition of loans and extensions of credit for purposes of the lending limit. The interim final rule implements the new definition, effective July 21, 2012, but gives national banks and savings association until January 1, 2013 to comply. The interim final rule permits use in certain circumstances of look-up tables for measuring the exposures for each transaction type, a change that is expected to reduce the burden on smaller institutions. The OCC is accepting comments on the interim final rule through August 6, 2012.

    OCC Bank Compliance

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