Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CFPB Seeks Information on Compliance Costs

    Consumer Finance

    On June 14, the CFPB published a Notice and Request for Comment on its proposal to collect qualitative information from industry participants regarding the compliance costs and other effects of CFPB rules on providers and consumers. The CFPB plans to use structured interviews, focus groups, conference calls, and written questionnaires to obtain supplemental information about industry compliance burdens. The CFPB frames the proposal as part of its ongoing effort to streamline inherited regulations, and has asked that comments on the proposed information collection be submitted by August 13, 2012.

    CFPB Bank Compliance

    Share page with AddThis
  • Two Largest U.S. Cities Adopt Responsible Banking Ordinances

    Consumer Finance

    On May 15, the cities of New York and Los Angeles adopted ordinances that will require banks doing business with those cities to report certain information about their banking and lending activities. In New York, the City Council adopted a Local Law that, once approved by the mayor or passed over the mayor’s veto, will establish a community investment advisory board comprised of city officials, banking industry representatives, community development or consumer protection groups, and small business owners. The board will assess the banking needs of the city and evaluate the performance of the city’s depository banks in meeting those needs. To conduct the assessment and evaluation, the board will collect from depository banks information regarding each institution’s efforts to, among other things, (i) meet small business credit needs, (ii) conduct consumer outreach and other steps to provide mortgage assistance and foreclosure prevention, and (iii) offer financial products for low and moderate income individuals throughout the city. The board will be required to publish the information collected and prepare an annual report, which city officials can consider in deciding with which institutions the city will place its deposits. The ordinance adopted by the Los Angeles City Council establishes a monitoring program headed by the City Treasurer. Under the program, a depository bank doing business with the city or wishing to do so will be required to report each year information regarding its small business, mortgage, and community development lending, as well as information about its participation in foreclosure prevention and principal reduction programs. Investment banks will be required to file a statement describing their corporate citizenship in areas such as participation in charitable programs or scholarships and internal policies regarding the utilization of subcontractors designated as women-owned, minority-owned, or disadvantaged businesses. The disclosures will be posted online for public viewing within 30 days of the beginning of each new fiscal year. The cities of Cleveland, Pittsburgh, Philadelphia, and San Diego already have laws in place designed for the same general purposes, and other cities are considering similar laws.

    Bank Compliance CRA Responsible Banking

    Share page with AddThis
  • Federal Prudential Regulators Issue Final Stress Test Guidance

    Consumer Finance

    On May 14, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued guidance on stress tests for banks with more than $10 billion in total consolidated assets. The final guidance provides, in a manner largely consistent with the proposed guidance, principles for banks to follow when conducting stress tests, including: (i) a stress testing framework, (ii) general stress testing principles, (iii) stress testing approaches and applications, (iv) the importance of stress testing in assessing the adequacy of capital and liquidity, and (v) the need for internal governance and controls over the stress testing framework. The regulators amended the final guidance to clarify certain issues raised during the comment period, including changes to (i) incorporate an additional principle for stress testing, (ii) clarify application of the guidance to U.S. branches and agencies of foreign banking organizations, (iii) clarify the role of a bank’s liabilities and operational risk in conducting a stress test, (iv) explain that senior management should have the primary responsibility for stress testing implementation and technical design, and (v) clarify that a banking organization’s minimum annual review and assessment should ensure that stress testing coverage is comprehensive, tests are relevant and current, methodologies are sound, and results are properly considered. In a separate announcement, the banking regulators explicitly addressed concerns raised by community bankers by explaining that community banks are neither required nor expected to conduct the stress tests described above. However, the statement stresses that all banking organizations, regardless of size, should have the capacity to analyze the potential impact of adverse outcomes on their financial condition.

    FDIC Dodd-Frank OCC Bank Compliance

    Share page with AddThis
  • UK Upper Tribunal Finds Bank Executive's Compliance Actions Reasonable, Overturns FSA Decision

    Federal Issues

    Recently, the United Kingdom’s Upper Tribunal overturned a decision of the Financial Services Authority (FSA) that held a top bank executive liable for failure to take reasonable steps to adequately address certain regulatory compliance problems. Specifically, the FSA charged that the executive failed to take reasonable steps to identify and remediate serious flaws in the design and operational effectiveness of the firm’s governance and risk management frameworks and was too slow to initiate a comprehensive review of systems and controls across the business, which should have been conducted when he was appointed to lead the firm. The executive challenged the FSA penalty, arguing that his actions to investigate every specific compliance issue that arose and remedy problems in accordance with a defined plan were sufficient and reasonable and that he had undertaken efforts to strengthen his company’s compliance monitoring team. The Upper Tribunal agreed, holding that the FSA’s expectation that the executive institute a broad overhaul at an earlier date was beyond the bounds of reasonableness. The Upper Tribunal also noted that the majority of the compliance failures originated in one division, that the firm was addressing those issues, and that no one within that or other departments of the firm, nor anyone from the FSA, had ever suggested to the executive a need for a more comprehensive review. The Upper Tribunal directed the FSA to take no action against the executive.

    Financial Services Authority Bank Compliance

    Share page with AddThis

Pages

Upcoming Events