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OCC releases bank supervision operating plan for FY 2022
On October 15, the OCC’s Committee on Bank Supervision released its bank supervision operating plan for fiscal year 2022. The plan outlines the agency’s supervision priorities and highlights several supervisory focus areas including: (i) strategic and operational planning; (ii) credit risk management, including allowances for loan and lease losses and credit losses; (iii) cybersecurity and operational resiliency; (iv) third-party oversight; (v) Bank Secrecy Act/anti-money laundering compliance; (vi) consumer compliance management systems and fair lending risk assessments; (vii) Community Reinvestment Act performance; (viii) LIBOR phase-out preparations; (ix) payment systems products and services; (x) fintech partnerships involving potential cryptocurrency-related activities and other services; and (xi) climate-change risk management. The plan will be used by OCC staff members to guide the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, and technology service providers.
The OCC will provide updates about these priorities in its Semiannual Risk Perspective, as InfoBytes has previously covered.
Fed joins Central Bank Network for Indigenous Inclusion
On October 13, Federal Reserve Governor Lael Brainard announced that the Fed has joined the Central Bank Network for Indigenous Inclusion to foster continuing dialogue, research, and education and increase awareness of economic and financial issues and opportunities for Indigenous economies. The same day, Brainard spoke at Fed Listens: Roundtable with Oklahoma Tribal Leaders in Oklahoma City, Oklahoma, to discuss how the economic disparities experienced by tribal nations were exacerbated by the Covid-19 pandemic. She noted that in an effort to overcome such disparities, it will be important to identify and address barriers to financial inclusion. In addition, Brainard discussed how the Fed has a role to play in supporting economic growth and financial inclusion in Native communities, and that the Fed is collaborating with the other banking agencies to propose Community Reinvestment Act reforms that would increase financial inclusion and the availability of community development financing in underserved communities.
OCC proposes rescinding its 2020 CRA rule
On September 8, the OCC announced in the Federal Register that it is soliciting comments on a proposal to rescind its 2020 Community Reinvestment Act Rule and to replace it with rules based largely on those adopted jointly by the Federal banking agencies in 1995, as amended. As previously covered by a Buckley Special Alert, the final rule, issued in May 2020, provides for at least a 27-month transition period for compliance based on a bank’s size and business model, among other things. According to the OCC, the proposal, “would align the OCC’s CRA rules with the current Board of Governors of the Federal Reserve System and Federal Deposit Insurance Corporation rules and thereby facilitate the on-going interagency work to modernize the CRA regulatory framework and create consistency for all insured depository institutions.” Since many aspects of the CRA 2020 rule remain in transition and have not been implemented, the OCC anticipates that the proposed rule will have a limited impact on national banks and savings associations. According to Acting Comptroller Michael J. Hsu, the issuance “is an important step toward strengthening and modernizing the CRA,” and that the agency “is committed to working with the Federal Reserve and FDIC on a future joint rulemaking.” According to the OCC, the proposed rules would apply to all national banks and all federal and state savings associations. Comments are due by October 29.
Agencies provide guidance on Hurricane Ida and California wildfires
Recently, the FDIC, Federal Reserve Board, NCUA, OCC, and the Conference of State Bank Supervisors issued joint statements covering supervisory practices for financial institutions affected by Hurricane Ida and the California wildfires (see here and here). Among other things, the agencies informed institutions facing operational challenges that the regulators will expedite requests for temporary facilities, noting that in most cases, “a telephone notice to the primary federal and/or state regulator will suffice initially to start the approval process, with necessary written notification being submitted shortly thereafter.” The agencies also called on financial institutions to “work constructively” with affected borrowers, noting that “prudent efforts” to adjust or alter loan terms in affected areas “should not be subject to examiner criticism.” Institutions facing difficulties in complying with any publishing and reporting requirements should contact their primary federal and/or state regulator. Additionally, the agencies noted that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services that revitalize or stabilize federally designated disaster areas. Institutions are also encouraged to monitor municipal securities and loans impacted by Hurricane Ida and the California wildfires.
FDIC announces Tennessee disaster relief
On August 26, the FDIC issued FIL-58-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Tennessee affected by severe storms and flooding. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
OCC updates CRA, FHA, and ECOA notices
On August 5, the OCC issued Bulletin 2021-35, which informs national banks, federal savings associations, and federal branches and agencies of foreign banking organizations (collectively, banks) of the names and addresses for notices required by the CRA, ECOA, and for posters under the Fair Housing Act. Banks are required to make the appropriate changes to their notices and posters, as necessary, within 90 days of August 5.
This bulletin rescinds OCC Bulletin 2011-41, “Community Reinvestment Act Notices, Fair Housing Act Posters, Equal Credit Opportunity Act Notices: Guidance.”
Regulators discuss CRA modernization
On August 3, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Oversight of Regulators: Does our Financial System Work for Everyone?” which, among other things, highlighted the future of the CRA. OCC acting Comptroller of the Currency Michael Hsu discussed that the OCC has an aggressive timeline for collaborating with the Federal Reserve and FDIC to release joint rulemaking that modernizes the CRA. In his written testimony, Hsu noted that the OCC is “working to strengthen regulations implementing the [CRA],” such as the May announcement regarding reconsideration of the 2020 final rule overhauling the CRA (covered by InfoBytes here) and calling to prohibit discriminatory practices while promoting financial inclusion and increased access to credit for the unbanked and underbanked. During the hearing, Hsu also pointed out that the CRA is a “complicated law,” so groups “are working pretty much around the clock on coming up with options to strengthen the CRA to make sure that low and moderate-income communities have their needs met.” FDIC Chairman Jelena McWilliams also discussed that the FDIC has engaged in a multi-year, interagency effort to examine alterations to CRA regulations “that would benefit low- and moderate-income communities and modernize the rules for the first time in a quarter of a century.”
FDIC announces Michigan disaster relief
On July 23, the FDIC issued FIL-52-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Michigan affected by severe storms, flooding, and tornadoes. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC further stated that it will also consider regulatory relief from certain filing and publishing requirements.
OCC to rescind CRA final rule as agencies signal joint overhaul
On July 20, the OCC announced it will propose to rescind the agency’s May 2020 final rule overhauling the Community Reinvestment Act (CRA), signaling the OCC’s intention to collaborate with the Federal Reserve Board and the FDIC on a separate joint rulemaking. As previously covered by a Buckley Special Alert, the OCC’s final rule 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.
The announcement follows the completion of a review undertaken by acting Comptroller Michael Hsu (covered by InfoBytes here). Hsu stated that although “the OCC deserves credit for taking action to modernize the CRA,” the adoption of the final rule was “a false start” in attempting to overhaul the regulation. According to Hsu, the OCC intends to work with the Fed and the FDIC to develop a joint Notice of Proposed Rulemaking and build on an Advance Notice of Proposed Rulemaking issued by the Fed last September (covered by InfoBytes here). The federal agencies issued an interagency statement noting that they have “broad authority and responsibility for implementing the CRA” and that “[j]oint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.”
Fed, OCC report on health of MDIs
Recently, the Federal Reserve Board and the OCC issued reports pursuant to Section 367 of the Dodd-Frank Act generally detailing the health of Minority Depository Institutions (MDIs) and the agencies’ efforts taken to assist MDIs as the Covid-19 pandemic disproportionately affected low- and moderate-income communities and racial and ethnic minorities. The Fed’s report, “Promoting Minority Depository Institutions,” discussed, among other things, extra steps taken by the agency to support and assist MDIs over the past year, which included conducting individualized outreach on several topics like how to access the discount window and the Paycheck Protection Program Liquidity Facility (covered by InfoBytes here and here). The report also examined efforts taken by the Fed to preserve and promote MDIs through its Partnership for Progress program—“a national outreach effort to help MDIs confront unique business-model challenges, cultivate safe banking practices, and compete more effectively in the marketplace”—and covered the Fed’s unanimous approval last September to approve an Advance Notice of Proposed Rulemaking on modernizing the Community Reinvestment Act (covered by InfoBytes here).
The OCC outlined actions taken to preserve and promote MDIs in its “2020 Annual Report,” including the launch of the Roundtable for Economic Access and Change known as Project REACh (covered by InfoBytes here). OCC subject matter experts also provided regulatory technical assistance to MDIs on topics including safety and soundness, cybersecurity, compliance with Bank Secrecy Act/anti-money laundering requirements, and current expected credit loss accounting methodology, among others. The OCC also noted that despite a seven-basis-points drop on the average return on assets for MDIs through the pandemic, the health of those institutions “remained satisfactory.”