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  • OCC issues updated LIBOR self-assessment tool

    Federal Issues

    On October 18, the OCC released an updated self-assessment tool for banks to evaluate their preparedness for the LIBOR cessation at the end of the year. The updated guidance reminds banks that they should cease entering into new contracts using LIBOR as a reference rate as soon as practicable but no later than December 31, 2021. The self-assessment tool may be used by banks to identify and mitigate a bank’s LIBOR transition risks, and management should use the tool to evaluate whether preparations for the transition are sufficient. The OCC notes that “LIBOR exposure and risk assessments and cessation preparedness plans should be complete or near completion with appropriate management oversight and reporting in place,” and “most banks should be working toward resolving replacement rate issues while communicating with affected customers and third parties, as applicable.” The OCC also reminds banks to tailor risk management processes to the size and complexity of a bank’s LIBOR exposures and “consider all applicable risks (e.g., operational, compliance, strategic, and reputation) when scoping and completing LIBOR cessation preparedness assessments.”

    Bulletin 2021-46 rescinds Bulletin 2021-7 published in February (covered by InfoBytes here).

    Federal Issues LIBOR OCC Bank Regulatory Risk Management

  • OCC releases bank supervision operating plan for FY 2022

    Federal Issues

    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.

    Federal Issues OCC Supervision Bank Regulatory Third-Party Third-Party Risk Management Risk Management Bank Secrecy Act Anti-Money Laundering Fair Lending CRA Fintech Climate-Related Financial Risks

  • ARRC recommends firms reduce use of LIBOR before year end

    Federal Issues

    On October 14, the Alternative Reference Rates Committee (ARRC) recommended that all market participants take proactive action now to reduce their use of U.S. dollar LIBOR to promote a smooth end to new LIBOR contracts by year end. ARRC referred to a joint statement issued last November by the Federal Reserve Board, FDIC, and OCC encouraging banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable, but by December 31, 2021 at the latest. (Covered by InfoBytes here.) According to the agencies, entering into contracts after this date will create safety and soundness risks given consumer protection, litigation, and reputation risks at stake. ARRC recommended that firms adopt its selected alternative, the Secured Overnight Financing Rate, which is consistent with steps that several firms have already taken to ensure they are in the position to meet the supervisory guidance. This includes “setting targets for reductions in new LIBOR activity, limiting the range of LIBOR offerings, and implementing internal escalation exceptions processes around new LIBOR contracts for narrow cases in line with supervisory guidance.” 

    Federal Issues ARRC LIBOR SOFR Federal Reserve FDIC OCC Bank Regulatory

  • NYDFS requires flood insurance and diversity and inclusion training for insurance producers and public adjusters

    State Issues

    On October 13, NYDFS announced that property/casualty insurance producers are required to take continuing education in flood insurance and diversity and inclusion. NYDFS is the first state regulator to mandate such requirements, which have been added to the state’s insurance regulations. “Requiring education on flood insurance and diversity and inclusion is not only timely, it is in the best interest of consumers,” acting Superintendent Adrienne A. Harris said. In addition, property/casualty insurance producers who sell flood insurance through the National Flood Insurance Program (NFIP) will be required to comply with the continuing education requirement, which according to the NYDFS announcement, is intended to ensure consumers receive accurate NFIP quotes and are not accidentally underinsured for flood damage. The requirement will assist “producers and adjusters to better service a diverse population of consumers and be culturally sensitive and aware when interacting with consumers and members of the public,” NYDFS stated. 

    State Issues State Regulators NYDFS Flood Insurance Climate-Related Financial Risks Diversity National Flood Insurance Program Bank Regulatory

  • Fed joins Central Bank Network for Indigenous Inclusion

    Federal Issues

    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.

    Federal Issues Federal Reserve Diversity Covid-19 CRA Bank Regulatory

  • Chopra sworn in as CFPB director

    Federal Issues

    On October 12, Rohit Chopra was sworn in as Director of the CFPB. Chopra issued a message to Bureau staff, the Federal Reserve Board, FDIC Board of Directors, and members of the Financial Stability Oversight Council, applauding former acting Director Dave Uejio’s service and stressing the importance of safeguarding household financial stability. Chopra explained that promoting competition, shifting market power toward consumers and law-abiding businesses, and anticipating emerging risks remain critically important to the CFPB’s mission. Noting that this is an “extremely fragile moment for our economy and our country,” Chopra explained that the Covid-19 pandemic has “put into clearer focus the longstanding systemic and structural barriers we must overcome to build a more inclusive economy.” He added that he intends to “build on” the work Uejio has already started to address racial equality and the pandemic, and said Uejio will remain at the Bureau until he is confirmed as assistant secretary for Fair Housing & Equal Opportunity.

    The CFPB also announced several leadership changes within the Bureau. Newly appointed Deputy Director Zixta Q. Martinez, whose roles at the Bureau previously included senior advisor for Supervision, Enforcement and Fair Lending, will oversee the Bureau’s Operations Division. Karen Andre, who most recently served as special assistant to the president for Economic Agency Personnel within the Executive Office of the President will serve as associate director for Consumer Education and External Affairs. Returning to the CFPB are Jan Singelmann who will serve as chief of staff. Singelmann previously served as senior litigation counsel in the Bureau’s Office of Enforcement and most recently served as counsel for Senator Sherrod Brown, whose work covers consumer finance and data privacy issues. Erie Meyer, who returns to serve as chief technologist, was previously on the implementation team that launched the Bureau and was a founding team member of the Bureau’s Office of Technology and Innovation. 

    Federal Issues CFPB Consumer Finance Covid-19 Bank Regulatory

  • NYDFS awards funds to support underserved communities

    State Issues

    On October 7, NYDFS announced the first awards from the New York Community Development Financial Institution (CDFI) Fund to support access to safe and affordable banking services in historically underserved and redlined, low-income communities. According to the announcement, with a multi-year $25 million New York state-commitment, the CDFI Fund plans to allocate resources for the growth of CDFIs to assist in the delivery of affordable financial products and services and financial literacy programming to low- and moderate-income New York citizens. In addition, the CDFI Fund will expand “access to capital and technical assistance services for New York State small businesses and non-profit organizations.” In total, 31 CDFIs were selected to receive financial inclusion grants, which totaled nearly $5 million.

    State Issues NYDFS Redlining Consumer Finance CDFI Bank Regulatory

  • FDIC announces deposit insurance seminars

    Federal Issues

    On October 7, the FDIC announced that it will conduct four identical seminars for bank employees and bank officers regarding FDIC deposit insurance coverage between October 21 and December 14. According to the FDIC, the seminars will: (i) provide an overview of FDIC-deposit insurance rules; (ii) cover topics such as the general principles of coverage, ownership categories, and requirements; (iii) provide information on additional deposit insurance resources; and (iv) include coverage examples and a live Q&A session. Registration will be required, but the seminars are free. Seminar participants must register at least two business days prior to the event, which can be accessed here.

    Federal Issues FDIC Deposit Insurance Bank Regulatory

  • Fed announces enforcement action against Minnesota bank

    Federal Issues

    On October 7, the Federal Reserve Board announced an enforcement action against a Minnesota-based bank. In the consent order, the Fed alleges that the bank violated the National Flood Insurance Act (NFIA) and Regulation H. The order assesses a $11,00 penalty against the bank for an alleged pattern or practice of violations of Regulation H but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.

    Federal Issues Federal Reserve Enforcement Regulation H Flood Insurance National Flood Insurance Act Bank Regulatory

  • Fed and Treasury address climate change risks

    Federal Issues

    On October 7, Federal Reserve Governor Lael Brainard spoke at the Federal Reserve Stress Testing Research Conference discussing the impacts of climate change on economic activity. Brainard revealed that the Fed is considering the potential implications of climate-related risks for financial institutions and the financial system and emphasized that scenario analysis is emerging as a possible key analytical tool. Regarding the climate scenario analysis, Brainard noted that climate change’s future financial and economic consequences depends on the physical effects and the nature and speed of the transition to a sustainable economy. She highlighted the importance of “model[ing] the transition risks arising from changes in policies, technology, and consumer and investor behavior and the physical risks of damages caused by an increase in the frequency and severity of climate-related events as well as chronic changes, such as rising temperatures and sea levels.” Brainard also discussed opportunities to learn from other countries' use of climate scenario analysis and overcoming the challenges in implementing climate scenario analysis, noting that “climate scenario analysis may need to consider interdependencies across the financial system,” among other things. Brainard added that she anticipates that it will be useful “to provide supervisory guidance for large banking institutions in their efforts to appropriately measure, monitor, and manage material climate-related risks, following the lead of a number of other countries.”

    The same day, the U.S. Treasury Department announced the Treasury Climate Action Plan, which is directed by Executive Order 14008 and Treasury’s efforts to support adaptation and increase resilience of its facilities and operations to the impacts of climate change. Among other things, the plan establishes five priority action areas, including: (i) rebuilding stagnated programs and capabilities; (ii) addressing climate change vulnerabilities across Treasury operations; (iii) ensuring a climate-focused approach to managing Treasury’s real property portfolio footprint; (iv) enabling management to fully consider climate change realities; and (v) accounting for a financial investment approach appropriate to Treasury’s climate objectives. In addition to the priority areas, Treasury will utilize the data and science of climate change to adjust policies, programs, and activities in improving its resilience to climate risks and impacts, according to the announcement.

    Federal Issues Climate-Related Financial Risks Federal Reserve Department of Treasury Bank Regulatory

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