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Federal Banking Agencies Seek Comments on Proposal to Further Streamline Call Reports
On November 2, the Federal Reserve Board, FDIC, and OCC (agencies)—all members of the Federal Financial Institutions Examination Council (FFIEC)—issued a joint notice and request for comment on a proposal to further streamline the Consolidated Reports of Condition and Income (Call Reports) in an effort to reduce data reporting requirements and regulatory burdens for financial institutions. The proposal would modify Call Reports applicable to banks with (i) domestic offices only and less than $1 billion in total assets (FFIEC 051); (ii) domestic offices only (FFIEC 041); and (iii) domestic and foreign offices (FFIEC 031). The proposed revisions, which would eliminate or combine several data items and revise certain existing reporting thresholds, would take effect as of the June 30, 2018, report date. Comments on the proposal are due within 60 days after its publication in the Federal Register.
Previous requests for proposed burden-reducing Call Report revisions were submitted by the agencies in August 2016 and June 2017. (See InfoBytes’ coverage of the August request here.)
Trump Signs Legislation to End Arbitration Rule
On November 1, President Trump signed a resolution repealing the CFPB’s embattled arbitration rule (Rule). The resolution, which passed the Senate two weeks ago, was issued under the Congressional Review Act (previously covered by InfoBytes here). Trump’s signature came two days after Richard Cordray, the Director of the CFPB, wrote to the President requesting he veto the resolution. In his letter, Cordray sought to appeal to the President’s business experience in an attempt to explain the necessity of going to court when “treated unfairly.” With Trump’s signing of the resolution, the Rule is now unenforceable. The Rule has previously come under scrutiny from federal regulators (see previous InfoBytes coverage here and here), as well as from industry trade groups (see previous InfoBytes coverage here). After the President’s signing, Keith A. Noreika, Acting Comptroller of the OCC, praised Congress and the President for vacating the rule, touting it as a “victory for consumers” because upholding the Rule would have “significantly increased the cost of credit.”
CFPB Launches Beta Version of HMDA Platform
On November 3, the CFPB announced the beta release of the new HMDA Platform. The beta version enables financial institutions to become familiar with the platform and permits entities to establish test log-in credentials, upload sample files and validate data, receive edit reports, and confirm test their test submissions. Entities can test and retest throughout the beta period, and any test data will be removed from the system when the 2017 filing period opens on January 1, 2018.
As previously covered by InfoBytes, in November 2016 the Federal Financial Institutions Examination Council (FFIEC) announced that it was discontinuing its HMDA Data Entry Software and instead requiring that financial institutions file HMDA data through a new web-based interface. In August, the CFPB issued the final rule amending the 2015 HMDA Rule, with most of the revisions taking effect January 1, 2018 (see InfoBytes coverage here).
The CFPB is requesting feedback on the platform and test experiences during the beta period time.
OCC Presents First National Bank Charter Since the Financial Crisis
On October 27, Acting Comptroller of Currency, Keith A. Noreika, issued the first full-service national bank charter since the financial crisis to a banking institution in Florida. The institution is also the first de novo national bank and de novo approved for federal deposit insurance in Florida since the financial crisis. While presenting the charter, Noreika commented on the rarity of de novo banks and encouraged better efficiency in the process for their establishment in order to, “create more economic opportunity for consumers, businesses, and communities across the nation.”
As previously covered by InfoBytes, the House Financial Services Committee held a hearing in March related to the “de novo drought” and to examine the impact the Dodd-Frank Act has had on the creation of new financial institutions.
NCUA Issues Final Rules Regarding Appeals Procedures; Proposes Rule Regarding Capital Planning and Stress Testing
On October 30, the National Credit Union Administration (NCUA) issued a final rule expanding the number of material supervisory determinations that can be appealed to the NCUA Supervisory Review Committee (SRC). Under the rule, federally insured credit unions (FICUs) may appeal examination-related determinations that may significantly affect capital, earnings, operating flexibility, or level of supervisory oversight. The effective date for the final rule is January 1, 2018.
On October 30, the NCUA also proposed changes to rules covering capital planning and stress testing requirements for covered credit unions (see previously InfoBytes coverage on proposed changes to stress tests by other federal agencies). The proposal would allow FICUs with over $10 billion in assets to conduct their own stress tests in accordance with NCUA requirements and report the results in their capital plan submissions. The specific testing requirements are tiered and dependent on various asset size and capital planning cycles. Comments about the NCUA proposed rule must be received on or before December 29.
CFPB Posts Strategic Plan for Fiscal Years 2018-2022
On October 18, the CFPB released and requested feedback on its draft strategic plan for fiscal years 2018-2022. This strategic plan identifies the Bureau’s long-term goals and objectives.
The proposed strategic plan outlines four broad goals for the next five years with multiple objectives and various strategies defined for each goal. Consistent with previous CFPB releases, these objectives reflect the Bureau’s continued use of data and technology to advance its mission. The four goals are:
- “Prevent financial harm to consumers while promoting good practices that work for consumers, responsible providers, and the economy as a whole.” Objectives include creating and modifying regulations; supervising institutions; and enforcing consumer financial laws.
- “Empower consumers to make informed financial choices to reach their own life goals and enhance their own financial well-being.” Objectives include handling complaints and sharing data; and creating and offering educational resources.
- “Inform the public, policy makers, and the CFPB’s own policy-making with market intelligence and data-driven analysis of consumer financial markets and consumer behavior.” Objectives include monitoring markets and producing research reports.
- “Advance the CFPB’s performance by maximizing resource productivity.” Objectives include hiring a diverse work force; using technology for public engagement; ensuring effective and efficient management; and maintaining meaningful channels for feedback.
The CFPB is requesting comments by November 18.
OCC Proposes Changes to Annual Stress Test Rule
On October 27, the Office of the Comptroller of Currency (OCC) issued proposed changes to its “stress test” rules for covered financial institutions required by the Dodd-Frank Act. Specifically, the proposal would, (i) extend the window by three months to allow the OCC to choose an appropriate “as-of” date in the trading and counterparty default component of the stress test (intended to conform with recent rule changes by the Federal Reserve); and (ii) extend the transition process for certain banks and savings associations that cross the $50 billion asset threshold before stress testing requirements are applicable.
Comments for the proposed changes must be received on or before December 26.
In addition to this proposal, on October 6, the Fed, FDIC, and the OCC, issued a joint notice and request for comment, which proposes to combine the agencies’ three separate, identical stress test report forms into a single new Federal Financial Institutional Examination Council (FFIEC) report (FFIEC 016) under the Dodd-Frank Act (previously covered by InfoBytes here).
Senate Nullifies CFPB Arbitration Rule
On October 24, the Senate cleared a resolution under the Congressional Review Act to nullify the CFPB’s recently adopted final arbitration rule, with Vice President Mike Pence casting the deciding vote to break the 50-50 tie. As previously covered in InfoBytes, the House passed H.J. Res. 111 earlier in July to invalidate the rule, which prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. The resolution now heads to President Trump.
Both CFPB Director Richard Cordray and Acting Comptroller of the Currency Keith A. Noreika issued statements following the vote. Noreika stated: “The elected representatives acted to stop a rule from going into effect that would have likely increased the cost of credit for hardworking Americans and made it more difficult for small community banks to resolve differences with their customers without achieving the rule’s goal of deterring future financial abuse.” Noreika labeled the action by Congress as a “victory for consumers and small banks across the country.”
However, according to many media outlets, Director Cordray condemned the Senate’s action. Cordray explained: “Tonight's vote is a giant setback for every consumer in this country. Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”
Treasury Releases Report Criticizing CFPB Arbitration Rule
On October 23, the Treasury Department released a report criticizing the CFPB’s arbitration rule (Rule)—finding the Rule did not satisfy the statutory prerequisites under the Dodd-Frank Act for banning arbitration agreements. Specifically, the report concludes that “the Bureau has not made a reasoned showing that increased consumer class action litigation will result in a net benefit to consumers or the public as a whole.” Like the OCC’s findings (as covered by InfoBytes previously), the Treasury Department found that the Rule will result in increased costs to consumers as affected businesses are unlikely to absorb the new financial costs associated with increased class action litigation. Moreover, the report notes that (i) the CFPB’s data shows that the majority of class action lawsuits deliver no relief to consumers; (ii) that despite the rule’s high costs, the CFPB did not demonstrate the Rule would help increase compliance with federal consumer laws; and (iii) the CFPB failed to consider less burdensome alternatives to the rule.
In addition to the Treasury Department, the Rule is also under scrutiny by Congress and the subject of a lawsuit filed by the U.S. Chamber of Commerce and other financial industry groups (previously discussed in InfoBytes here and here, respectively).
OCC Issues Updates to Risk Management Principles
On October 20, the OCC released modifications to its risk management principles for new, modified, or expanded financial products and services (collectively, new activities). Bulletin 2017-43 rescinds OCC Bulletin 2004-20 and section 760 of the Office of Thrift Supervision Examination Handbook. The Bulletin provides guidance on risks in the following categories: strategic, reputational, credit, operational, compliance, and liquidity. The Bulletin also outlines the main components of an effective risk management system, such as the need for:
- “adequate due diligence and approvals before introducing a new activity”;
- “policies and procedures to properly identify, measure, monitor, report, and control risks”;
- “effective change management for new activities or affected processes and technologies”; and
- “ongoing performance monitoring and review systems.”
According to the OCC, the sophistication of a bank’s risk management system should be commensurate with the bank’s size, complexity, and risk profile. Further, “bank management and boards of directors should understand the impact of new activities on banks’ financial performance, strategic planning process, risk profiles, traditional banking models, and ability to remain competitive.”