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Fed proposes changes to its Policy on Payment System Risk governing intraday credit
On May 28, the Federal Reserve Board issued a notice and request for comments on proposed changes to its Policy on Payments System Risk (PSR Policy) to expand access to collateralized intraday credit from Federal Reserve Banks (Reserve Banks) and clarify eligibility standards for accessing uncollateralized intraday credit from the Reserve Banks. Specifically, the Fed is proposing changes to part II of its PSR Policy, which was previously revised and implemented in 2011 to “improve intraday liquidity management and payment flows for the banking system while helping to mitigate the credit exposures of the Reserve Banks from daylight overdrafts.” The proposed changes would also align the Fed’s payments system risk and overnight overdraft policies with the deployment of the FedNow Service (covered by InfoBytes here) and the Fed’s 24x7x365 payment environment. Relatedly, the Fed noted it is also proposing to incorporate its policy on overnight overdrafts into the PSR Policy. Comments on the proposed changes are due 60 days after publication in the Federal Register.
Agencies extend CRA credit period for certain disaster relief efforts
On May 27, the FDIC, OCC, and the Fed (collectively, “Agencies”) issued an interagency statement on granting a 36-month extension of the original period provided for Community Reinvestment Act (CRA) consideration for bank activities that help to revitalize or stabilize Puerto Rico and the U.S. Virgin Islands in response to Hurricane Maria. As previously covered by Infobytes, the Agencies issued an interagency statement on the availability of CRA credit for financial institution activities that “help revitalize or stabilize the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas by the President because of Hurricane Maria” in January 2018. Provided financial institutions continue to be responsive to the community needs of their own CRA assessment areas, the Agencies will now give “favorable consideration” to community development activities, such as assistance to displaced people, in the areas impacted by Hurricane Maria. In addition, the Agencies state that they may give greater weight to activities aimed at assisting the low and moderate income affected areas, but that general consideration will be given regardless of median or personal income. The Agencies have determined that the ongoing impact of Hurricane Maria in Puerto Rico and the U.S. Virgin Islands warrants an extension through September 20, 2023.
OCC modifies exception to CIF withdrawal period extensions
On May 27, the OCC announced the publication of a final rule that adopts one change to the interim final rule published last August. As previously covered by InfoBytes, the interim final rule clarified, among other things, that under the OCC’s fiduciary activities regulation (12 CFR 9.18 (b)(5)(iii)), a bank that is administering a collective investment fund (CIF) invested “primarily in real estate or other assets that are not readily marketable” may require a prior notice period of up to one year for withdrawals. The interim final rule codified the OCC’s interpretation of the notice requirement as “requiring the bank to withdraw an account within the prior notice period or, if permissible under the CIF’s written plan, within one year after prior notice was required” (known as “the standard withdrawal period”). An exception allows banks to extend the withdrawal period (with opportunities for further extensions) under certain conditions and with OCC approval. While the final rule adopts the interim final rule’s framework, it revises one of the criteria necessary for OCC approval of an extension. Specifically, in order to qualify for an extension, a “bank must ‘represent’ rather than ‘commit’ that it will act upon the withdrawal request as soon as practicable.” The final rule took effect May 26.
CFPB updates status on women and minority-owned business data
On May 24, the CFPB filed its fifth status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses.
Among other things, the Bureau notes in the status report that it has satisfied the following required deadlines: (i) last September it released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration (InfoBytes coverage here); and (ii) it convened an SBREFA panel last October and released the panel’s final report last December (InfoBytes coverage here). The Bureau reports that its rulemaking staff continues to brief new Bureau leadership on significant legal and policy issues that must be resolved in order to prepare a notice of proposed rulemaking for the Section 1071 regulations, and states that the parties have met to discuss an appropriate deadline for issuing the NPRM. According to the status report, should the parties agree on a deadline they “will jointly stipulate to the agreed date and request that the court enter that deadline.”
Find continuing Section 1071 coverage here.
VA establishes VAPCP requirements
On May 28, the Department of Veterans Affairs (VA) published a final rule in the Federal Register, which establishes the “COVID–19 Veterans Assistance Partial Claim Payment” (VAPCP) program to help veterans resume making normal loan payments on VA-guaranteed loans after exiting forbearance due to the Covid-19 pandemic. The final rule incorporates several revisions in response to comments submitted by veterans, lenders, servicers, consumer groups, and trade associations on the VA’s proposed rule published last December (covered by InfoBytes here). Under the final rule, the partial claim maximum limit is increased from the proposed 15 percent to 30 percent of the unpaid principal balance of the guaranteed loan as of the date the veteran entered into a Covid-19 forbearance. The timeframe for servicers to submit partial claim payment requests to the VA also was increased from 90 to 120 days. Additionally, the final rule will allow servicers to use the Covid-VAPCP program “even if other home retention options are feasible, provided the partial claim payment option is in the veteran’s financial interest.” For a loan to qualify for a Covid-VAPCP, among other things, (i) the guaranteed loan must have been either current or less than 30 days past due on March 1, 2020, or made on or after March 1, 2020; (ii) the veteran must have received a Covid-19 forbearance and missed at least one scheduled monthly payment; (iii) at least one unpaid scheduled monthly payment must remain that the veteran did not make while under a Covid-19 forbearance; (iv) the veteran must indicate the ability to “resume making scheduled monthly payments, on time and in full, and that the veteran occupies, as the veteran’s residence, the property securing the guaranteed loan for which the partial claim is requested”; and (v) the veteran must timely execute all necessary loan documents in order to establish an obligation to repay the partial claim payment.
Notably, the final rule strikes the following requirements that were included in the proposed rule: (i) veterans will not be required to repay the partial claim within 120 months; (ii) interest will not be charged on the Covid-VAPCP; and (iii) servicers will not have to complete financial evaluations of veterans in the program.
The rule is effective July 27.
Agencies to proceed with Call Report revisions
On May 24, the FDIC, Federal Reserve Board, and the OCC published a joint notice and request for comments on information collections published last December and this February (covered by InfoBytes here). The proposed reporting changes would revise and extend three versions of the Call Report—FFIEC 031, FFIEC 041, and FFIEC 051—as well as FFIEC 002, “Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,” and FFIEC 002S, “Report of Assets and Liabilities of a Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank.” After considering comments received on the information collections, the agencies announced their intention to proceed with the proposed revisions and will submit a request to Office of Management and Budget for approval. The proposed revisions to the reporting forms, along with revised instructions related to FDIC amendments to the deposit insurance assessment system, will be effective with the June 30, 2021, report date. Additionally, the agencies noted that the exclusion of sweep deposits and certain other deposits from reporting as brokered deposits will be effective with the September 30, 2021, report date. Comments on the joint notice must be received by June 23.
Federal agencies release host state loan-to-deposit ratios
On May 21, the FDIC, the Federal Reserve Board, and the OCC released the current host state loan-to-deposit ratios for each state or U.S. territory, which the agencies use to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act). Under the Interstate Act, banks are prohibited from establishing or acquiring branches outside of their home state for the primary purpose of deposit production. Branches of banks controlled by out-of-state bank holding companies are also subject to the same restriction. Determining compliance with Section 109 requires a comparison of a bank’s estimated statewide loan-to-deposit ratio to the estimated host state loan-to-deposit ratio. If a bank’s statewide ratio is less than one-half of the published host state ratio, an additional review is required by the appropriate agency, which involves a determination of whether a bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.
OCC releases enforcement actions and terminations
On May 20, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included in the release is a formal agreement entered into with a Pennsylvania-based bank on April 20 in connection with alleged unsafe or unsound practices relating to oversight, internal controls, audit, and information technology controls. The agreement requires the bank to (i) establish a compliance committee to monitor the bank’s progress in complying with the agreement’s provisions; (ii) report such progress to the bank’s board on a quarterly basis; and (iii) develop, implement, and adhere to a written risk-based, internal information, technology audit program. The agreement further provides that the technology audit program must be performed by an independent and qualified party and must include fundamental elements of a sound audit program.
OCC finalizes CIF withdrawal period extensions
On May 21, the OCC issued an interim final rule, which finalizes a rule applicable to national banks and federal savings associations administering a collective investment fund (CIF) invested primarily in real estate or other assets that are not readily marketable. Specifically, under the OCC’s fiduciary activities regulation (12 CFR 9.18), a bank that is administering a CIF invested “primarily in real estate or other assets that are not readily marketable” may require a prior notice period of up to one year for withdrawals. As previously covered by Infobytes, in August 2020, the OCC issued an interim final rule which clarified rules regarding account withdrawals from CIFs in response to the Covid-19 pandemic. The recently released interim final rule codifies the August rule by allowing banks to request to extend the one-year redemption period by another year due to “unanticipated and severe market conditions for specific assets held by the fund,” subject to meeting certain conditions.
The interim final rule will be effective upon publication in the Federal Register.
OCC reconsiders CRA final rule
On May 18, the OCC announced it will reconsider its 2020 final rule overhauling the Community Reinvestment Act (CRA). As previously covered by a Buckley Special Alert, the 2020 final rule, finalized last year, 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.
“While this reconsideration is ongoing, the OCC will not object to the suspension of the development of systems for, or other implementation of, provisions with a compliance date of January 1, 2023, or January 1, 2024, under the 2020 CRA rule,” the OCC stated. The agency further stressed that its decision to suspend compliance deadlines for the 2020 final rule “will provide for an orderly reconsideration of the June 2020 rule” and “provide the OCC with the opportunity to consider additional stakeholder input, to evaluate issues and questions that have been raised, to reassess the necessary data, and to take additional regulatory action, as appropriate.” The OCC also added that it does not plan to finalize a December 2020 proposed rule covering evaluation measure benchmarks, retail lending distribution test thresholds, and community development minimums under the new general performance standards outlined in the 2020 final rule (covered by InfoBytes here). Moreover, the agency will discontinue the CRA information collection published in the Federal Register last December.
However, the OCC noted that it will continue to implement certain provisions of the 2020 final rule with a compliance date of October 1, 2020, as outlined in OCC Bulletin 2020-99 (covered by InfoBytes here), and reminded banks to “maintain appropriate documentation for CRA examination purposes” as specified in the bulletin.