InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Special Alert: NYDFS accelerates Libor transition planning
On December 23, 2019, the New York Department of Financial Services issued an “Industry Letter” requesting that each NYDFS-regulated institution submit the institution’s plan for addressing the transition away from Libor-based credit, derivative, and securities exposures. The NYDFS letter has spurred additional focus by financial institutions in the issue, and not only by those regulated by NYDFS. This Client Alert summarizes the current state of play in Libor transition, and outlines some key considerations for developing a Libor transition plan.
* * *
Click here to read the full special alert.
If you have any Libor-related questions please contact a Buckley attorney with whom you have worked in the past.NCUA releases 2020 supervisory priorities
In January, the NCUA issued a letter to board of directors and chief executive officers at federally insured credit unions outlining the agency’s 2020 supervisory priorities. Top supervisory priorities include:
- Bank Secrecy Act/Anti-Money Laundering (BSA/AML). Examinations will continue to focus on customer due diligence and beneficial ownership requirements. The NCUA will also collaborate with law enforcement and banking regulators on initiatives such as updates to the FFIEC’s BSA/AML examination manual and enforcement guidelines, guidance concerning politically exposed persons, and measures for improving suspicious activity and currency transaction report filing procedures.
- Consumer Financial Protection. Based on a rotating regulation review cycle, NCUA examiners will review compliance (at a minimum) with the following regulations: the Electronic Fund Transfer Act, Fair Credit Reporting Act, Gramm-Leach-Bailey (Privacy Act), Payday Alternative Lending and other small dollar lending, Truth in Lending Act, Military Lending Act, and the Servicemembers Civil Relief Act.
- Cybersecurity. In 2020 the NCUA will continue conducting cybersecurity maturity assessments for credit unions with assets over $250 million and will begin to assess those with assets over $100 million. In addition, the NCUA intends to pilot new procedures—scaled to an institution’s size and risk profile—to evaluate critical security controls during examinations between maturity assessments.
- LIBOR Cessation Planning. Examiners will assess credit unions’ planning related to the discontinuation of LIBOR. According to the NCUA, credit unions should “proactively transition away from instruments using LIBOR as a reference rate.”
Other areas of focus include credit risk, current expected credit losses, liquidity risk, and modernization updates. The extended examination cycle will continue to apply to qualifying credit unions.
NYDFS directs financial institutions to submit LIBOR transition risk management plans
On December 23, NYDFS issued an Industry Letter (Letter) directing its regulated depository and non-depository institutions, insurers, and pension funds to outline their plans for managing the risks associated with the potential impact of LIBOR’s likely cessation at the end of 2021. NYDFS seeks assurance that regulated institutions’ board of directors and senior management fully understand the associated risks, have developed appropriate plans, and have initiated actions to facilitate transition to an alternative reference rate. The Letter does not mandate use of any particular alternative rate, but notes that “the Alternative Reference Rates Committee . . ., convened by the FRB and the [Federal Reserve Bank of New York (FRBNY)], has chosen [the Secured Overnight Financing Rate published by the FRBNY] as its recommended alternative to U.S. dollar LIBOR.” The Letter requires NYDFS-regulated institutions to describe: (i) programs that will assess financial and non-financial transition risks; (ii) “processes for analyzing and assessing alternative rates, and the potential associated benefits and risks of such rates both for the institution and its customers and counterparties”; (iii) processes to communicate with customers and counterparties; (iv) plans and processes for “operational readiness, including related accounting, tax and reporting aspects of [the] transition” from LIBOR; and (v) their governance framework, including oversight by an institution’s board of directors or its equivalent governing authority. Institutions are required to submit their transition-risk management plans to NYDFS by February 7.