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Financial Services Law Insights and Observations


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  • Six largest U.S. banks testify on pandemic responses and banking programs

    Federal Issues

    On May 27, the House Financial Services Committee held a hearing entitled “Holding Megabanks Accountable: An Update on Banking Practices, Programs and Policies.” During the hearing, chief executive officers from the six largest U.S. banks testified on their banks’ activities during the Covid-19 pandemic, as well as various issues related to safety and soundness, consumer protection, diversity and inclusion, risk management, compensation, climate risk, and the use of emerging technology. Several proposed bills containing provisions that would impact the banks if enacted were also discussed, including those that would (i) require the banks to publicly disclose and pay damages to harmed consumers within a short timeframe when more than 50,000 consumers are affected or potential remediation exceeds $10 million; and (ii) require federal regulators to design strategic plans to hold the banks accountable for compliance failures resulting in extensive consumer harm. The Committee’s memorandum focused on several areas discussed during the hearing including the following:

    • Pandemic response. The Committee expressed concerns over allegations that some of the banks prioritized Paycheck Protection Program (PPP) loans for wealthier clients over smaller borrowers, including small and minority-owned businesses, and that certain banks allegedly inappropriately charged overdraft fees.
    • Banking deserts. The Committee reported that the number of branches in the U.S. is down from ten years ago, noting that the existence of communities lacking adequate access to a bank branch makes it more difficult to reduce the number of unbanked and underbanked consumers.
    • Diversity and inclusion. The Committee suggested that lack of diversity within the banks continues to be an issue, pointing out that shareholder proposals at certain banks for racial equality audits were not supported by the banks. However, the Committee noted that all six banks made commitments in 2020 to invest millions into supporting minority depository institutions and community development financial institutions to support communities of color during the pandemic.
    • Fintech. The Committee discussed the increased use of artificial intelligence and machine learning to assist in digital banking, customer relations, fraud detection, and underwriting. Some of the banks, the Committee noted, have “acknowledged the competitive threat of fintech’s growth” and have asked regulators to “create a level playing field.” With respect to cryptocurrency custody services and the use of distributed ledger technology to perform payment activities, the Committee observed that while the banks do not yet provide these services, a few of them recently announced that they are considering the idea of offering funds to select investors allowing bitcoin ownership, while others may offer bitcoin investments in the near future. 

    Earlier in the week, the same CEOs discussed pandemic responses during the Senate Banking Committee’s hearing on the “Annual Oversight of Wall Street Firms.” The CEOs addressed challenges with building out digital platforms to facilitate PPP loan applications and forgiveness programs, as well as challenges to distributing funds quickly and in a manner that would prevent fraud from entering the system. The CEOs also emphasized their continued commitment to helping borrowers still facing financial hardships as federal foreclosure and eviction moratoriums begin to expire. One CEO noted during the hearing that his bank intends to continue to assist borrowers find loan modifications “irrespective of the deadline passing.”


    Federal Issues House Financial Services Committee Covid-19 Diversity Fintech Consumer Finance

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  • DFPI Economic Equity Conference releases diversity survey results

    State Issues

    On April 21, California’s Department of Financial Protection and Innovation (DFPI) hosted its first “Economic Equity Conference” presenting its Survey of Diversity in State Banking. The conference was designed to provide state financial leaders with strategies to enhance their “diversity, equity, and inclusion initiatives and consider their role in helping to close the racial wealth gap.” The conference featured the release of findings from a banking survey distributed to every state-chartered bank and credit union in October 2020. Some key takeaways of the report include:

    • Responding financial institutions reported collecting employee and board member data on the following: (i) “60 percent collect ethnic and/or gender data;” (ii) “roughly 40 percent inquire about veteran/disability status”; (iii) “about 15 percent ask about ‘other’ categories, including marital status and age”; and  (iv) “only 3 percent collect data on sexual orientation.”
    • About half of responding financial institutions require diversity education or training for employees, but only 23 percent require diversity training for board members.
    • Around 40 percent of financial institutions have “board-approved diversity, equity, and inclusion goals, with purposeful recruiting being the most common.”
    • About 33 percent of responding institutions “track diversity, equity, and inclusion efforts, with reliance on self-assessment tools being the most common.”
    • More than 75 percent of survey respondents “would like the DFPI to support diversity, equity, and inclusion efforts by providing education and training to licensees.”

    State Issues DFPI Diversity

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  • NYDFS announces Statewide Office of Financial Inclusion and Empowerment

    State Issues

    On April 13, NYDFS announced the new Statewide Office of Financial Inclusion and Empowerment, which is intended to meet the financial services needs of low- and middle-income New Yorkers and provide a “single-stop state resource” for consumers to access financial help. Superintended Linda A. Lacewell stated that the intention of the office is to “advance the Department’s strategic financial inclusion initiatives” and “pilot and develop policy initiatives designed to help further financial inclusion and empowerment.” Among other things, the new office will (i) maintain a centralized list of financial services counseling providers from across the state in the areas of housing, student loan, debt, and general financial literacy; (ii) coordinate state and local services intended to expand access to credit and opportunities for wealth building; (iii) “[i]ncubate new programs to expand access to safe and affordable banking services, credit and financial education,” and “coordinate public-private partnerships”; and (iv) foster the provision of high-quality, low-cost financial products across New York. Lacewell also announced that the Honorable Tremaine Wright will serve as the office’s first director. Wright, who will develop and implement the office’s policies and programs, was previously elected to the New York State Assembly where she was chair of New York State Black, Puerto Rican, Hispanic & Asian Legislative Caucus.

    State Issues State Regulators NYDFS Diversity Consumer Finance

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  • FDIC encourages banks to submit diversity self-assessments

    Federal Issues

    On March 15, the FDIC’s Office of Minority and Women Inclusion (OMWI) encouraged FDIC-supervised financial institutions with 100 or more employees to submit voluntary self-assessments of their diversity policies and practices. OMWI’s diversity program will assess a financial institution’s diversity policies in the following areas: (i) organizational commitment; (ii) workforce profile and employment practices; (iii) procurement and business practices/supplier diversity; (iv) transparency of organizational diversity and inclusion; and (v) an entities’ self-assessment. OMWI noted that the self-assessment is not an examination requirement, and therefore will not impact a financial institution’s safety and soundness, consumer compliance, or Community Reinvestment Act examination ratings.

    Federal Issues FDIC Diversity

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  • House hearing addresses diversity and inclusion accountability

    Federal Issues

    On September 8, the House Financial Services Subcommittee on Diversity and Inclusion held a hearing entitled “Holding Financial Regulators Accountable for Diversity and Inclusion: Perspectives from the Offices of Minority and Women Inclusion.” Two panels consisting of Office of Minority and Women Inclusion directors and acting directors from the OCC, Federal Reserve Board, Federal Reserve Bank of New York, FDIC, NCUA, Treasury Department, SEC, FHFA, and CFPB answered questions posed by subcommittee members on strategies taken to promote diversity and inclusion (D&I) in the industries they regulate as well as within the agencies themselves. Panelists discussed in-house D&I areas of focus, such as improving minority recruitment and retention in the workforce and increasing diversity in leadership teams, vendor and contractor relationships, and hiring panels. Panelists also discussed efforts for mitigating unconscious bias. While the majority of the hearing focused on in-house strategies, some panelists also touched upon key steps their agencies are taking to promote D&I at regulated entities. For example, NCUA’s representative stated that it is committed to improving workforce diversity in the broader financial services sector and ensuring credit unions are offering products and services that reflect the communities they serve. FDIC’s representative noted that the agency is trying to get capital into the hands of minority small businesses, while Treasury’s representative discussed efforts taken during the Covid-19 pandemic to ensure minority depository institutions’ participation in the Paycheck Protection Program. Some of the panelists raised concerns about the low number of diversity self-assessments that lenders voluntarily provide to regulators, however they noted that there has been an increase in submissions over the past few years and that providing more information to the institutions has been beneficial. Subcommittee members also discussed proposed legislation to address D&I problems—including H.R 8160, the “Promoting Diversity and Inclusion in Banking Act,” which would require regulators to examine D&I at regulated entities to promote equality under the law.

    Federal Issues U.S. House Diversity Hearing Prudential Regulators

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  • FDIC requests 2019 diversity self-assessments through new automated portal

    Agency Rule-Making & Guidance

    On March 23, the FDIC issued FIL-23-2020 to announce a request from the agency’s Office of Minority and Women Inclusion for 2019 diversity self-assessments from FDIC-regulated financial institutions in accordance with Section 342 of the Dodd-Frank Act. Financial institutions with 100 or more employees should refer to the FIL for instructions on completing the voluntary self-assessment. The FDIC strongly encourages financial institutions to use the new automated portal: Diversity Self-Assessment of FDIC Regulated Financial Institutions when completing self-assessments, as it allows for multiple authorized users and the ability to view previous submissions, as well as provides additional resources for participants. Self-assessments are due May 31.

    Agency Rule-Making & Guidance FDIC Federal Issues Diversity Dodd-Frank Financial Institutions

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  • House committee report urges large banks to release diversity data

    Federal Issues

    On February 12, Maxine Waters, Chairwoman of the House Financial Services Committee, and Joyce Beatty, Chair of the Subcommittee on Diversity and Inclusion, released a majority staff report titled “Diversity and Inclusion: Holding America’s Large Banks Accountable,” which details diversity and inclusion data and policies collected from 44 of the nation’s largest banks. The information requested from the banks included, among other things, (i) “[e]mployee compensation by gender, race, and ethnicity”; (ii) demographic information about the banks’ boards; (iii) data regarding “staff and budget dedicated to diversity initiatives”; and (iv) “diversity policies and practices.” The committee staff found that boards of directors and senior employees at banks are not diverse, and that “[b]anks have limited spending and investments with diverse firms.” Additionally, it was found that “workforce diversity is more visible in entry level rather than executive and senior level positions.” The report recommended a number of avenues for banks to improve diversity and inclusion such as disclosing diversity data to the public and to regulators including bank board diversity. The report also suggested “[i]ncreased spending and investment with diverse” firms and vendors. According to the press release, Congressional legislative actions in these areas would “improve diversity and inclusion at America’s largest banks.”

    Federal Issues House Financial Services Committee Diversity and Inclusion Subcommittee Diversity

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  • Waters announces subcommittee chairs, including newly formed Subcommittee on Diversity and Inclusion

    Federal Issues

    On January 24, Chair of the House Financial Services Committee, Maxine Waters, announced that Joyce Beatty (D-OH) will serve as the first Chair of the newly formed Subcommittee on Diversity and Inclusion. According to Waters’ policy speech on January 17, the new Subcommittee will be “dedicated to looking at diversity and inclusion issues under the Committee’s jurisdiction.” Specifically, Waters cited to low representation of minorities and women in the financial services industry, particularly at the management level, as a reason for the creation of the subcommittee. Using the Offices of Minority and Women Inclusion of the federal financial services regulators as an example, Waters suggested that the subcommittee be responsible for overseeing diversity in management, employment, and business activities in the financial industry. In addition to diversity and inclusion, Waters noted that, among other things, fair housing, including conducting “robust oversight” of HUD, and fintech would be top priorities for the subcommittee.

    Federal Issues Diversity House Financial Services Committee Congressional Oversight Congressional Inquiry HUD Fintech

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  • CFPB Releases Report on Diversity and Inclusion in the Mortgage Industry, Banking Agencies Attend Roundtable Meeting

    Consumer Finance

    On April 27, the Consumer Financial Protection Bureau published its report summarizing strategies intended to promote diversity and inclusion by mortgage industry participants. The report, Diversity and Inclusion in the Mortgage Industry: Readout from an Opening Roundtable, is the result of the Bureau’s collaboration with the financial services industry. The roundtable meeting—led by the Bureau’s Office of Minority and Women Inclusion (OMWI)—convened representatives from the mortgage industry, nonbank financial companies, and OMWI staff from the OCC, FDIC, Federal Reserve, and FHFA. OMWI was a created by Section 342 of the Dodd-Frank Act and charges directors with “increasing diversity in agency programs and contracts, and assessing diversity policies and practices of entities regulated by the agency.” The report highlights issues raised by roundtable participants and stresses the need to develop a “strong business case for diversity and inclusion.” The Bureau’s position on the strategies and practices discussed include the following:

    • promoting diversity and inclusion strengthens organizations and improves overall performance;
    • building in diversity and inclusion as “fundamental principles” and taking a “tone from the top” approach highlights the importance of leadership buy-in and accountability;
    • boosting diversity and inclusion through the recruitment, hiring, retention, and advancement of personnel creates opportunities for more diverse viewpoints;
    • promoting a more diverse workforce and tailoring products to the needs of different consumers fosters a greater understanding of the needs of a more diverse customer base; and
    • understanding the importance of data collection and analysis supports the business case for diversity.

    Consumer Finance CFPB Mortgages Diversity

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  • Federal Banking Agencies Urge Financial Institutions to Conduct Diversity Self-Assessments

    Consumer Finance

    On August 2, the Federal Reserve, OCC, and FDIC released FAQs regarding their standards for assessing the diversity policies and practices of regulated entities. Following the June 10, 2015 Federal Register publication titled “Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies” (Policy Statement), the FAQs seek to clarify the agencies’ standards for entities conducting self-assessments of their diversity policies. Although self-assessments are voluntary, the banking agencies strongly encourage financial institutions to disclose their diversity policies, diversity practices, and self-assessment information on their websites and provide the same to their primary federal financial regulator.

    FDIC Federal Reserve OCC Diversity

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