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Financial Services Law Insights and Observations


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  • Fed and Illinois regulator take action against bank on capital and management

    On May 4, the Federal Reserve Board announced an enforcement action against an Illinois state-chartered community bank and its holding company related to alleged deficiencies identified in recent examinations. While the written agreement (entered into by the parties at the end of April) does not outline the specific deficiencies, it notes that the bank and the holding company have started taken corrective action to address the issues identified by the Federal Reserve Bank of St. Louis (FRB) and the Illinois Department of Financial and Professional Regulation (IDFPR). Among other things, the holding company’s board of directors must take appropriate steps to fully use its financial and managerial resources to ensure the bank complies with the written agreement and any other supervisory action taken by the bank’s federal or state regulator. The board is also required to submit a written plan to the FRB and the IDFPR describing actions and measures it intends to take to strengthen board oversight of the management and operations of the bank. The bank is required to submit a written plan outlining its current and future capital requirements and must notify the FRB and the IDFPR within 30 days after the end of any calendar quarter in which its capital ratios fall below the minimum ratios specified within the approved capital plan. Additionally, the bank is prohibited from taking on debt, redeeming its own stock, or paying out dividends or distributions without the prior approval of state and federal regulators.

    Bank Regulatory Federal Issues Federal Reserve Enforcement State Regulators Illinois FRB State Issues

  • Federal banking agencies amend capital rules to encourage support of recovery

    Federal Issues

    On October 8, the OCC, FDIC and Federal Reserve Board finalized two rules intended to encourage depository institutions to utilize their capital buffers, which must be maintained in order to avoid having restrictions placed on capital distributions, for lending and other financial intermediation activities. The agencies amended rules governing risk-based capital and leverage ratio requirements for U.S. banking organizations, to make limitations on capital distributions more gradual in nature. The agencies also amended rules governing the total loss-absorption capacity of the largest U.S. bank holding companies and U.S. operations of the largest foreign banking organizations.

    Federal Issues OCC FDIC Federal Reserve FRB Deposits

  • Federal Reserve Board extends temporary actions on intraday credit availability

    Federal Issues

    On October 1, the Federal Reserve Board extended certain temporary actions that are designed to increase the availability of intraday credit to mitigate the impact of Covid-19.  The temporary actions were previously announced on April 23 (previously covered here), and include: (1) suspending uncollateralized intraday credit limits and waiving overdraft fees for eligible institutions; (2) permitting a streamlined procedure to request collateralized intraday credit; and (3) suspending two collections of information that are used to calculate net debit caps.  The actions are extended to March 31, 2021.

    Federal Issues Covid-19 Federal Reserve FRB Consumer Credit Overdraft Fees Debit Cards

  • Federal Reserve Board extends measures to ensure high level of resilience among large banks

    Federal Issues

    On September 30, the Federal Reserve Board announced it would extend measures previously instituted to ensure that large banks maintain a high level of capital resilience in light of uncertainty introduced by the Covid-19 outbreak. The measures were extended for an additional quarter. Large banks (i.e. banks with more than $100 billion in total assets) will be prohibited from making share repurchases. Additionally, dividend payments will be capped and tied to a formula based on recent income. The announcement notes that the Board will conduct a second stress test later this year to further test the resiliency of large banks.

    Federal Issues Covid-19 Federal Reserve FRB Bank Compliance

  • Federal agencies and CSBS to hold webinar on PPP

    Federal Issues

    On August 20, the FDIC, Federal Reserve Board, OCC, NCUA, and the Conference of State Bank Supervisors  announced that a webinar will be held with SBA officials discussing the loan forgiveness process and recent changes in the Paycheck Protection Program on Thursday, August 27 from 11:00 a.m. to 12:00 p.m. (EDT). Participants must preregister for the webinar and are encouraged to email questions in advance to An archive of the webinar materials will be available here, a few hours after the webinar ends.


  • Federal Reserve Board announces revised pricing for its Municipal Liquidity Facility

    Federal Issues

    On August 11, the Federal Reserve Board announced revised pricing for its Municipal Liquidity Facility. The revised pricing reduces the interest rate spread on tax-exempt notes for each credit rating category by 50 basis points and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes. The MLF, originally covered here, was one of several facilities intended to support the flow of credit in the economy.

    Federal Issues Covid-19 Federal Reserve FRB Interest Rate Credit Ratings

  • Bank Regulators Signal Changes to Capital Holding Requirements

    Federal Issues

    On September 8, the Federal Reserve Board (FRB) released a policy statement providing details regarding its Countercyclical Capital Buffer Framework (Framework). The FRB explained that the Framework is designed to implement requirements under the Basel III International bank capital rules, and will generally raise capital holding requirements for internationally active banks when there is an elevated risk of systemic credit losses. In responding to comments, the FRB used the policy statement to clarify that when the systemic threat is reduced, banks would be allowed to release excess capital into the economy to further create financial stability. Meanwhile, the Group of Central Bank Governors and Heads of Supervision (Group) that oversees the Basel Committee on Banking Supervision (Committee) cautioned the Committee to avoid significant increases in overall bank capital requirements as the Committee creates a final rule to address excessive variability in risk-weighted assets. The Group expressed its desire that the Committee focus on improving and harmonizing the methods through which banks determine their own risks. The Committee’s final rule is due by year’s end.

    FRB Capital Requirements Basel

  • Federal Reserve Board Appoints Adviser To The Board for Monetary Policy

    Consumer Finance

    On October 8, the Federal Reserve Board announced the appointment of William English as an advisor to the Board for Monetary Policy in the Office of Board Members. Since July 2010, Mr. English has served as the director of the Board’s Division of Monetary Affairs and as secretary to the Federal Open Market Committee. Mr. English is expected to remain as secretary to the FOMC so that he can continue to contribute to the monetary policy process.

    FRB Federal Reserve

  • Interagency Final Rule On Regulatory Capital, Revisions To The Supplementary Leverage Ratio

    Consumer Finance

    On September 26, the OCC, the FDIC, and the Federal Reserve Board released a final rule that revises the calculation of total leverage exposure to make it more consistent with the January 2014 revisions to the international leverage ratio framework published by the Basel Committee on Banking Supervision. Like the proposed rule, the final rule directs the total leverage exposure calculation to include a bank’s on-balance-sheet assets (less tier 1 capital) and a potential future exposure amount calculated for each derivative contract. The final rule on total leverage exposure differs from the proposed rule in that it: (i) includes in the calculation the amount of cash collateral received for derivative contracts and the notional amount of each credit derivative for which the bank acts as the credit protection provider; (ii) adjusts the treatment of certain repo-style transactions; and (iii) allows the use of the credit conversion factors set forth in the 2013 revised capital rule to calculate some off-balance-sheet exposures. This rule does not apply to community banks. Total leverage exposure is the denominator for the supplementary leverage ratio calculation, which divides a bank’s tier 1 capital against its total leverage exposure. Banks must comply with the new supplementary ratio requirements by January 1, 2018, but they must calculate and publicly report their supplementary ratios beginning January 1, 2015.

    FRB Basel

  • Federal District Court Gives Federal Reserve Deadline to Decide Interchange Fee Rule

    Consumer Finance

    On August 14, the U.S. District Court for the District of Columbia reportedly gave the Federal Reserve Board (FRB) one week to determine whether it will write an interim final rule to replace the interchange fee rule recently voided by the court. During a status hearing, the court ordered the FRB’s general counsel to appear on August 21, 2013 to inform the court whether the FRB will rewrite the rule, suggesting that an interim rule would need to be in place by the end of August. The court also reportedly stated that the funds collected from retailers while the rule was in effect could be ordered to be refunded and asked the parties to provide further briefing on the issue.



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