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  • FDIC releases process for MDI designation requests

    On May 19, the FDIC released a process for insured institutions or applicants for deposit insurance to submit requests for recognition as a minority depository institution (MDI). As previously covered by InfoBytes, last June the FDIC approved and released an updated Statement of Policy Regarding Minority Depository Institutions to enhance the agency’s efforts to preserve and promote MDIs. 

    The updated statement of policy details the framework by which the FDIC implements objectives set forth in Section 308 of FIRREA and describes agency initiatives for fulfilling its MDI statutory goals. According to the FDIC, “supervised institutions or applicants for deposit insurance that seek to be recognized as an MDI may submit a written request, signed by a duly authorized officer or representative of the institution or applicant, at any time to the appropriate regional office.” Supervised institutions are also able to submit requests in connection with a merger application or a change in control notice. Requests should contain sufficient information in support of the designation, and the FDIC will send a letter acknowledging recognition of the institution as an MDI if an institution has met the eligibility requirements.

    Bank Regulatory Federal Issues FDIC Minority Depository Institution Supervision False Claims Act / FIRREA

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  • FDIC issues 2021 annual report

    On February 17, the FDIC released its 2021 Annual Report, providing an overview of the agency’s goals and agenda over the past year, and describing the financial health of the agency, its funds, and insured financial institutions. The report highlighted areas of focus for the FDIC over the past year, such as:

    • Financial inclusion. According to the report, the FDIC “has seen meaningful improvements in recent years in reaching the ‘last mile’ of unbanked households in this country. Based on the results of our biennial survey of households, the proportion of U.S. households that were banked in 2019 – 94.6 percent – was the highest since the survey began in 2009.” The report noted several FDIC-led initiatives related to inclusive banking. In June 2021, the FDIC’s technology lab, FDiTechannounced a tech sprint, Breaking Down Barriers: Reaching the Last Mile of Unbanked U.S. Households, which challenged participants to “explore new technologies and techniques that would help expand the capabilities of banks to meet the needs of unbanked individuals and households.” (Covered by InfoBytes here.) The FDIC also expanded its #GetBanked public awareness campaign into the Los Angeles, Dallas, and Detroit metropolitan areas in continuation of the agency’s efforts to increase financial inclusion to the unbanked population. (Covered by InfoBytes here.)
    • Mission-Driven Banks. According to the report, the FDIC increased Minority Depository Institutions (MDI) representation on the agency’s Community Bank Advisory Committee (CBAC), which “established a new MDI subcommittee of the CBAC to highlight the work of MDIs in their communities and to provide a platform for MDIs to exchange best practices, and enabled MDIs to review potential purchases of a failing MDI before non-MDI institutions are given this opportunity.” As previously covered by InfoBytes, these efforts were incorporated in a Statement of Policy.
    • Competitiveness of Community Banking. According to the report, the FDIC held a “rapid phased prototyping competition” where more than 30 technology firms were invited to participate in the competition "to develop tools for providing more timely and granular data to the FDIC on the health of the banking sector while also making such reporting less burdensome for banks. Of those 30 firms, we asked four participants to move forward in the competition by proposing a proof of concept for their technologies – either independently or jointly.” The FDIC also facilitated the development of “a public/private standard-development organization to establish standards for due diligence of vendors and for the technologies they develop.”
    • Deposit Insurance Fund (DIF). According to the report, the DIF balance increased to a record $123.1 billion in 2021–a $5.2 billion increase from the year-end 2020 balance. No insured financial institutions failed in 2021 and “contingent liability for anticipated failures declined to $20.8 million as of December 31, 2021, compared to $78.9 million as of December 31, 2020.”

    Bank Regulatory Federal Issues FDIC Minority Depository Institution Diversity Community Banks Deposit Insurance

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  • House subcommittee holds hearing on cybersecurity

    Federal Issues

    On November 3, the House Financial Services Subcommittee on Consumer Protection and Financial Institutions held a hearing titled “Cyber Threats, Consumer Data, and the Financial System.” The hearing examined cybersecurity and consumer data protection challenges for financial institutions, discussed agencies efforts to strengthen cyber defenses for financial institutions, and reviewed the current legal framework governing data security. According to a committee memorandum, cyberattacks on banks are increasing in number. In the first half of 2021, banks and credit unions saw a 1,318 percent increase in ransomware attacks. In written testimony, one of the witnesses expressed his concern regarding the technological disparity between minority depository institutions (MDI) and large banks, observing that “cultural shifts inside the financial services industry, including the core processors and regulators, are necessary to help MDIs better orient themselves to meet new customer demands.” Another witness discussed in his written testimony support for the NCUA to obtain data security and privacy authority over third-party vendors, which is an authority currently given to other federal agencies. Among other things, the hearing addressed several bills on cybersecurity and consumer protection: (i) Safeguarding Non-bank Consumer Information Act; (ii) Strengthening Cybersecurity for the Financial Sector; and (iii) Enhancing Cybersecurity of Nationwide Consumer Reporting Agencies Act. Specifically, one of the witnesses in his written testimony recommended that Congress revise the definition of “data aggregators” in the Safeguarding Non-bank Consumer Information Act to ensure that it covers non-financial institution entities and individuals.

    Federal Issues House Financial Services Committee Privacy/Cyber Risk & Data Security Consumer Protection Minority Depository Institution Federal Legislation

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  • FDIC establishes MDI support office

    Federal Issues

    On November 2, the FDIC announced the creation of a new office to support the agency’s ongoing strategic and direct engagement with Minority Depository Institutions (MDIs), Community Development Financial Institution banks (CDFIs), and other mission-driven banks, in addition to promoting private sector investments in low- and moderate-income communities. The announcement further noted that FDIC Chairman Jelena McWilliams has initiated several programs for the FDIC’s MDI program since 2018, which include: (i) creating the Mission-Driven Bank Fund to facilitate critical capital investments in FDIC-insured MDIs and CDFIs (covered by InfoBytes here); (ii) establishing the MDI Subcommittee of the Advisory Committee on Community Banking; and (iii) adopting new processes to facilitate preservation of the minority character of an MDI in the case of a failure.

    Federal Issues FDIC Minority Depository Institution Bank Regulatory

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  • FDIC launches investment vehicle to support MDIs and CDFIs

    Federal Issues

    On September 16, the FDIC announced the launch of a new capital investment vehicle to support insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs) that provide capital and financial services to low- and moderate-income, minority, and rural communities. The Mission-Driven Bank Fund supports the FDIC’s commitment to preserving and promoting mission-driven institutions, and provides investors with an opportunity to support these institutions, enabling MDIs and CDFIs to provide affordable financial products and services, stimulate economic and community development, and build opportunity and prosperity. Among other things, the fund’s collaborative investment framework will channel private capital and other resources to allow institutions to (i) raise the necessary capital to better serve their communities; (ii) weather economic downturns and recover faster; (iii) attract technical expertise to grow operations and expand services; (iv) “acquire, deploy, and maintain technology solutions”; and (v) “build capacity and scale.” The FDIC notes that it “will retain an advisory role to support the fund’s mission, but will not contribute capital to, manage, or be involved in investment decisions of, the fund.”

    Federal Issues FDIC Minority Depository Institution CDFI Bank Regulatory

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  • Fed, OCC report on health of MDIs

    Federal Issues

    Recently, the Federal Reserve Board and the OCC issued reports pursuant to Section 367 of the Dodd-Frank Act generally detailing the health of Minority Depository Institutions (MDIs) and the agencies’ efforts taken to assist MDIs as the Covid-19 pandemic disproportionately affected low- and moderate-income communities and racial and ethnic minorities. The Fed’s report, “Promoting Minority Depository Institutions,” discussed, among other things, extra steps taken by the agency to support and assist MDIs over the past year, which included conducting individualized outreach on several topics like how to access the discount window and the Paycheck Protection Program Liquidity Facility (covered by InfoBytes here and here). The report also examined efforts taken by the Fed to preserve and promote MDIs through its Partnership for Progress program—“a national outreach effort to help MDIs confront unique business-model challenges, cultivate safe banking practices, and compete more effectively in the marketplace”—and covered the Fed’s unanimous approval last September to approve an Advance Notice of Proposed Rulemaking on modernizing the Community Reinvestment Act (covered by InfoBytes here).

    The OCC outlined actions taken to preserve and promote MDIs in its “2020 Annual Report,” including the launch of the Roundtable for Economic Access and Change known as Project REACh (covered by InfoBytes here). OCC subject matter experts also provided regulatory technical assistance to MDIs on topics including safety and soundness, cybersecurity, compliance with Bank Secrecy Act/anti-money laundering requirements, and current expected credit loss accounting methodology, among others. The OCC also noted that despite a seven-basis-points drop on the average return on assets for MDIs through the pandemic, the health of those institutions “remained satisfactory.”

    Federal Issues Minority Depository Institution Federal Reserve OCC Covid-19 CRA Dodd-Frank Compliance Bank Secrecy Act Anti-Money Laundering Bank Regulatory

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  • FDIC provides updates on real estate lending standards and MDIs

    Agency Rule-Making & Guidance

    On June 15, the FDIC Board of Directors met in open session to discuss Real Estate Lending Standards and Minority Depository Institutions (MDIs), among other things. According to FIL-41-2021, the FDIC issued a proposed rule to amend the Interagency Guidelines for Real Estate Lending Policies “to conform the method for calculating the ratio of loans in excess of the supervisory loan-to-value (LTV) limits with the capital framework established in the community bank leverage ratio (CBLR) rule.” The proposed amendments would provide a consistent approach for calculating the ratio of loans in excess of the supervisory LTV limits at all FDIC-supervised institutions by, among other things, establishing supervisory LTV criteria for certain real estate lending transaction types and allowing exceptions to the supervisory LTV limits. Comments on the proposed rule are due 30 days after publication in the Federal Register.

    During the meeting, the FDIC Board of Directors also approved and released an updated Statement of Policy Regarding Minority Depository Institutions to enhance the agency’s efforts to preserve and promote MDIs. In August 2020, the FDIC approved a proposed statement of policy, which updated and clarified the agency’s policies and procedures related to MDIs (covered by InfoBytes here). The recently updated statement of policy replaces the 2002 Statement of Policy and includes, among other things:

    • Clarification of the FDIC’s expectations for technical assistance and illustration of opportunities for engagement with members of FDIC staff;
    • Outreach efforts by the FDIC including, among other things, the establishment of the MDI Subcommittee of the Advisory Committee on Community Banking and enhanced activities to promote collaboration with MDIs;
    • Definitions of terms utilized in the MDI program, detailed reporting requirements, and specific methods used to measure the effectiveness of MDI program activities; and
    • Clarification of considerations made by examination staff when evaluating performance and assigning ratings.

    After considering the comment letters, the FDIC revised the proposed statement of policy to identify, specifically, “state bankers associations as collaboration partners, along with other trade associations that support MDIs in the development of education and training events and other initiatives for MDIs.”

    Agency Rule-Making & Guidance FDIC Minority Depository Institution Supervision Real Estate Bank Regulatory

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  • Agencies issue rulemaking to facilitate Emergency Capital Investment Program for CDFIs and MDIs

    Agency Rule-Making & Guidance

    On March 22, the OCC, Federal Reserve Board, and the FDIC published an interim final rule (IFR) to facilitate the implementation of the Emergency Capital Investment Program (ECIP). As previously covered by InfoBytes, the ECIP was established by the Consolidated Appropriations Act of 2021, and will provide up to $9 billion in capital directly to Community Development Financial Institutions and minority depository institutions to provide, among other things, “loans, grants, and forbearance for small and minority businesses and consumers in low income communities” that may be disproportionately impacted by the Covid-19 pandemic. The IFR outlines capital designations and investment eligibility criteria, and specifically notes that the agencies have revised “the capital rule to clarify that senior preferred stock will qualify as additional tier 1 capital and subordinated debt will qualify as tier 2 capital.” The ECIP will expire six months after the date on which the national Covid-19 emergency ends.

    Agency Rule-Making & Guidance Federal Reserve OCC FDIC CDFI Minority Depository Institution Covid-19 Bank Regulatory

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  • Fed clarifies MDI definition guidance

    Agency Rule-Making & Guidance

    On March 5, the Federal Reserve Board issued clarifying guidance regarding definitions for minority depository institutions (MDIs), expanding the definition of an MDI to include women-owned financial institutions. In addition to statutory provisions—which define the term “minority” to mean any African American, Native American, Hispanic American, or Asian American, and “states that an MDI is any depository institution where a majority of the voting stock is owned by one or more socially and economically disadvantaged individuals”—the Federal Reserve System’s definition of an MDI will now recognize women’s depository institutions, and will provide these depository institutions with the same resources as other MDIs. According to the Board, the definition of a “women’s depository institution” is consistent with how the term is defined under the Community Reinvestment Act. Additionally, the Board highlighted resources available for MDIs through its Partnership for Progress program, which helps MDIs operate in a safe and sound manner and meet supervisory standards.

    Agency Rule-Making & Guidance Federal Reserve Minority Depository Institution Bank Regulatory

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  • Treasury announces Emergency Capital Investment Program for CDFIs and MDIs

    Federal Issues

    On March 4, the U.S. Treasury Department announced a new initiative to provide access to capital for communities traditionally excluded from the financial system that have significantly struggled during the Covid-19 pandemic. The Emergency Capital Investment Program (ECIP), established by the Consolidated Appropriations Act of 2021, will provide up to $9 billion in capital directly to Community Development Financial Institutions (CDFIs) and minority depository institutions (MDIs) to provide, among other things, “loans, grants, and forbearance for small and minority businesses and consumers in low income communities.” The ECIP will set aside $2 billion for CDFIs and MDIs with less than $500 million in assets, as well as $2 billion for CDFIs and MDIs with less than $2 billion in assets. Treasury notes that the program is intended to incentivize impactful lending, and states it is currently “developing additional ‘deep impact’ metrics to further incentivize targeted investments by participants in those communities most in need of capital.” Institutions seeking to participate in the ECIP can access application instructions and materials along with an application portal here.

    To support the implementation of the ECIP, the FDIC, Federal Reserve Board, and the OCC issued an interim final rule to “revis[e] their capital rules to provide that Treasury’s investments under the program qualify as regulatory capital of insured depository institutions and holding companies.” The interim final rule is effective immediately upon publication in the Federal Register. Comments will be accepted for 60 days following publication.

    Federal Issues Agency Rule-Making & Guidance CDFI Minority Depository Institution Covid-19 Department of Treasury Bank Regulatory FDIC Federal Reserve OCC

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