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OCC updates PTFA booklet in Comptroller’s Handbook
On March 2, the OCC announced an update to the Protecting Tenants at Foreclosure Act booklet of the Comptroller’s Handbook. The revised booklet is intended to provide examiners with information and procedures concerning foreclosure activities and related consumer protections under the Protecting Tenants at Foreclosure Act of 2009 (PTFA). Among other things, the booklet provides a summary of requirements and addresses risks associated with a bank’s compliance with PTFA. The OCC notes that the Economic Growth, Regulatory Relief, and Consumer Protection Act made permanent certain sections of PTFA, and states that the applicable provisions “apply to any immediate successor in interest—including banks—that foreclose on a federally related mortgage loan or on any dwelling or residential real property, as defined in section 3 of [RESPA], that is subject to a bona fide lease, as defined in the PTFA and in 12 USC 2602.”
Fed governor discusses modernizing payment systems for community banks
On February 27, Federal Reserve (Fed) Governor Michelle W. Bowman spoke before the Banking Outlook Conference held at the Federal Reserve Bank of Atlanta on ways the Fed can increase transparency and modernize payment services for community banks. Bowman stated that the Fed is “uniquely positioned as a provider of payment services and as a supervisor of banks to ensure that our nation’s evolving financial system works for community banks.” Bowman discussed how the Fed can achieve this objective by, among other things, (i) adopting an additional same-day automated clearinghouse (ACH) window, which “will allow banks and their customers, particularly those located outside the eastern time zone, to use same-day ACH services during a greater portion of the business day”; (ii) implementing FedNow, which would, as previously covered by InfoBytes, “facilitate end-to-end faster payment services, increase competition, and ensure equitable and ubiquitous access to banks of all sizes nationwide”; and (iii) encouraging partnerships between community banks and fintech firms to “leverage the latest technology to provide customer-first, community-focused financial services and provide customers with efficiencies, such as easy-to-use online applications or rapid loan decisionmaking.” Bowman highlighted the Fed’s fintech innovation office hours, as well as the Fed’s recently launched fintech innovation webpage (covered by InfoBytes here), and emphasized the Fed’s desire to hear directly from banks and fintech companies on innovation challenges.
With respect to third-party service providers, Bowman proposed several important initiatives for the Fed to help community banks effectively manage their third-party relationships and access innovative new technology. These include providing clear, consistent due diligence guidance on third-party relationships to provide uniform standards that are aligned with guidance issued by the OCC and other banking agencies. Bowman also suggested increasing the transparency of its third-party supervisory program by releasing information that may be useful about key service providers to community banks, and tailoring regulatory burdens for community banks with assets under $1 billion.
Agencies seek comments on covered funds under Volcker Rule
On February 28, the OCC, Federal Reserve Board, FDIC, SEC, and CFTC issued a notice of proposed rulemaking (NPR) to modify and streamline the “covered funds” requirements under Section 13 of the Bank Holding Company Act, commonly known as the Volcker Rule. (Previous InfoBytes coverage of the Volcker Rule here). According to the press release, the proposed amendments “would modify and clarify the regulations concerning covered funds and would address certain related issues, including qualifying foreign excluded funds.” Among other things, the amendments to the regulations would (i) “permit the activities of qualifying foreign excluded funds”; (ii) “revise the exclusions from the definition of covered fund for foreign public funds, loan securitizations, and small business investment companies”; (iii) create exclusions from “covered fund credit funds, qualifying venture capital funds, family wealth management vehicles, and customer facilitation vehicles”; (iv) allow certain transactions that would otherwise be prohibited under the so-called “Super 23A” restrictions; (v) redefine “ownership interest”; and (vi) exclude certain investments from “a banking entity’s calculation of its ownership interest in the covered fund.” Comments in response to the NPR must be submitted by April 1.
OCC releases January enforcement actions
On February 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. The new enforcement actions include four civil money penalty orders, three cease and desist orders, five removal/prohibition orders, and a termination of an existing enforcement action. Included among the actions is a January 30 Consent Order to resolve the OCC’s claims that a New York-based bank engaged in Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program violations. According to the consent order, an OCC examination identified alleged deficiencies in the bank’s BSA/AML compliance program, including (i) failure to “assess and monitor high risk customer activity flowing to or from high risk jurisdictions”; (ii) deficient BSA/AML policies, procedures, systems and controls; (iii) inadequate suspicious activity monitoring and suspicious activity reporting (SAR) to FinCEN; (iv) deficient Customer Due Diligence processes, including failure to appoint a BSA officer; and (v) failure to sufficiently monitor or provide controls for increased wire and ACH transactions. The consent order requires the bank to, among other things, (i) appoint a compliance committee within 30 days; (ii) submit a written strategic plan to the OCC covering at least the next three years; (iii) appoint a “permanent, qualified, and experienced BSA Officer” with sufficient staff; (iv) create and adopt a “written program of internal control policies and procedures to provide for the compliance with the BSA”; and (v) adopt and deploy a “written system of internal controls and processes to ensure compliance with the requirements to file SARs.”
U.S., EU discuss financial regulatory developments
On February 19, the U.S. Treasury Department issued a joint statement on the U.S. – EU Financial Regulatory Forum held February 11-12 in Washington, D.C. U.S. participants included officials from the Federal Reserve Board, CFTC, FDIC, SEC, OCC, and Treasury. Forum topics focused on five key themes: “(1) supervision and regulation of cross-border activities, particularly in the areas of derivatives and central clearing; (2) the importance of monitoring market developments, both in relation to financial assets classes, like leveraged loans and collateralized loan obligations, and reference rates, like the London Interbank Offered Rate; (3) implementation of international standards in banking and insurance; (4) regulatory issues presented by fintech/digital finance; and (5) EU regulations related to sustainable finance.”
Among other topics, participants discussed U.S. banking developments concerning prudential requirements for foreign banks, including tailoring standards based on risk; proposed amendments to the Volcker Rule; EU data protection rules; cross-border supervision and data flow in financial services; the transition period following the U.K.’s departure from the EU; and European Commission priorities such as preventing and combating money laundering and the financing of terrorism. Participants acknowledged the importance of fostering continued dialogue between the U.S. and the EU noting that, “[r]egular communication on supervisory and regulatory issues of mutual concern should foster financial stability, supervisory cooperation, investor protection, market integrity, and a level playing field.”
FDIC and OCC expand comment period for CRA proposal
On February 19, the FDIC and the OCC jointly released a statement extending the public comment period for the proposed Community Reinvestment Act regulations by 30 days. As previously covered by a Buckley Special Alert, the two agencies initially released the notice of proposed rulemaking—which the agencies assert will provide clarity on what activities are eligible for CRA consideration—on December 12. The new comment deadline is April 8.
Agencies finalize Call Report capital-related reporting revisions
On February 19, the FDIC issued FIL-11-2020 announcing the Federal Reserve Board, FDIC, and OCC have finalized capital-related reporting revisions (see Federal Register notice and FIL-10-2020) to the Consolidated Reports of Condition and Income (Call Reports) for certain banks (FFIEC 031, 041, 051) as well as the Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101). Among other things, the final revisions include changes to the capital simplifications rule and the community bank leverage ratio rule, in addition to Call Report instructional revisions taking effect in 2021 concerning reporting home equity lines of credit that convert from revolving to non-revolving status. These reporting revisions are subject to approval by OMB.
FDIC issues 2020 stress testing scenarios
On February 14, the FDIC released economic scenarios—developed in coordination with the Federal Reserve Board (Fed) and the OCC—for certain supervised financial institutions with consolidated assets of more than $250 billion. The Dodd-Frank Act requires financial companies to run stress tests using the scenarios. According to the FDIC, the scenarios cover a baseline scenario that is “in line with a survey of private sector economic forecasters” and a severely adverse scenario “designed to assess the strength and resilience of financial institutions.”
As previously reported by InfoBytes, the OCC and the Fed both released their stress testing scenarios on February 6.
Mobile banking company approved for FDIC deposit insurance
On February 7, the FDIC approved a proposed national bank’s application for deposit insurance and consent to merge with its parent company. The FDIC found that financial projections show the bank, which will offer banking products through mobile, online, and phone-based banking channels, will be “well capitalized” based on initial paid-in capital funds of no less than $104.4 million to be provided through the transfer of assets and liabilities. During the first three years of operation, the bank must maintain a Tier 1 leverage ratio of 10 percent or greater, and may also be required to maintain higher minimum capital requirements as dictated by the bank’s operating plan or as required by the OCC pursuant to its regulatory authority. According to the FDIC, the proposed national bank will be located in Utah, and while it will have no branches, deposit-taking ATMs, or offices available to the public, it will offer full-service banking products and combine “traditional retail banking approaches with modern technology.”
The FDIC noted that deposit insurance will not take effect until the bank has been granted a charter and its banking operation has been fully approved by the OCC to operate as a depository institution (in August 2018, the OCC granted preliminary conditional approval of the bank’s de novo chapter application). According to the FDIC, approval is conditioned on the Federal Reserve Board granting final approval to the parent company to become a bank holding company.
Fed, OCC issue 2020 stress test, capital adequacy scenarios
On February 6, the Federal Reserve Board (Fed) released the hypothetical scenarios banks and supervisors will use to conduct the 2020 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress tests exercises for large bank holding companies and large U.S. operations of foreign firms. This year’s stress tests will evaluate 34 large banks with more than $100 billion in total assets to ensure that these banks have adequate capital and processes to continue lending to households and businesses, even during a severe recession. Both scenarios—baseline and severely adverse—include 28 variables that cover domestic and international economic activity. In addition, banks with large trading operations must also factor in a global market shock component as part of their scenarios. Capital plan and stress testing submissions are due by April 6. The Fed noted that it “continues to work toward having the stress capital buffer in place for this year’s stress tests,” and that “[t]he release of these hypothetical scenarios does not affect that separate rulemaking process.”
In related news, on February 6 the OCC also released its own stress testing scenarios for OCC-supervised institutions.