InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Agencies issue joint proposal on community bank leverage ratio for qualifying organizations
On November 21, the Federal Reserve Board, FDIC, and OCC jointly announced a proposed rule to simplify capital requirements for qualifying community banking organizations that opt into the community bank leverage ratio framework. Among other criteria, qualifying organizations must have “less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9 percent.” FDIC FIL-77-2018 provides an overview of the proposed regulation amendments—required under Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act—which would allow qualifying organizations to satisfy (i) generally applicable leverage and risk-based capital requirements; (ii) the prompt corrective action framework’s well-capitalized ratio requirements; and (iii) any other generally applicable capital and leverage requirements. Comments will be due 60 days after publication in the Federal Register.
Agencies propose $400,000 threshold for residential appraisal requirement
On November 20, the OCC announced a joint notice of proposed rulemaking with the Federal Reserve Board and the FDIC, which raises the threshold for residential real estate transactions requiring an appraisal to $400,000 from its current level of $250,000. According to the OCC, the proposal is in response to feedback that the current exemption threshold has not increased to keep pace with the price appreciation in the residential real estate market. The proposal includes the rural residential appraisal exemption included in the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here). Additionally, among other things, the proposal implements the Dodd-Frank Act mandate that institutions appropriately review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice. Comments will be due 60 days after publication in the Federal Register.
Federal, state financial regulatory agencies issue guidance for institutions affected by California wildfires; FinCEN encourages financial institutions to communicate BSA filing delays
On November 19, the Financial Crimes Enforcement Network (FinCEN) issued a notice to financial institutions that file Bank Secrecy Act reports encouraging such institutions to communicate with FinCEN and their functional regulators regarding any expected filing delays caused by the California wildfires. FinCEN also reminded financial institutions to review advisory FIN-2017-A007, previously covered by InfoBytes, which discusses potential fraudulent activity related to recent disaster relief schemes.
In a related action, the Federal Reserve Board, California Department of Business Oversight, Conference of State Bank Supervisors, FDIC, NCUA, and OCC (collectively, the “agencies”) issued a joint statement on November 15 providing guidance to financial institutions impacted by the California wildfires. The agencies encouraged lenders to work with borrowers in impacted communities to modify loans as appropriate based on the facts and circumstances of each borrower and loan. In addition, the agencies assured lenders that they would (i) expedite any request to operate temporary facilities to provide more convenient services to those affected by the wildfires; (ii) not generally assess penalties for institutions that take prudent steps to satisfy any publishing or reporting requirements, including by contacting their state or federal regulator to discuss satisfaction of such requirements; and (iii) consider granting institutions favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.
Find continuing InfoBytes coverage on disaster relief here.
OCC releases recent enforcement actions
On November 15, 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 cease and desist orders, civil money penalty orders, formal agreements, prompt corrective action directives, removal/prohibition orders, and terminations of existing enforcement actions. Two notable enforcement actions are discussed below.
On October 25, the OCC issued a consent order against a Louisiana-based bank related to examination findings from 2018 wherein the bank failed to adopt and implement an adequate Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program. Among other conditions, the consent order requires the bank to (i) develop and implement an ongoing BSA/AML risk assessment program; (ii) adopt an independent audit program to conduct a review of the bank’s BSA/AML compliance program; and (iii) submit a written progress report within 30 days after the end of each calendar quarter that details actions undertaken to ensure compliance with the consent order’s provisions. The bank neither admitted nor denied the OCC’s findings and is not required to pay a civil money penalty.
On October 23, the OCC assessed a $100 million civil money penalty against a national bank for alleged deficiencies in the bank’s BSA/AML compliance programs. Specifically, the alleged deficiencies include the failure to comply with a 2015 consent order in a timely manner, which required the bank to, among other things, adopt and implement an adequate BSA/AML compliance program and file timely Suspicious Activity Reports. The consent order acknowledges that the bank has undertaken corrective action to remedy the deficiencies noted by the OCC.
FDIC seeks comments on small-dollar loans
On November 14, the FDIC issued a request for information (RFI) seeking public comment on ways it can encourage FDIC-supervised financial institutions to offer “responsible, prudently underwritten small-dollar credit products that are economically viable and address the credit needs of bank customers.” In the RFI’s release, FDIC Chairman Jelena McWilliams pointed to studies showing that “[c]onsumers benefit when small-dollar credit products are available from banks” and requested “the public to use the RFI process to tell [the FDIC] how to ensure that consumers can obtain small dollar credit from banking institutions in a responsible manner.” The RFI seeks information related to the “full spectrum of issues” related to banks offering small-dollar credit, including regulatory and non-regulatory obstacles for banks, as well as actions the FDIC could take to assist banks in serving the small-dollar market. In addition to general feedback, the RFI includes a list of suggested topics and questions for commenters to address. Comments will be due 60 days after publication in the Federal Register.
Recently, the OCC and the CFPB have also made efforts to encourage banks to meet the small-dollar credit needs of consumers. In May, the OCC issued Bulletin 2018-14 encouraging banks to offer responsible short-term, small-dollar installment loans with typical maturities between two and 12 months (covered by InfoBytes here). In addition to applauding the OCC’s Bulletin, the CFPB announced it expects to publish proposed rules reconsidering the ability-to-repay provisions of the rule covering Payday, Vehicle Title, and Certain High-Cost Installment Loans in January 2019 (covered by InfoBytes here).
OCC Comptroller discusses state of banking system; emphasizes areas of economic opportunity and innovation
On November 14, Comptroller of the Currency Joseph Otting discussed the condition of the U.S. federal banking system at the “Special Seminar on International Finance” in Tokyo. Otting highlighted three areas where the OCC is working to promote economic opportunity and service to bank customers: innovation, short-term small dollar lending, and supervision of international banks operating in the U.S. Specifically, Otting discussed, among other things, the importance of (i) providing a path for fintech companies to become national banks to promote modernization, innovation, and competition; and (ii) encouraging banks to provide responsible short-term small-dollar installment loans—typically between $300 and $5,000—to help consumers meet unplanned financial needs.
Notably, while noting that foreign banks have the option to operate under a state license and that the OCC strongly supports the dual banking system in the U.S., Otting stressed that the OCC is well qualified to supervise foreign banks’ federal U.S. branches, and noted that there are “supervisory efficiencies” to be gained when switching from state-by-state oversight and “consolidating the supervision of branches of foreign banks with the supervision of the national bank subsidiary of the parent company, which the OCC already supervises.” According to Otting, operating under a single regulatory framework with one prudential regulator—the OCC—would achieve a “more complete, more efficient, and, importantly, more thorough regulation of the institution.”
Agencies issue disaster relief guidance for California wildfires
On November 13, the OCC, Fannie Mae, Freddie Mac, and HUD issued disaster relief guidance related to the California wildfires. The OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by wildfires and high winds “for as long as deemed necessary for bank operation or public safety.” In issuing the proclamation, the OCC noted that it expects that only those bank offices directly affected by potentially unsafe conditions will close and that they should make every effort to reopen as quickly as possible to address the banking needs of their customers. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on natural disasters and other emergency conditions.
Fannie Mae reminded servicers of available mortgage assistance options for homeowners impacted by the wildfires: (i) qualifying homeowners are eligible to stop making mortgage payments for up to 12 months without incurring late fees and without having delinquencies reported to the credit bureaus; (ii) servicers may immediately suspend or reduce mortgage payments for up to 90 days without any contact with homeowners believed to have been affected by a disaster; and (iii) servicers must suspend foreclosures and other legal proceedings for homeowners believed to be impacted by a disaster. Freddie Mac similarly reminded servicers of these mortgage relief options.
HUD announced an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is further making FHA insurance available to those victims whose homes were destroyed or severely damaged.
Find continuing InfoBytes coverage on disaster relief here.
OCC policy and procedure update addresses institution-affiliated party enforcement actions
On November 13, the OCC issued OCC Bulletin 2018-41, announcing the release of Policies and Procedures Manual 5310-13 (PPM 5310-13), which outlines the OCC’s policy and framework for taking enforcement actions against institution-affiliated parties (IAP) of national banks, federal savings associations, and foreign banks’ federal branches and agencies. Among other things, PPM 5310-13 explains the definition of an individual who qualifies as an IAP and describes common enforcement actions taken against current or former IAPs, which include “violations of law, regulation, final agency orders, conditions imposed in writing, or written agreements; unsafe or unsound practices; or breaches of fiduciary duty.” PPM 5310-13 also outlines procedures and processes related to most informal and formal IAP enforcement actions.
Additionally, the OCC issued updated policies and procedures (see PPMs 5310-3 and 5000-7) concerning bank enforcement actions and related matters, as well as civil money penalties, to ensure consistency with PPM 5310-13. All three PPMs are effective immediately.
Agencies issue joint proposal to streamline small institution reporting requirements
On November 7, the OCC, FDIC, and Federal Reserve issued a proposal to streamline regulatory reporting for qualifying small institutions to implement Section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Specifically, the joint proposal would permit depository institutions with less than $5 billion in assets—previously set at $1 billion—that do not engage in certain complex or international activities to file the FFIEC 051 Call Report, the most streamlined version of the Call Reports. Additionally, the proposal would reduce the existing reportable data items in the FFIEC 051 Call Report by approximately 37 percent for the first and third calendar quarters. The proposal also includes similar provisions for uninsured institutions with less than $5 billion in total consolidated assets that are supervised by the Federal Reserve and the OCC. Comments on the proposal must be received within 60 days of publication in the Federal Register.
FFIEC issues joint statement on OFAC Cyber-Related Sanctions Program
On November 5, the Federal Financial Institutions Examination Council (FFIEC) members issued a joint statement alerting financial institutions to the potential impact that the U.S. Treasury Department’s Office of Foreign Assets Control’s (OFAC) recent actions under its Cyber-Related Sanctions Program may have on financial institutions’ risk management programs. OFAC implemented the Cyber-Related Sanctions Program in response to Executive Order 13694 to address individuals and entities that threaten national security, foreign policy, and the economy of the U.S. by malicious cyber-enabled activities. FFIEC’s press release announcing the joint statement references OFAC’s June action against five Russian entities and three Russian individuals who, through “malign and destabilizing cyber activities,” provided material and technological support to Russia’s Federal Security Service (previously covered by InfoBytes here), noting that these entities may offer services to financial institutions operating in the U.S.
The joint statement reminds financial institutions to ensure that their compliance and risk management processes address possible interactions with an OFAC sanctioned entity. The statement notes that continued use of products or services from a sanctioned entity may cause the financial institution to violate the OFAC sanctions. Additionally, use of software or technical services from a sanctioned entity may increase a financial institution’s cybersecurity risk. The statement encourages financial institutions to take appropriate corrective action, as well as to ensure their third-party service providers comply with OFAC’s requirements.
The OCC also released Bulletin 2018-40, which corresponds with the FFIEC’s joint statement.