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OCC provides guidance to institutions affected by Hurricane Michael
On October 9, the OCC issued a proclamation permitting OCC-regulated institutions to close their offices affected by Hurricane Michael in the Gulf Coast region. The OCC noted that only institutions directly impacted by the potentially unsafe conditions should close, and that those offices should attempt to reopen as soon as possible to serve their customers’ banking needs. OCC Bulletin 2012-28 provides further guidance on natural disasters and other emergency conditions.
Find continuing InfoBytes coverage on disaster relief here.
Agencies permit bank resource sharing for Bank Secrecy Act compliance
On October 3, the Financial Crimes Enforcement Network, Federal Reserve Board, FDIC, NCUA, and OCC (together, the agencies) issued an interagency statement outlining instances where banks and credit unions may choose to enter into collaborative arrangements to share resources in order to more efficiently and effectively manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations. The statement noted that collaborative arrangements are most suitable for “banks with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing.” The agencies described several examples in which collaboration between banks may be beneficial, such as (i) conducting internal control functions, including reviewing and drafting BSA/AML policies and procedures and risk-based customer identification and account monitoring processes; (ii) sharing resources for BSA/AML independent testing; and (iii) conducting BSA/AML training on regulatory requirements and internal policies, procedures, and processes. Other potential benefits include cost reductions, increases in operational efficiencies, and the availability to leverage specialized expertise.
However, the agencies cautioned that banks who choose to enter into collaborative agreements should carefully consider the associated risks “in relation to the bank’s risk profile, adequate documentation, consideration of legal restrictions, and the establishment of appropriate oversight mechanisms.” Moreover, banks should ensure that the collaborative arrangement is consistent with sound principles of corporate governance, have in place a contractual agreement, conduct periodic performance reviews, and consult their regulator’s guidance concerning third-party relationship to ensure compliance. The agencies further noted that “each bank is responsible for ensuring compliance with BSA requirements. Sharing resources in no way relieves a bank of this responsibility.” The interagency statement emphasizes that it is not applicable “to collaborative arrangements or consortia formed for the purpose of sharing information under Section 314(b) of the USA PATRIOT Act,” and “banks that form collaborative arrangements as described in this interagency statement are not an association for purposes of Section 314(b) of the USA PATRIOT Act.”
(See also Federal Reserve Board press release, FDIC press release, NCUA press release, and OCC press release and Bulletin 2018-36.)
FinCEN, federal banking agencies provide exemption from customer identification program requirements for premium finance loans
On September 27, the Financial Crimes Enforcement Network (FinCEN), Federal Reserve Board, FDIC, NCUA, and OCC (together, the agencies) collectively issued an interagency order announcing an exemption from the requirements of the customer identification program (CIP) rules for premium finance loans extended by banks to commercial customers. The exemption, which is effective immediately, will facilitate short-term financing to business to aid in the purchase of property and casualty insurance policies. The order states that FinCEN believes these types of loans present a low risk for money laundering due to the “purpose for which the loans are extended and the limitations on the ability of a customer to use such funds for any other purpose.” However, banks engaged in premium finance lending are still required to comply with all other regulatory requirements implementing the Bank Secrecy Act (BSA), including filing suspicious activity reports. The federal banking agencies further determined that the order granting this exemption is consistent with both the purposes of the BSA and safe and sound banking practices. (See also Federal Reserve Board SR 18-6, FDIC FIL-52-2018, and OCC Bulletin 2018-35.)
Federal banking agencies request comments on proposal to revise and extend various information collection procedures
On September 28, the Federal Reserve Board, FDIC, and OCC (the Agencies)—with the approval of the Federal Financial Institutions Examination Council (FFIEC)—published a joint notice and request for comment proposing to extend and revise currently approved collections of information for: (i) Consolidated Reports of Condition and Income (Call Reports) for certain banks (FFIEC 031, 041, 051); (ii) Reports of Assets and Liabilities for branches and agencies of foreign banks (FFIEC 002, 002S); (iii) Foreign Branch Reports of Condition (FFIEC 030, 030S); and (iv) the Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101). Among other things, the proposed revisions generally address the revised accounting for credit losses described within Accounting Standards Update No. 2016-13, and include reporting changes for regulatory capital related to the Agencies’ current expected credit losses methodology.
The revisions would begin taking effect March 31, 2019, for quarterly report date respondents; December 31, 2022, for annual report date respondents; and on later dates for certain respondents. Comments must be submitted by November 27.
OCC updates Comptroller’s Handbook with new TILA booklet
On September 26, the OCC issued Bulletin 2018-31, which updates the “Truth in Lending Act” (TILA) booklet of the Comptroller’s Handbook, which previously was issued in December 2014. The booklet provides guidance for OCC examiners to be used in connection with the examination and supervision of national banks and federal savings associations, which offer or extend consumer credit products covered by TILA. The updates reflect changes made to Regulation Z, TILA’s implementing regulations, since the booklet’s previous release, and includes procedures implementing the CFPB’s TILA-RESPA integrated disclosure rule (TRID). Additional updates include, among other things, (i) special provisions on certain construction loans; (ii) special provisions relating to small creditors and rural or underserved areas; (iii) changes regarding appraisals for higher-priced mortgage loan exemptions; (iv) updates to mortgage origination examination procedures; and (v) updates to mortgage servicing rules and the small creditor definition.
With the issuance of the new booklet, the OCC rescinds (i) OCC Bulletin 2014-61, “Truth in Lending Act: Revised Comptroller’s Handbook Booklet and Rescissions”; (ii) The TILA sections of OCC Bulletin 2015-27, “Revised Interagency Examination Procedures for Consumer Compliance”; and (iii) OCC Bulletin 2015-42, “Initial Examinations for Compliance With TILA-RESPA Integrated Disclosure Rule.”
OCC releases bank supervision operating plan for fiscal year 2019
On September 26, the OCC’s Committee on Bank Supervision released its bank supervision operating plan (Plan) for fiscal year 2019. The Plan outlines the agency’s supervision priorities and specifically highlights the following supervisory focus areas: (i) cybersecurity and operational resiliency; (ii) commercial and retail credit loan underwriting, concentration risk management, and the allowance for loan and lease losses; (iii) Bank Secrecy Act/anti-money laundering compliance; (iv) change management to address new regulatory requirements; and (v) internal controls and end-to-end processes necessary for product and service delivery.
The annual plan guides the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, and service providers.
The OCC will provide updates about these priorities in its Semiannual Risk Perspective, as InfoBytes previously has covered.
OCC seeks comments on notice of proposed rulemaking to raise recovery planning standards threshold to $250 billion
On September 19, the OCC issued a notice of proposed rulemaking to revise its 2016 guidelines on recovery planning standards for insured national banks, insured federal savings associations, and insured federal branches. The OCC seeks to raise the average total consolidated assets threshold from $50 billion to $250 billion, and give banks above the threshold 12 months instead of 18 months to comply with the guidelines. The proposed rule would also make technical amendments to remove outdated compliance dates. According to the OCC, a threshold increase would tailor the focus on “institutions that present greater systemic risk to the banking system.” The proposal is also consistent with the scope of the FDIC and Federal Reserve Board’s resolution planning threshold, which was raised from $50 billion to $250 billion as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
Comments on the proposal are due by November 5.
Federal and state financial regulatory agencies issue interagency disaster relief guidance for institutions affected by Hurricane Florence
On September 14, the OCC, Federal Reserve Board, FDIC, NCUA, and the Conference of State Bank Supervisors (collectively, the “agencies”) issued a joint statement providing guidance to financial institutions impacted by Hurricane Florence. The agencies encouraged lenders to work with borrowers in impacted communities and to consider, among other things, (i) whether to modify loans based on the facts and circumstances, and (ii) requesting to operate temporary bank facilities if faced with operational difficulties. On the same day, the FDIC also provided guidance for depository institutions assisting affected customers (see FIL-48-2018), which may include “waiving fees, increasing ATM cash limits, easing credit card limits, allowing loan customers to defer or skip payments, and delaying the submission of delinquency notices to credit bureaus.” Furthermore, the FDIC encouraged depository institutions to use Bank Secrecy Act-permitted “non-documentary verification methods” for customers unable to provide standard identification documents.
The agencies also reminded institutions to contact their appropriate federal and/or state regulator should they experience disaster-related difficulties when complying with publishing and regulatory reporting requirements, and further noted that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The statement also provides links to previously issued examiner guidance for institutions affected by major disasters.
Find continuing InfoBytes coverage on disaster relief here.
NYDFS files lawsuit over OCC’s fintech charter decision
On September 14, New York Department of Financial Services (NYDFS) Superintendent, Maria T. Vullo, filed a lawsuit against the OCC arguing that the agency’s decision to allow fintech companies to apply for a Special Purpose National Bank Charter (SPNB) is a “lawless” and “ill-conceived” move that will destabilize financial markets more effectively regulated by the state. As previously covered in InfoBytes, last December the U.S. District Court for the Southern District of New York dismissed NYDFS’ previous challenge because the court lacked subject matter jurisdiction over NYDFS’ claims since the OCC had yet to finalize its plans to actually issue SPNBs. However, in light of the OCC’s July announcement welcoming nondepository fintech companies engaged in one or more core banking functions to apply for a SPNB (previously covered by Buckley Special Alert here), Superintendent Vullo once again issued a challenge to the OCC’s decision, arguing that it is unlawful and grants federal preemptive powers over state law. Among other things, NYDFS requests the court to (i) declare that the OCC’s decision to grant SPNBs exceeds its statutory authority under the National Bank Act, and specifically that the decision improperly defines the “‘business of banking’ to include non-depository institutions,” and (ii) enjoin the OCC “from taking further actions to implement its provisions.”
OCC updates Comptroller’s Handbook booklet to address deposit-related credit
On September 12, the OCC issued Bulletin 2018-28, which updates the “Deposit-Related Credit” booklet of the Comptroller’s Handbook previously issued March 2015. The booklet provides guidance for OCC examiners to be used in connection with the examination and supervision of national banks and federal savings associations who offer small-dollar, unsecured deposit-related credit products and services, such as check credit, overdraft protection, and deposit advance products. The booklet also includes, among other things, (i) updated guidance following the rescission of OCC Bulletin 2013-40, “Deposit Advance Products: Final Supervisory Guidance,” (previously covered by InfoBytes here) and the issuance of OCC Bulletin 2018-14, “Installment Lending: Core Lending Principles for Short-Term, Small-Dollar Installment Lending” (previously covered by InfoBytes here); (ii) information concerning limitations and requirements for consumer credit products extended to active-duty servicemembers covered by the Military Lending Act; (iii) integrated citations to third-party risk management guidance and procedures; (iv) information pertaining to new products and services, including sound due diligence practices; and (v) prohibitions against unfair, deceptive, or abusive acts or practices under Dodd-Frank.