The banking agencies continued to remain relatively quiet, apart from the Federal Reserve's release of its semi-annual Monetary Policy Report.  The FDIC published an interesting study on the continuing vitality of brick-and-mortar branch offices, including the point that mobile banking has not displaced them.  A speech by the Deputy Director of the CFPB provides perhaps the clearest explanation to date of that agency's supervision and examination process.                                  

The full set of developments over the past week is as follows: 

The Economy

  • Federal Reserve issues Monetary Policy Report (Feb. 24).
    • “The labor market improved further during the second half of last year and into early 2015, and labor market conditions moved closer to those the Federal Open Market Committee (FOMC) judges consistent with its maximum employment mandate.”
    • “Inflation is anticipated to decline further in the near term, mainly reflecting the pass-through of lower oil prices to consumer energy prices.  However, the Committee expects inflation to rise gradually toward its 2 percent longer-run objective over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate.”
    • “As part of prudent planning, the Federal Reserve has continued to prepare for the eventual normalization of the stance and conduct of monetary policy.  The FOMC announced updated principles and plans for the normalization process following its September meeting and has continued to test the operational readiness of its monetary policy tools.  The Committee remains confident that it has the tools it needs to raise short-term interest rates when doing so becomes appropriate, despite the very large size of the Federal Reserve’s balance sheet.”
    • Report available at http://www.federalreserve.gov/monetarypolicy/mpr_default.htm.
  • Congressional testimony of Federal Reserve Chair Yellen on the Monetary Policy Report available at http://www.federalreserve.gov/newsevents/testimony/yellen20150224a.htm

Branching

  • FDIC releases study, Brick-and-Mortar Banking Remains Prevalent in an Increasingly Virtual World (Feb. 19).
    • “Little evidence that the emergence of new electronic channels for delivering banking services has substantially diminished the need for traditional branch offices where banking relationships are built.”
    • Four factors influence number and distribution of branch offices over time:
      • Population growth.
      • Banking crises.
      • Legislative changes to branching laws.
      • Technological innovation.
    • Study available at https://www.fdic.gov/news/news/press/2015/pr15018.html

Call Reports

CFPB

  • CFPB Deputy Director Antonakes outlines CFPB examination and supervision priorities and processes (Feb. 18).
    • Two key distinctions from banking agency examinations.
      • Focus on risks to consumers rather than risks to institutions.
      • Examinations focus on institutional product lines rather than on institution as a whole, and lines are compared across institutions that may be organized in different ways.
    • Product lines at each institution evaluated based on potential for consumer harm related to a particular market; the size of the product market; the supervised entity’s market share; and risks inherent to the supervised entity’s operations and offering of financial consumer products within that market.
    • Priority of examination based on potential risks to consumer at both market level and institution level.
      • Focus generally on institutions with larger market share.
      • Use of field and market intelligence to set priorities.
    • Examination of larger institutions.
      • Discrete examinations by product line.
      • “Roll-up” examination report summarizes findings of all examinations and includes overall compliance rating.
    • Corrective action.
      • Significant violations referred to CFPB action review committee.  Three sets of factors applied in considering type of enforcement action.
        • Violation factors: magnitude of harm to consumers and nature of violation.
        • Institution-based factors: behavior after violation occurred, including degree of cooperation with CFPB and self-correction.
        • Policy-based factors: CFPB action in previous comparable situations and, implicitly, need to send a message.
      • Enforcement action alternatives similar to those of banking agencies:
        • Confidential supervisory action, such as board resolution or MOU.
        • Public enforcement actions, such as consent orders and monetary penalties.
    • Prepared remarks at the Exchequer Club available at http://www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-deputy-director-steven-antonakes-at-the-exchequer-club/.
  • CFPB Director Cordray discusses enforcement objectives for CFPB in remarks to state AGs (Feb. 23).

Credit Reports

Financial Literacy

Financial Markets

Leveraged Lending

Mortgage Lending

  • FHFA Refinance Report Shows Uptick in December (Feb. 20).

Regulatory Reform

Small Business Lending

  • NCUA launches Small Business Lending Resource Center (Feb. 20).
    • The Small Business Lending Resource page provides detailed information about NCUA’s member business lending rules and regulations, supervisory guidance, links to the Small Business Administration’s loan programs and related articles from The NCUA Report.
    • The Small Business Lending Resource page may be found at http://www.ncua.gov/News/Pages/NW20150220SBLResource.aspx
  • SBA and NAFCU partner to help entrepreneurs gain access to capital (Feb. 23).

Too Big to Fail

  • Federal Reserve to release results of supervisory stress tests on Mar. 5 and related results from Comprehensive Capital Analysis and Review on Mar. 11.

Bank Failures

  • None.

Congressional Events – Upcoming

  • Feb. 24
    • Senate Banking Committee hearing, “The Semiannual Monetary Policy Report to the Congress.”
    • Senate Banking Committee hearing on awards of Congressional Gold Medals.
  • Feb. 25
    • House Financial Services Committee hearing, “Monetary Policy and the State of the Economy.”
  • Feb. 26
    • House Financial Services Committee hearing, “The Future of Housing in America: Oversight of the Federal Housing Administration – Part II.”
  • Mar. 3
    • Senate Banking Committee, “Federal Reserve Reform.”
  • Mar. 17
    • Senate Banking Committee, “Systemically Important Financial Institution Threshold.”
  • Mar. 19
    • Senate Banking Committee, “Systemically Important Financial Institution Threshold.”
  • Mar. 24
    • Senate Banking Committee, “Financial Stability Oversight Council Accountability and Transparency.”

Upcoming Events

  • Feb. 23-25
    • OCC Workshop, Building Blocks for Directors: Keys to Success, Miami FL.
  • Feb. 26
    • Interagency teleconference, Ask the Regulator: Interagency Guidance on Leveraged Lending.
    • Federal Reserve/OCC joint public meeting at Los Angeles branch of Federal Reserve Bank of San Francisco on proposal of CIT Group to acquire IMB Holdco and its subsidiary, OneWest Bank.
    • Federal Reserve Bank of Atlanta, 2015 Banking Outlook Conference: Preparing for Take-Off.
  • Mar. 3
    • FDIC New York Region Regulatory Conference Call, BSA Today – Regulatory Tips, Trends, and Hot Topics.
  • Mar. 5
    • CFTC Public Roundtable, Recovery and Orderly Wind-Down of Derivatives Clearing Organizations.
  • Mar. 10
    • OCC Workshop, Risk Governance: Improve Director Effectiveness, Morristown NJ.
  • Mar. 11
    • OCC Workshop, Credit Risk: You Can Make a Difference, Morristown NJ.
  • Mar. 16-18
    • OCC Workshop, Building Blocks for Directors: Keys to Success, San Antonio TX.
  • Mar. 24
    • Federal Reserve Bank of Boston, CRA for Community-Based Organizations: Partnering for Success.
  • Mar. 17-18
    • FOMC meeting.
  • Mar. 30 – Apr. 1
    • Federal Reserve Bank of Atlanta, 20th Annual Financial Markets Conference, Central Banking in the Shadows: Monetary and Financial Stability Postcrisis.
  • Mar. 31
    • Federal Reserve Bank of Kansas City, Midwest Anti-Money Laundering Conference.
  • May 4
    • EGRPRA outreach meeting, Boston MA.
  • May 20 – 21
    • Federal Reserve Bank of New York, Mortgage Contract Design: Implications for Households, Monetary Policy, and Financial Stability.

Regulatory Comment Deadlines

  • Feb. 28 – Federal Reserve: application of common equity tier 1 capital rules to holding companies organized in forms other than stock corporations.  
  • Mar. 2 – Federal Reserve: methodology for determining capital surcharge on U.S. GSIBs.  
  • Mar. 3 – Federal Reserve/OCC: definition of qualifying master netting agreement and related terms.  
  • Mar. 5 – Federal Reserve: lifting ceiling for eligibility for Small Bank Holding Company Policy Statement from $500 million to $1 billion.  
  • Mar. 23 – CFPB: revisions to Regulations E and Z covering prepaid cards.  
  • Mar. 24 – FinCEN: renewal of information collection in existing regulations requiring development and implementation of written anti-money laundering programs.  
  • Mar. 25 – FSOC: U.S. financial stability and asset management products and activities.  
  • Mar. 30 – CFPB: amendments to mortgage rules regarding the status of small creditors, creditors in rural or underserved areas, and qualified mortgages.  
  • Mar. 30 – CFPB: safe student account scorecard.  
  • Mar. 31 – FDIC: definition of qualifying master netting agreement and related terms.  
  • Apr. 20 – SEC: disclosure of permissibility of hedging of equity securities of company by directors or employees.  
  • May 14 – Federal Reserve/OCC/FDIC: EGRPRA review of regulations covering banking operations, capital, and CRA.