The Federal Open Market Committee meeting last week was probably the most important event for the banking industry. The target range for the federal funds rate remains  unchanged at ¼ to ½%, and the Committee's statement suggests that future increases in the rate will be gradual.  Also of interest was the New York Dep't of Financial Services' grant of a virtual currency license to what is now the fourth entrant in the new regulatory regime of NYDFS.   

          The full set of developments over the last week includes:

The Economy

  • Federal Open Market Committee meeting, June 14-15.
    • No change to target range for federal funds rate of ¼ to ½%.
    • From statement issued at close of meeting:
      • "[T]he pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up. Although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened. Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months."
      • "The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further."
      • "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."
      • Statement available at http://www.federalreserve.gov/newsevents/press/monetary/20160615a.htm.
      • FOMC's economic projections and target federal funds rate projections available at http://www.federalreserve.gov/newsevents/press/monetary/20160615b.htm.
  • Federal Reserve Bank of NY releases May 2016 Survey of Consumer Expectations (June 13).

Accounting for Credit Losses

  • Banking agencies issue joint statement with supervisory views on new accounting standard, Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (June 17).

Auto Lending

CRA

  • Banking agencies release list of distressed or underserved nonmetropolitan middle-income geographies (June 17).
    • In these geographies, revitalization or stabilization activities eligible for CRA consideration as community development.
    • One-year lag for geographies that drop off list: a geography on the 2015 list but not the 2016 list remain eligible through 2016.
    • List available at http://www.ffiec.gov/press/pr061716.htm.

Dodd-Frank

  • "The Impact of Post-Crisis Reforms on the U.S. Financial System and Economy," remarks of FDIC Chairman Gruenberg to the Exchequer Club (June 15).
    • "[A]n objective look at relevant data suggests that on balance, the reforms that have been put in place since the crisis have made the financial system more resilient and more stable, while strengthening the ability of banking organizations to serve the U.S. economy."
    • Remarks cover credit availability, bank profitability, market liquidity, and migration of financial activities to nonbanks.
    • Remarks available at https://www.fdic.gov/news/news/speeches/spjun1516.html.

Interstate Branching

  • Banking agencies issue host state loan-to-deposit ratios to determine compliance with prohibitions on branches and agencies outside a bank's home state for the purpose of deposit production (June 17).
    • If a bank's own loan-to-deposit ratio in a host state is less than 50% of host state's overall loan-to-deposit ratio of banks chartered or located in that state, then bank may be engaged in deposit production.
    • If bank below 50% threshold is reasonably helping to meet credit needs of communities served by bank's interstate branches, then bank's host state activities are deemed acceptable.
    • Ratios specific to each state ranging from 58% (Wyoming) to 104% (Rhode Island).
    • Ratios available at http://www.federalreserve.gov/newsevents/press/bcreg/20160617c.htm.

Too Big to Fail

  • FSOC to meet on June 21.
    • Open session to include discussion of 2016 annual report.
    • Executive session to include update on market developments, discussion of Federal Reserve proposed rulemakings for certain insurance companies, and annual re-evaluation of designations of nonbank financial companies.

Truth in Lending

Virtual Currency

  • NY Dep't of Financial Services grants license to fourth entrant in NY's virtual currency regime, XRP II, LLC (an affiliate of Ripple Labs) (June 13).
    • Announcement and copy of license available at http://www.dfs.ny.gov/about/press/pr1606131.htm.
    • Three previous recipients of licenses or charters are itBit Trust Company, Circle Internet Financial, and Gemini Trust Company.
    • Licenses have been denied to Snapcard and OKLink PTE.

Congressional Activity – Recent

Congressional Activity – Upcoming

  • June 21
    • Senate Banking Committee hearing, "The Semiannual Monetary Policy Report to the Congress."
  • June 22
  • June 23
    • House Financial Services Committee hearing, "The Next Terrorist Financiers: Stopping Them Before They Start."
    • Senate Banking Committee hearing, "Bank Capital and Liquidity Regulation Part II: Industry Perspectives."
  • July 14
    • Senate Banking Committee hearing, "Evaluating the Financial Risks of China."

Upcoming Events

  • June 20-22
    • OCC Director Workshop, "Building Blocks for Directors," Syracuse NY.
  • June 23
    • OCC forum on "Supporting Responsible Innovation in the Federal Banking System," Washington DC.
  • June 28
    • OCC Director Workshop, "Risk Governance," Milwaukee WI.
  • June 29
    • OCC Director Workshop, "Credit Risk," Milwaukee WI.
  • July 19
    • OCC Director Workshop, "Compliance Risk," Sioux Falls SD.
  • July 20
    • OCC Director Workshop, "Operational Risk."
    • FDIC Money Smart Train-the-Trainer Online Live Meeting.
  • July 26
    • OCC Director Workshop, "Credit Risk," Tampa FL.
  • July 27
    • OCC Director Workshop, "Operational Risk," Tampa FL.
  • Aug. 4
    • FDIC 2016 Joint Mutual Forum, Arlington VA.

Regulatory Comment Deadlines

  • June 25 – FDIC: recordkeeping requirements for banks with more than 2 million deposit accounts.
  • July 5 – FFIEC: changes to Uniform Interagency Consumer Compliance Rating System.
  • July 22 – Banking agencies et al.: incentive-based compensation limits.
  • Aug. 2
    • Federal Reserve: ANPR on capital rules for certain insurance companies.
    • Federal Reserve: proposed enhance prudential standards for systemically important insurance companies.
    • FinCEN: imposition of special measures against North Korea.
  • Aug. 5 
    • Federal Reserve/FDIC/OCC: net stable funding ratio.
    • Federal Reserve: amendment of QFCs to prevent immediate cancellation in event of bankruptcy or other resolution.
  • Aug. 8 – Treasury/IRS: foreign-owned, single-owner entities required to obtain EIN.
  • Aug. 22 – CFPB: ban on mandatory arbitration clauses.
  • Sept. 14 – CFPB: payday loans.