The first week of the new year saw the swearing in of the 114th Congress, which went right to work – albeit with modest success in the banking area.  The House and Senate passed the reauthorization of the Terrorism Risk Insurance Act, which includes relief from Dodd-Frank margin requirements for nonfinancial end-users of non-cleared swaps used to hedge commercial risks.  The House was unable to fast-track a bill with other amendments to the Dodd-Frank Act, including changes to the Volcker Rule and certain provisions dealing with swaps and derivatives, as well as other amendments to the securities laws.  The House will now handle the bill under regular House procedures.  

The agencies were very quiet.  The only noteworthy release was a set of FAQs from the FDIC on brokered deposits.

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

The Economy

  • Unemployment rate decreases to 5.6% for December (Jan. 9).

Brokered Deposits

  • FDIC updates FAQs on brokered deposits (Jan. 5).

Dodd-Frank

  • House vote on H.R. 37, the "Promoting Job Creation and Reducing Small Business Burdens Act", fails to gain fast-track approval, which requires two-thirds majority (Jan. 7).
    • Bill would have amended several provisions of Dodd-Frank.
      • Volcker Rule and collateralized loan obligations – conformance period for divestiture of CLOs extended for two additional years to July 21, 2019.
      • Indemnification obligations for swap data repositories and clearinghouses in connection with information sharing with CFTC repealed.
      • Private equity funds that receive fees for investment banking services exempt from broker-dealer registration
    • Other amendments:
      • Threshold for savings and loan holding companies to register set at same level for banks.
      • Emerging growth companies – simplified disclosure requirements and treatment of companies that cease to qualify as emerging growth companies.
      • Small company disclosures – exemption from XBRL requirements.
      • Small Business Investment Company advisers – relief from certain registration requirements.
      • Simplification of 10-K disclosures and changes to Regulation S-K.
      • Disclosures of compensatory benefit plans – threshold for disclosure lifted from $5 million to $10 million.
    • H.R. 37 available at http://thomas.loc.gov/cgi-bin/query/z?c114:H.R.37:
    • Bill to follow more standard track – e.g., committee review and approval – for second floor vote where simple majority is required.

EGRPRA/Regulatory Reform

Monetary Policy

  • FOMC releases minutes of Dec. 16-17, 2014, meeting.  
  • Highlights of FOMC deliberations include:
    • In their discussion of the economic situation and the outlook, meeting participants regarded the information received over the intermeeting period as supporting their view that economic activity was expanding at a moderate pace.
    • Labor market conditions improved further, with solid job gains and a lower unemployment rate; participants judged that the underutilization of labor resources was continuing to diminish. Participants expected that, over the medium term, real economic activity would increase at a pace sufficient to lead to further improvements in labor market indicators toward levels consistent with the Committee’s objective of maximum employment.
    • Inflation was continuing to run below the Committee’s longer-run objective, reflecting in part continued reductions in oil prices and falling import prices.  Market-based measures of inflation compensation declined further, while survey-based measures of longer term inflation expectations remained stable.
    • Participants generally anticipated that inflation would rise gradually toward the Committee’s 2 percent objective as the labor market improved further and the transitory effects of lower energy prices and other factors dissipated.
    • The risks to the outlook for economic activity and the labor market were seen as nearly balanced. Some participants suggested that the recent domestic economic data had increased their confidence in the outlook for growth going forward.
    • Participants generally regarded the net effect of the recent decline in energy prices as likely to be positive for economic activity and employment.
    • However, many of them thought that a further deterioration in the foreign economic situation could result in slower domestic economic growth than they currently expected.
  • Minutes available at http://www.federalreserve.gov/newsevents/press/monetary/20150107a.htm.

Swaps and Derivatives

  • Margin requirements for certain non-cleared swaps to be eliminated by section 302 of H.R. 26, the Terrorism Risk Insurance Program Reauthorization Act of 2015.
    • Section 4s(e) of Commodity Exchange Act, as amended by section 731 of Dodd-Frank, required initial and variation margin on all non-cleared swaps.
    • Section 302 to lift margin requirements for a non-cleared swap where at least one counterparty is:
      • a nonfinancial entity that uses the swap to hedge or mitigate commercial risk and that notifies the CFTC of how it generally meets its financial obligations associated with the swap;
      • a cooperative entity that qualifies for a public interest exemption under section 6(c)(1) of the Commodity Exchange Act; or
      • an affiliate of such an entity.
    • Bill passed by House (Jan. 7) and Senate (Jan. 8).  President seems likely to sign the bill into law.
    • To affect pending rulemaking on margin requirements by CFTC; proposed rule available at 79 Fed. Reg. 59898 (Oct. 3, 2014).
    • H.R. 26 available at http://thomas.loc.gov/cgi-bin/query/z?c114:H.R.26:

Terrorism Risk Insurance Act

  • H.R. 26, the Terrorism Risk Insurance Program Reauthorization Act of 2015 passed by House (Jan. 7) and Senate (Jan. 8).
    • Original Terrorism Risk Insurance Act had expired on December 31, 2014.
    • Structure of the original statute is unchanged except for an increase in threshold before government support from $100 million to $200 million.
    • Bill also includes amendment of Dodd-Frank provision on margin requirements for non-cleared swaps traded by certain entities.  See Swaps and Derivatives above.
    • H.R. 26 available at http://thomas.loc.gov/cgi-bin/query/z?c114:H.R.26:

Volcker Rule

  • House fails to pass, on a fast-track basis, amendment to Volcker Rule to permit banks to hold CLOs until July 21, 2019, two  years beyond current deadline (Jan. 7).
    • For details on bill, see Dodd-Frank above.
    • Bill likely to return to floor after going through regular House procedures.

Bank Closings

  • None.

Congressional Events – Upcoming

  • House Financial Services Committee
    • Jan. 13: Organizational Meeting.

Upcoming Events

  • OCC Community Bank Director Workshops, full 2015 schedule available at http://www.seiservices.com/occ2015/default.aspx/eurl.axd/535dadfc0f8b0b46aa59a491ad7e75c1.  
  • Jan. 13
    • Treasury Department public forum on money services businesses and banking access.
  • Jan. 27-28
    • FOMC meeting.
  • Feb. 4
    • EGRPRA outreach meeting, Dallas TX.
  • Feb. 23-25
    • OCC Workshop, Building Blocks for Directors: Keys to Success, Miami FL.
  • Mar. 3, 2015
    • FDIC New York Region Regulatory Conference Call, BSA Today – Regulatory Tips, Trends, and Hot Topics.
  • 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. 17-18
    • FOMC meeting.
  • May 4, 2015
    • EGRPRA outreach meeting, Boston MA.
  • Dec. 2, 2015
    • EGRPRA outreach meeting, Washington DC.

Regulatory Comment Deadlines

  • Jan. 12 – FHFA: FHLB membership to require 1% of assets in home mortgage loans.  
  • Jan. 22 – CFTC: position limits on exempt and agricultural commodity futures, options, and economically equivalent physical commodity swaps.  
  • Jan. 26 – FDIC: filing requirements and processing procedures for Change in Bank Control Act notices.  
  • Feb. 2 – Federal Reserve: enhanced prudential standards for GE Capital.  
  • Feb. 16 – CSBS: Model Regulatory Framework for virtual currency.  
  • Feb. 17 – Federal Reserve/OCC/FDIC: revisions to capital rules for advanced approaches banks.  
  • Feb. 23 – FSOC: asset management and systemic risk.  
  • Feb. 29 – 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: recognition under capital and liquidity rules of netting or collateral agreements involving swaps and derivatives.  
  • Mar. 23 – CFPB: revisions to Regulations E and Z covering prepaid cards.