Two events dominated last week in the banking industry. On June 7, 2016, House Financial Services Committee Chairman Hensarling introduced a bill that would, among other things, allow banking organizations of all sizes to avoid most Dodd-Frank regulations if they maintain high leverage capital, presumably 10% or more. The bill also would contain several forms of relief from Dodd-Frank for community banks, and it would repeal the Volcker Rule.  For its part, the CFPB unveiled its Know-Before-You-Owe initiative for auto lending.  While directed at communications between consumers and auto dealers, the initiative encourages consumers to obtain pre-approvals from banks in lieu of or in addition to indirect loans at a dealer.  

          The full set of developments over the last week includes:

The Economy

  • Federal Reserve Bank of NY releases May 2016 Survey of Consumer Expectations (June 13).
  • "Current Conditions and the Outlook for the U.S. Economy," remarks of Federal Reserve Chair Yellen before The World Affairs Council of Philadelphia (June 6).
    • "If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives."
    • Remarks available at http://www.federalreserve.gov/newsevents/speech/yellen20160606a.htm

Auto Lending

CRA

Consumer Compliance

Cybersecurity

  • FFIEC issues joint statement, “Cybersecurity of Interbank Messaging and Wholesale Payment Networks” (June 7).
    • Statement calls for comprehensive risk management of messaging and payment networks.  Supervisory expectations for banks include:
      • Ongoing risk assessments, particularly of critical systems.
      • Ensuring all systems are up to date.
      • Restrictions on number of credentials with special access to critical systems.
      • Business continuity risk management.
    • Statement available at http://www.ffiec.gov/press/pr060716.htm.

Dodd-Frank

  • House Financial Services Committee Chairman Jeb Hensarling (R-TX) unveils proposed Financial CHOICE Act (June 7).  Official bill text not available but summary describes contents to include:
    • Off-ramp from much of Dodd-Frank and Basel III capital and liquidity standards for banking organizations that maintain high levels of leverage capital, presumably 10% or more.
      • Regulators may continue to conduct stress tests of exempted organizations but not for purpose of determining capital distributions.
    • End too-big-to-fail.
      • Replace Title II (orderly liquidation authority) with new bankruptcy process.
      • New limits on discount window access.
      • Repeal Title VIII (Federal Reserve supervision of systemically important payments and clearing organizations).
    • Restructuring CFPB.
      • Renamed with mission expanded to include maintenance of competitive markets.
      • Director replaced with 5-member board.
      • Repeal of authority to take enforcement action against “abusive” practices.
      • Repeal of indirect auto lending guidance.
    • New limits on independence and rulemaking authority of banking agencies.
      • Repeal of Chevron deference doctrine – full repeal would apply to all federal agencies.
    • Enhanced penalties for fraud and deception.
    • Repeal provisions of Dodd-Frank that  “limit capital formation.”
      • Repeal would include Volcker Rule.
    • Additional relief for community banks and credit unions.
    • Summary of bill and remarks of Chairman Hensarling before the Economic Club of New York available at http://financialservices.house.gov/news/documentsingle.aspx?DocumentID=400730.

Foreign banking organizations

  • Federal Reserve and FDIC take two actions regarding resolution planning by FBOs.  SeeResolution Plans below.

Mortgage Loans – Servicemembers Civil Relief Act

  • OCC issues bulletin to advise national banks and federal thrifts of temporary extension to Dec. 31, 2017, of protection for servicemembers from sale, foreclosure, or seizure of property within one year following separation from service absent a court order or waiver (June 10).

Payment Processing

Resolution Plans

  • Federal Reserve and FDIC take two actions on resolution planning by foreign banking organizations.
    • Filing deadline for next resolution plans by 4 largest foreign banking organizations extended to July 1, 2017 (June 8).
    • Reductions in required content of next three plans by 84 FBOs with limited U.S. operations (June 10). 
      • Upcoming plans should focus on changes to prior resolution plans, actions taken to improve or that may alter the plans, and actions to protect subsidiary insured depository institutions from risks of nonbank affiliates.
      • Announcement available at https://www.fdic.gov/news/news/press/2016/pr16049.html.

VA Loans

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.

Volcker Rule

  • Would be repealed under legislation proposed by House Financial Services Committee Chairman Hensarling (June 7).  For details, see Dodd-Frank above.

Congressional Activity – Recent

Congressional Activity – Upcoming

  • June 14
    • Senate Banking Committee hearing, "Oversight of the U.S. Securities and Exchange Commission."
  • June 15
    • House Financial Services Committee markup of eleven bills.
      • 8 bills would amend federal securities laws, including a bill to require the SEC to assess the costs and benefits of any regulatory action, alternatives to the action, and the impact of the action on small business and market liquidity.
      • One bill would limit ability of Federal Reserve to agree to any international insurance agreement.
      • One bill would protect those who report suspected exploitation of senior citizens.
      • One bill would require Treasury to publish lists of funds and assets held by senior Iranian political and military leaders.
      • Bills and Committee Memorandum available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=400764.
  • June 21
    • Senate Banking Committee hearing, "The Semiannual Monetary Policy Report to the Congress."

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.
  • Aug. 4
    • FDIC 2016 Joint Mutual Forum, Arlington VA.

Regulatory Comment Deadlines

  • June 15 – FDIC: mobile financial services strategies to serve the underbanked.
  • 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 enhanced 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.