The most notable event of the last week was the long-awaited confirmation that the Federal Open Market Committee would begin to raise the federal funds target rate toward 2%.  Apart from an increase likely in the middle of the year, the pace of increases is uncertain.  For the banking industry specifically, two other developments were noteworthy.  The FFIEC announced its cybersecurity priorities for the remainder of 2015, and the CFPB launched what may be a far-reaching review of the credit card market.

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

Domain Names for Banks

  • Dot BANK is a new top-level domain (like .COM) that intends to be a “trusted, more secure and easily identifiable space on the Internet for the global banking communities and the customers it serves.”  For additional information there is a series of free webinars.  For a schedule click here.

The Economy

  • FOMC Statement following two-day meeting (Mar. 18).
    • View of the economy:
      • Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat.
      • Labor market conditions have improved further, with strong job gains and a lower unemployment rate.
      • Household spending is rising moderately; declines in energy prices have boosted household purchasing power.
      • Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened.
      • Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices.
    • Action:
      • To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation.
      • "Patience" as an element of FOMC policy omitted.
    • Press release available at http://www.federalreserve.gov/newsevents/press/monetary/2015monetary.htm.
    • Economic projections and target federal funds rate projections available at http://www.federalreserve.gov/newsevents/press/monetary/20150318b.htm.
  • "Monetary Policy Lessons and the Way Ahead," remarks of Vice Chairman Fischer (Mar. 23).
    • See Monetary Policy below.

Community Banking

  • OCC agenda to assist mutual savings association and community banks outlined by Comptroller Curry (Mar. 23).
    • Efforts include ongoing meetings of the OCC Mutual Savings Association Advisory Committee, supporting collaboration among community banks, reducing unnecessary burdensome regulation, and also recommending actions Congress can take to reduce needless burden.
    • Remarks before the ABA Mutual Community Bank conference available at http://www.occ.gov/news-issuances/speeches/2015/pub-speech-2015-43.pdf
  • Senate Banking Committee hearing, "Examining the Regulatory Regime for Regional Banks" (Mar. 19).
    • Hearing focused on enhanced prudential standards for larger banks provided for in section 165 of Dodd-Frank.
    • Federal Reserve Board Governor Tarullo testimony.
      • Federal Reserve takes a tiered approach to supervision and organizes the firms it supervise into portfolios based predominately, although not exclusively, on asset size.
        • Community banking organizations, which are generally those with $10 billion or less in total assets;
        • Regional banking organizations, which have total assets between $10 billion and $50 billion;
        • Large banking organizations, which have total assets over $50 billion but are not among the largest and most complex banking organizations; and
        • Firms overseen by the Large Institution Supervision Coordinating Committee (LISCC), which are the largest and most complex banking organizations.
      • Testimony available at http://www.federalreserve.gov/newsevents/testimony/tarullo20150319a.htm.
    • Comptroller Curry testimony.
      • OCC has tailored its supervisory programs into three portfolios:
        • Community banks: $8 billion or less.
        • Midsize banks: $8 to $50 billion in assets with a regional or multi-state footprint, including some larger banks,.
        • Large banks: more than $50 billion with national or global operations, complex corporate structures, extensive activities and exposures in the wholesale funding and capital markets, or part of a larger, complex financial conglomerate..
      • Oral statement and written testimony available at http://www.occ.gov/news-issuances/congressional-testimony/2015/pub-test-2015-39-oral.pdf
    • FDIC Chairman Gruenberg testimony.
      • Definition of large bank set by statute.
      • No specific FDIC criteria for regional banks.
        • "May be thought of" as banks much larger in size than community banks but that tend to focus on traditional banking activities.  Less complex than large banks.
      • Criteria for community bank designation:
        • Loans-to-assets ratio of at least 33%.
        • Core deposits-to-assets ratio of at least 50%.
        • Maximum of 75 offices operating in no more than 2 large metropolitan statistical areas and in no more than 3 states.
      • Testimony available at https://www.fdic.gov/news/news/speeches/index.html.
    • Archived webcast available at http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=98f894ea-f13e-471d-ad34-5f6b98fd3c7d
  • OCC statement regarding bank investment in the municipal securities market (Mar. 18).

BSA/AML

  • FinCEN Advisory on the FATF–Identified Jurisdictions with AML/CFT Deficiencies (Mar. 16).
    • The Financial Action Task Force (FATF) updated its list of jurisdictions with strategic AML/CFT deficiencies.
    • These changes may affect U.S. financial institutions’ obligations and risk-based approaches with respect to relevant jurisdictions.
    • Financial institutions should consider these changes when reviewing their enhanced due diligence obligations and risk–based policies, procedures, and practices with respect to the jurisdictions noted below.
    • Guidance available at http://www.fincen.gov/statutes_regs/guidance/html/FIN-2015-A001.html.

Community Development

  • OCC Deputy Comptroller Wides remarks to the Association for Neighborhood and Housing Development, New York City (Mar. 19).

Consumer Protection

Credit Unions

  • Field-of-membership regulation the top issue for credit unions (Mar. 17).
    • Per NCUA, modernizing field-of-membership regulations is the most important issue for the long-term health of America’s credit unions.
    • Some of the suggestions from the NCUA’s Governmental Affairs Conference include:
      • Simplifying field-of-membership processing.
      • Modifying the meaning of “well-defined local community.”
      • Allowing credit unions to serve additional rural and underserved communities.
      • Allowing credit unions with multiple select employee groups to serve independent contractors.
      • Grandfathering select employee groups at credit unions that convert to community charters.
    • Press release available at http://www.ncua.gov/News/Pages/NW20150317FOM.aspx

Cybersecurity

  • FFIEC announces cybersecurity priorities for 2015 (Mar. 17).
    • Seven workstreams that stem from the 2014 pilot assessment of cybersecurity readiness at more than 500 financial institutions.
      • Cybersecurity Self-Assessment Tool—issue a self-assessment tool to assist institutions in evaluating their inherent cybersecurity risk and their risk management capabilities.
      • Incident Analysis—enhance FFIEC members' processes for gathering, analyzing, and sharing information with each other during cyber incidents.
      • Crisis Management—align, update, and test emergency protocols to respond to system-wide cyber incidents in coordination with public-private partnerships.
      • Training—develop training programs for the staff of its members on evolving cyber threats and vulnerabilities.
      • Policy Development—update and supplement Information Technology Examination Handbook to reflect rapidly evolving cyber threats and vulnerabilities with a focus on risk management and oversight, threat intelligence and collaboration, cybersecurity controls, external dependency management, and incident management and resilience.
      • Technology Service Provider Strategy—expand FFIEC members' focus on technology service providers’ ability to respond to growing cyber threats and vulnerabilities.
      • Collaboration with Law Enforcement and Intelligence Agencies—build upon existing relationships with law enforcement and intelligence agencies to share information on the growing cybersecurity threats and response techniques.
    • Press release available at https://www.ffiec.gov/press/pr031715.htm

Fannie Mae/Freddie Mac

  • FHFA publishes Progress Report on the Implementation of FHFA's Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac (Mar. 16).
  • The Rescue of Fannie Mae and Freddie Mac, Federal Reserve Bank of New York Staff Report No. 719 (Mar. 2015).
    • "The decision to take the firms into conservatorship and invest public funds achieved its short-run goals of stabilizing mortgage markets and promoting financial stability during a period of extreme stress."
    • "However, conservatorship led to tensions between maximizing the firms’ value and achieving broader macroeconomic objectives, and, most importantly, it has so far failed to produce reform of the U.S. housing finance system."
    • Staff report available at http://www.ny.frb.org/research/staff_reports/sr719.html.

Monetary Policy

  • "Monetary Policy Lessons and the Way Ahead", Remarks by Federal Reserve Vice Chairman Fischer at the Economic Club of New York (Mar. 23).
    • Discusses "liftoff" of federal funds target rate.
    • Rate of interest on excess reserves to be primary tool in controlling federal funds rate.
    • Overnight reverse repurchase agreement facility may also be used. 
      • Money market funds are eligible counterparties but are not eligible for interest on excess reserves.
    • Remarks available at http://www.federalreserve.gov/newsevents/speech/fischer20150323a.htm

Mortgage Lending

Municipal Securities

Operation Choke Point

  • Hearing, "The Federal Deposit Insurance Corporation’s Role in Operation Choke Point,” before the Oversight and Investigations Subcommittee of the House Financial Services Committee scheduled for Mar. 24.

Payment Systems

Reporting

Small Business

Too Big to Fail

  • Federal Reserve and FDIC issue feedback letters to three foreign banking organizations on resolution plans (Mar. 23).
    • Common shortcomings:
      • Unrealistic or inadequately supported assumptions about the likely behavior of customers, counterparties, investors, central clearing facilities, and regulators.
      • Inadequate analysis regarding interconnections within the firms.
    • Corrective actions:
      • Amending financial contracts entered into by U.S. affiliates to provide for a stay of certain early termination rights of external counterparties triggered by insolvency proceedings to the extent those rights are not addressed by the ISDA resolution stay protocol.
      • Ensuring the continuity of shared services that support critical operations and core business lines throughout the resolution process.
      • Demonstrating operational capabilities for resolution preparedness, such as the ability to produce reliable information in a timely manner.
    • Feedback available at http://www.federalreserve.gov/newsevents/press/bcreg/20150323a.htm.

Congressional Activity

Congressional Events – Upcoming

  • Mar. 24
    • House Financial Services Committee hearings.
      • “The Federal Deposit Insurance Corporation’s Role in Operation Choke Point.”
  • “Examining the SEC’s Agenda, Operations, and FY 2016 Budget Request.”
  • Senate Banking Committee hearings.
    • “Capital Formation and Reducing Small Business Burdens.”
    • “Examining the Regulatory Regime for Regional Banks.”
  •  Mar. 25
    • Senate Banking Committee hearing, “FSOC Accountability: NonBank Designation.”
       
    • House Financial Services Committee markups.
      • H.R. 299, the Capital Access for Small Community Financial Institutions Act of 2010.
      • H.R. 601, the Eliminate Privacy Notice Confusion Act.
      • H.R. 650, the Preserving Access to Manufactured Housing Act of 2015.
      • H.R. 685, the Mortgage Choice Act of 2015.
      • H.R. 1195, the Bureau of Consumer Financial Protection Advisory Boards Act.
      • H.R. 1259, the Helping Expand Lending Practices in Rural Communities Act.
      • H.R. 1265, the Bureau Advisory Commission Transparency Act.
      • H.R. 1367, to amend the Expedited Funds Availability Act.
      • H.R. 1408, the Mortgage Servicing Asset Capital Requirements Act of 2015.
      • H.R. 1480, the SAFE Act Confidentiality and Privilege Enhancement Act.
      • H.R. ___, the Community Institution Mortgage Relief Act of 2015.
      • A Resolution to establish the Task Force to Investigate Terrorism Financing.

Upcoming Events

  • Mar. 24
    • Federal Reserve Bank of Boston, CRA for Community-Based Organizations: Partnering for Success.
  • Mar. 25
    • NCUA Event, Successful Strategies for Field of Membership Expansion.
  • Mar. 25
    • FDIC Event, Teleconference on Risk Management – Embedding Lessons Learned.
  • 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.
  • Apr. 2 – 3
    • Federal Reserve System 2015 Community Development Research Conference.
  • Apr. 7
    • OCC Hosts Minority Depository Institutions Advisory Committee Meeting.
  • Apr. 13-15
    • OCC Director Workshop, Building Blocks for Directors: Keys to Success, Indianapolis, IN.
  • Apr. 21
    • OCC Director Workshop, Compliance Risk, Denver, CO.
  • Apr. 22
    • OCC Director Workshop, Credit Risk, Denver, CO.
  • May 4
    • EGRPRA outreach meeting, Boston MA.
  • May 5
    • OCC Director Workshop, Risk Governance, Louisville, KY.
  • May 6
    • OCC Director Workshop, Compliance Risk, Louisville, KY.
  • May 19
    • OCC Director Workshop, Risk Governance, Birmingham, AL.
  • May 20
    • OCC Director Workshop, Compliance Risk, Birmingham, AL.
  • May 20 – 21
    • Federal Reserve Bank of New York, Mortgage Contract DesignImplications for Households, Monetary Policy, and Financial Stability.
  • Jun. 2 – 3 
    • NACHA Payments Innovation, Alliance Meeting.
  • Jun. 14 – 17
    • ABA National Regulatory & Compliance Conference.

Regulatory Comment Deadlines

  • 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. 28 – CFTC: position limits for physical commodity derivatives and aggregation.
  • Mar. 30 – CFPB: amendments to mortgage rules regarding small creditor status, creditors in rural or underserved areas, and qualified mortgages.
  • Mar. 30 – CFPB: safe student account scorecard.
  • Mar. 30 – Request for Information Regarding an Initiative on Safe Student Banking.
  • Mar. 31 – FDIC: definition of qualifying master netting agreement and related terms.
  • Apr. 3 – Federal Reserve: methodology for determining capital surcharge on U.S. G-SIBs.
  • 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.
  • 60 days after publication in Federal Register – Federal Reserve: inclusion of legal entity identifiers in certain FR Y reports.