This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.

  • Quarles suggests input from banks on stress tests, eased liquidity requirements and Volcker Rule changes: Randal Quarles, the Fed's vice chairman for supervision, made some news in his Semiannual Supervision and Regulation Testimony before the House Financial Services Committee on April 17. "I personally believe that our stress testing disclosures can go further, and that we should consider additional measures, such as putting our stress scenarios out for comment," Quarles testified, echoing changes long sought by the banking industry. He also proposed easing liquidity requirements for large, non-global banks as part of an ongoing effort to tailor rules to firms' size and risk profile. "I believe it is time to take concrete steps toward calibrating liquidity requirements differently for non-G-SIBs than for G-SIBs," he said. Finally, as part of a growing chorus in support of changes to the Volcker Rule, Quarles said it was "unarguable" that the rule is having a negative effect on capital markets, and that regulators from the Fed and other agencies could at least "increase the certainty of application."
  • Quarles open to new approach to ILCs: Speaking at an IMF forum on April 17, and in Congressional testimony the day before, Quarles indicated that he would consider allowing companies to receive industrial loan company charters. In a seeming departure from past Fed policy, Quarles said he did not see ILCs as "a particularly special, excessively problematic case." In an exchange with Representative Mia Love (R-UT), Quarles said he agreed with the statement that "ILCs have been a stable source of capital in our communities, even during the financial crisis." ILCs are most prevalent in Love's state of Utah – which is also Quarles's home state. "I think we should apply the same measures of assessment that we apply to the granting of a charter of any other financial institution," he said.
  • Fed Board approves revised capital rule delaying implementation of CECL accounting standard under CCAR: The Federal Reserve Board on April 13 announced it had approved a proposal to revise its Comprehensive Capital Analysis and Review rules to provide an option to phase in the effects of a new accounting standard for credit losses, or Current Expected Credit Loss. Essentially, the Fed will hold off until 2020 on adding the new standard, which would require banks to immediately record expected losses when they make a loan, to its annual stress tests. In June 2016, the Financial Accounting Standards Board issued a new accounting standard for credit losses that includes the CECL methodology and replaces the existing incurred loss methodology for certain financial assets. The proposed rule will be published on an interagency basis with the FDIC and the OCC.
  • Trump nominates Clarida and Bowman to Fed Board: The White House on April 16 announced President Trump's intent to nominate Richard Clarida and Michelle Bowman to fill vacancies on the Federal Reserve Board of Governors. If approved by the Senate, Clarida would serve as vice chairman under Chairman Jerome Powell and Bowman would be a governor. An economist at Columbia University, Clarida served on President Reagan's Council of Economic Advisers and in 2002 was Assistant Secretary for Economic Policy at the US Treasury. Since 2006, he has been Global Strategic Advisor for PIMCO. Bowman currently serves as the Kansas State Bank Commissioner. She previously was an executive at Farmers & Drovers Bank and has served at the Department of Homeland Security and FEMA and on the staff of Senator Bob Dole.
  • Signs of life for banking regulatory reform legislation: While House and Senate lawmakers are still not on the same page regarding their respective banking and financial regulatory reform bills, there continue to be signs of movement. The Senate in March passed a deregulation bill (S. 2155) that does not go as far as the Dodd-Frank rollback passed by the House last year. House Financial Services Committee Chairman Jeb Hensarling (R-TX) who has been looking to expand the Senate measure in ways that Democrats are likely to balk at, told the US Chamber of Commerce on April 26 that he was "certainly open to other pathways" to advance some provisions in separate bills. "I'm far more wedded to substance than form. I'd be happy to attend multiple signing ceremonies in the White House. The more pens the merrier," Hensarling said. Representative Patrick McHenry (R-NC), chief deputy majority whip and vice-chairman of the Financial Services Committee, told journalists at an ABA conference in Washington on April 24, "We'll get Dodd-Frank reform signed by the president," adding that it is a only question of "one package or two packages and when." Senator Mark Warner (D-VA), a co-sponsor of the Senate bill, also indicated to the ABA that additional legislation, including measures aimed at capital formation and securities, could be considered separately, though he said the current Senate text was "about as far as we can go" without losing bipartisan support.
  • OCC's Otting calls for industry support for Senate bill: Speaking at the ABA's DC conference the next day, Comptroller of the Currency Joseph Otting called on members of the organization to urge the House to pass the Senate's deregulation bill, calling it "incredibly positive for the industry without increasing the risk to the industry." James Ballentine, ABA vice president, said Congressional reg. reform action will advance "very soon." The trade organization is urging House leaders to take up the Senate bill, since the legislative calendar is running down, plus, as Ballentine noted, "the appetite to get some more done is not there in the Senate at this time."
  • Who will lead the Financial Services Committee next year?: With Chairman Hensarling having announced his retirement from Congress, a wide range of stakeholders are closely watching the contest for his successor. Representative Blaine Luetkemeyer (R-MO) told the same ABA conference that he is "actively pursuing" the chairmanship of the House Financial Services Committee. Leutkemeyer, who worked in the banking and insurance industries before being elected to Congress, currently chairs the Financial Institutions and Consumer Credit Subcommittee. Three other senior Republicans on the Committee – Representatives Bill Huizeng (R-MI), Sean Duffy (R-WI) and Frank Lucas (R-OK) – have also expressed interest in the chairmanship. The aforementioned Representative McHenry had been seen as the likely successor, but, with the retirement of Speaker Paul Ryan, he is seeking to advance in the GOP leadership ranks. Of course, all this assumes that Republicans maintain control of the House, which recent polls put in some doubt. Representatie Maxine Waters (D-CA) is the senior Democrat on the committee.
  • Senate approves bill to halt CFPB auto-lending guidelines: The Senate on April 18 voted mostly along party lines to nullify safeguards issued by the CFPB to discourage discrimination in auto lending. The House is expected to follow suit. The White House issued a Statement of Administration Policy on April 17 in support of the disapproval/nullification resolution, stating that the CFPB bulletin issued in 2013 on Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act would limit consumers' auto financing options, was adopted without public comment, and is inconsistent with Dodd-Frank's explicit exclusion of auto dealers from CFPB jurisdiction. White House advisors would thus recommend that President Trump sign the measure (S. J. Res. 57), adopted pursuant to the 1996 Congressional Review Act, which empowers Congress to review, under an expedited legislative process, new federal regulations issued by government agencies and to overrule a regulation by passage of a joint resolution. The CFPB resolution marked the first time Congress had nullified a regulation adopted years prior, potentially setting a precedent to strike down other years-old or even decades-old federal rules and regulations.
  • Speaking of the CFPB – or is it the BCFP?: Acting CFPB director Mick Mulvaney told Capitol Hill lawmakers on April 11, "The Consumer Financial Protection Bureau does not exist." Instead, the agency will use the language in Dodd-Frank that created a Bureau of Consumer Financial Protection (BCFP). The bureau on March 30 announced its new logo and official seal. The changes at the bureau in the Mulvaney era continued with the appointment of Thomas Pahl, formerly acting director of the Federal Trade Commission's Bureau of Consumer Protection, as policy director for research, markets and regulations. Seen as a deregulation advocate, Pahl previously served at CFPB. Mulvaney on April 18 called on Congress to sharply reduce the bureau's budget, from $600 million to $450 million. And on April 24, the Fifth Circuit Court of Appeals in New Orleans agreed to hear a challenge to the bureau's single-director structure, brought by check cashing and payday loans companies that had been targeted for enforcement actions by the bureau.
  • Cyber insurance and its potential role in risk management programs: Members of the Federal Financial Institutions Examination Council on April 10 issued a joint statement alerting financial institutions to issues they should consider regarding the use of cyber insurance as a component of their risk management programs. At a time of data breaches, identity theft and other tech-driven challenges, the statement says cyber insurance could be a worthwhile investment for banks large and small. Bank stakeholders should review and understand the scope of coverage; triggers, limits and exclusions; individual carriers' history; and risk management requirements, according to the joint statement. But it warns that banks should avoid over-reliance on insurance to mitigate cyber risks. The statement was issued jointly by the Federal Reserve, FDIC, OCC, NCUA and CFPB.
  • US banks soon to face new EU data privacy rules: The European Union's General Data Protection Regulation, effective May 25, requires companies, including investment managers, funds, banks, and broker-dealers, with operations in Europe or even just information about individuals in Europe, to comply with a wide range of data privacy and security obligations. Some of the basic requirements include transparency regarding the personal data collected from Europeans, and its use in managing investments, and notices to individual investors and employees at institutional investors whose personal data is collected under "know your client" anti-money laundering requirements. Learn more about the impending regulation through our dedicated GDPR portal; to familiarize yourself with the contents of the GDPR, download DLA Piper's Explore GDPR app.