Regulatory events over the past two weeks have included three items that banks of all sizes should pay careful attention to.  First, the federal banking agencies finalized an addendum to the longstanding guidance on tax allocation agreements within a holding company structure; every bank with a holding company will need to review its agreement to ensure that, when the bank, its holding company, and other affiliates file as a consolidated group, any refund paid to the holding company and attributable to the bank is held by the holding company as agent for the bank.  Second, the OCC released interim guidance for its examiners on compliance with the Volcker Rule.  Every national bank should review its status under the Rule, even if it believes it does not engage in Volcker-covered activities.  We can expect that Federal Reserve and FDIC examiners will use similar standards in examinations of state banks and bank holding companies. Third, the CFPB has requested comment on mobile banking and in particular its impact on the underbanked.

The full set of developments over the past two weeks was as follows:

The Economy

  • FOMC Meeting (June 17-18).
    • "Information received since the Federal Open Market Committee met in April indicates that growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated. Household spending appears to be rising moderately and business fixed investment resumed its advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable."
    • Continuing $10 billion decreases in monthly purchases of longer-term Treasury securities and agency MBS, beginning in July.
      • Longer-term Treasury securities: $20 billion, down from $25 billion.
      • Agency MBS: $15 billion, down from $20 billion.
    • FOMC to continue to maintain 0 to ¼% target for federal funds rate.
    • Statement available at http://www.federalreserve.gov/newsevents/press/monetary/20140618a.htm.
    • FOMC economic projections available at http://www.federalreserve.gov/newsevents/press/monetary/20140618b.htm
    • Federal Reserve Bank of New York, Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Backed Securities (June 18) available at http://www.newyorkfed.org/markets/opolicy/operating_policy_140618.html

Community Banking

  • OCC announces workshops for directors.
    • "Mastering the Basics: A Director's Challenge," July 28-30, Columbus OH.
    • "Compliance Risk" and "Risk Assessment," July 22-23, Minneapolis MN.
  • OCC Minority Depository Institutions Advisory Committee meeting, June 25, Dallas TX.

Bank Fraud

  • U.S. Supreme Court upholds application of federal bank fraud statute without proof of intent to defraud a bank.
    • 18 U.S.C. § 1344(2) criminalizes any "scheme or artifice" to obtain property owned by or under the custody and control of a bank "by means of false or fraudulent pretenses, representations, or promises."
    • Loughrin v. United States, No. 13-316 (June 23, 2014), available at http://www.supremecourt.gov/.

Capital Planning and Stress Testing

  • Federal Reserve, OCC, FDIC propose shift of 12-month planning and testing cycle to calendar year (beginning Jan. 1) from current cycle that begins Oct. 1 (June 12).
    • Would shift current reporting deadlines to April 5 for banks and bank holding companies with total consolidated assets of $50 billion or more and July 31 for banks and bank holding companies with total consolidated assets of more than $10 billion and less than $50 billion.
    • Agencies would apply same capital planning and stress testing processes during a 15-month transition period until the new schedule takes effect.
    • Institutions would not have to use Basel III advanced approaches until cycle beginning Jan. 1, 2016.
    • Shift would take effect for 2015-2016 planning cycle.
    • New limits on large bank or bank holding company's ability to make capital distributions to extent actual capital issuances are less than amount indicated in capital plan.
    • Federal Reserve proposal available at http://www.federalreserve.gov/newsevents/press/bcreg/20140612a.htm.
    • OCC proposal available at http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-86.html.
    • FDIC proposal available at http://www.fdic.gov/news/news/press/2014/pr14046.html.
    • Comment deadline: 60 days from publication in Federal Register.
    • Comment deadline: Aug. 11.

CFPB

CFTC

  • J. Christopher Giancarlo sworn in as Commissioner (June 16).
  • Sharon Bowen sworn in as Commissioner (June 9).

Corporate Governance

Cyber Security

Deposit Insurance

Enforcement

Federal Reserve Board

  • Stanley Fischer sworn in as Vice Chair (June 16).
  • Lael Brainard sworn in as member; Jerome Powell sworn in for second term (June 16).

Financial Literacy

Financial Stability Oversight Council

Income Tax Allocation Agreements

Mobile Banking

Older Americans

Qualified Mortgages

  • House of Representatives passes by voice vote the Mortgage Choice Act, amending CFPB definition of qualified mortgage (June 9).
    • Charges by title insurance providers that are affiliated with a lender excluded from points and fees limit of 3% of principal.
      • Charges by unaffiliated title insurance providers already excluded.
    • Taxes held in escrow with no profit to lender also excluded from points and fees limit.
    • H.R. 3211, available at http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.3211:.

Regulatory – General

Securities Markets

Servicemembers

Tax Allocation Agreements

Terrorism Risk Insurance

Volcker Rule

Bank Closings

  • Valley Bank (Fort Lauderdale FL) (June 20).
    • All deposits assumed by Landmark Bank, National Association (Fort Lauderdale FL).
  • Valley Bank (Moline IL) (June 20).
    • All deposits assumed by Great Southern Bank (Reeds Spring MO).

Congressional Events

Upcoming Events

  • June 23-25
    • OCC workshop, Mastering the Basics: A Director's Challenge, St. Louis MO.
  • June 24
    • FSOC closed meeting to discuss recent market developments and an update on short-term wholesale funding markets.
    • House Financial Services Committee hearing, "The Annual Report of the Financial Stability Oversight Council."
  • June 25
    • SEC open meeting.
      • "Security-based swap dealer" and "major security-based swap participant" definitions for cross-border activities.
    • Senate Banking Committee hearings.
      • "The Financial Stability Oversight Council Annual Report to Congress."
      • "Dreams Deferred: Young Workers and Recent Graduates in the U.S. Economy."
      • Vote on nominations of Julian Castro as HUD Secretary and Laura Wertheimer as FHFA IG.
    • House Financial Services Committee hearing, "Examining Reauthorization of the Export-Import Bank: Corporate Necessity or Corporate Welfare?"
    • OCC Minority Depository Institutions Advisory Committee (Dallas TX).
  • June 26
    • SEC closed meeting – various enforcement matters.
    • House Financial Services Committee hearing, "Oversight of the SEC's Division of Trading and Markets."
  • July 8-9
    • OCC bank director workshops, "Risk Assessment" and "Credit Risk" (Seattle WA).
  • July 9
    • FDIC Atlanta Region webinar, "Bankers' Export Financing Resources."
  • July 22-23
    • OCC bank director workshops, "Compliance Risk" and "Risk Assessment" (Minneapolis MN).
  • July 23-24
    • Joint Mutual Forum hosted by FDIC and OCC.
  • July 28-30
    • OCC bank director workshop, "Mastering the Basics: A Director's Challenge" (Columbus OH).
  • Sept. 23-24
    • Community Banking in the 21st Century, Federal Reserve System/CSBS Second Annual Community Banking Research Conference.. 
  • Oct. 16-17
    • FDIC annual Consumer Research Symposium.

Regulatory Comment Deadlines

  • July 1 – SEC: recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants.  
  • July 7 – CFPB: correction or cure of debt-to-income overages and credit extension limit for small creditor definition; "small servicer" definition.  
  • July 8 – Federal Reserve: Dodd-Frank section 622 concentration limits on large financial companies.  
  • Aug. 4 – FHFA: Fannie and Freddie guarantee fees.  
  • Aug. 11 – OCC: integration of national bank and federal savings association rules on corporate activities and transactions.  
  • Aug. 11 – Federal Reserve: shift in 12-month cycle for capital planning and stress testing.  
  • 60 days from publication in Federal Register – FDIC, OCC: shift in 12-month cycle for capital planning and stress testing.  
  • Sept. 2 – Federal Reserve/FDIC/OCC: regulatory burden with respect to applications and reporting, powers and activities, and international operations.  
  • Sept. 10 – CFPB: request for information on mobile financial services.