The events of most immediate interest to community banks over the past week were announcements by both the FFIEC and the New York Department of Financial Services of new assessments of cyber security vulnerability and risk mitigation.  Both sides of Capitol Hill have been busy: the House passed amendments regarding the treatment of CLOs under the Volcker Rule, FinCEN's supervision of money service businesses, the "rural" designation under the CFPB mortgage rules, and expanded coverage of the Small Bank Holding Company Policy Statement; the House Financial Services Committee marked up several pieces of legislation dealing with mortgage lending and securities laws; and the Senate Banking Committee continues to grapple with housing reform.         

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

The Economy

Community Banking

  • "Rethinking the Aims of Prudential Regulation," Remarks of Federal Reserve Governor Tarullo at the Federal Reserve Bank of Chicago Structure Conference (May 8).
    • "Prudential regulation must deal with threats to financial stability whether or not those threats emanate from traditional banking organizations. Hence the need to broaden the perimeter of prudential regulation, both to certain nonbank financial institutions and to certain activities by all financial actors."
    • "The aims of prudential regulation for traditional banking organizations should vary according to the size, scope, and range of activities of the organizations. By specifying these aims with more precision, we can shape both a more effective regulatory system and a more efficient one. That is, once we have specified the regulatory aims for a particular type of financial institution, we can more effectively rationalize and, as appropriate, differentiate the rules and requirements to be applied to each kind of institution."
    • Text available at http://www.federalreserve.gov/newsevents/speech/tarullo20140508a.htm.  
  • House of Representatives passes H.R. 3329 by voice vote to expand coverage of Federal Reserve's Small Bank Holding Company Policy Statement (12 CFR part 225, App. C). 
    • Bill would require Federal Reserve to lift ceiling on applicability of Statement to bank holding companies from current $500 million in assets to $1 billion. Among other things, bank holding companies subject to Statement are:
      • Not subject to quantitative capital rules, although the Federal Reserve expects subsidiary banks to be well capitalized.
      • Subject to less stringent limits on acquisition debt.
    • Vote taken May 6.
    • Bill available at http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.3329:

Capital

  • "Insurance Capital Standards Clarification Act of 2014," S. 2270, introduced April 29.

CFPB

Community Development

Cyber Security

Financial Stability Oversight Council

Housing Reform

Legislation

  • House of Representatives passes five separate bills
    • H.R. 2672, creating an application process for the CFPB to designate “rural” areas under the mortgage rules (May 6).
      • See Mortgage Lending below.
    • H.R. 3329 , amendment to regarding expanded coverage of Federal Reserve’s Small Bank Holding Company Policy Statement.
      • See Community Banking above.
    • H.R. 4167, amendment to Volcker Rule regarding collateralized loan obligations.
      • See Volcker Rule below.
    • H.R. 4386, allowing FinCEN to rely on state examination reports in supervising certain money service businesses (May 6).
      • See Remittances below.

M&A

  • Federal Reserve proposes rule to implement Dodd-Frank section 622 prohibition on combinations between financial companies if the ratio of the resulting company's liabilities exceeds 10 percent of aggregate consolidated liabilities of all financial companies.
    • Liabilities are difference between risk-weighted assets (adjusted to reflect deductions from regulatory capital) and total regulatory capital.
    • Federal Reserve to determine aggregate consolidated liabilities of all financial companies annually, based on two-year average.
    • Proposal available at http://www.federalreserve.gov/newsevents/press/bcreg/20140508a.htm.
    • Comment deadline: July 8.

Monetary Policy

Mortgage Lending

  • House of Representatives passes H.R. 2672, the “Helping Expand Lending Practices in Rural Communities Act,” by voice vote to create a process for interested parties to apply to CFPB to designate area as “rural” for the purpose of certain exemptions under the CFPB mortgage rules.
  • Mortgage debt of older Americans
  • House Financial Services Committee markup of proposed mortgage legislation (May 7).  Markup recessed without final votes.
    • H.R. 1779, the Preserving Access to Manufactured Housing Act of 2013.
      • Clarification of definition "mortgage originator."
      • Amendments to definition of "high cost mortgage" and corresponding thresholds.
    • H.R. 2673, the Portfolio Lending and Mortgage Access Act.
      • Safe harbor from liability under QM rule for mortgage loans held on balance sheet by community financial institutions.
    • H.R. 3211, the Mortgage Choice Act of 2013.
      • Modifications to definition of "points and fees" to exclude insurance and taxes held in escrow and fees paid to affiliated companies as a result of their participation in an affiliated business arrangement.
    • H.R. 4521, the Community Institution Mortgage Relief Act of 2014.
      • Exemption of community financial institutions from escrow requirements for loans held in portfolio.
      • Amendment of RESPA to instruct CFPB  to provide regulatory relief for servicers that annually service 20,000 or fewer mortgage loans,
    • Bill text and Committee Memorandum available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=378782.

OFAC

Payday Lending

  • NY Dep't of Financial Services announces MasterCard and Visa have agreed to take action to prevent processing of illegal payday loans over debit card networks (April 30).

Privacy

Private Equity

Remittances

  • House of Representatives approves H.R. 4386, the "Money Remittances Improvement Act of 2014" (May 6).

Risk Management

  • Remarks by Comptroller Curry before RMA's Governance, Compliance, and Operational Risk Conference (May 8).

Securities Laws

  • House Financial Services Committee markup of proposed securities legislation (May 7).  Legislation includes (but is not limited to):
    • H.R. 4554, the Restricted Securities Relief Act.
      • Amendments to Rule 144 concerning public resale of stock.
      • Amendment to Section 18(b) of Securities Act of 1933 to exempt from state regulation security offered in compliance with Rule 144A.
    • H.R. ____, the Encouraging Employee Ownership Act of 2014 (discussion draft).
      • Amendments to SEC Rule 701 to raise threshold of securities sold in 12-month period for purpose of requiring new disclosures from $5 million to $20 million.
    • H.R. ____, the Private Placement Improvement Act (discussion draft).
      • Amendments to SEC Rule 506 to remove certain restrictions on small businesses attempting to raise capital under Title II of JOBS Act.
    • H.R. ____, to require the Securities and Exchange Commission to revise the definition of a well-known seasoned issuer to reduce the worldwide market value threshold under the definition (discussion draft).
      • WKSI public float threshold reduced from $700 million to $250 million.
    • H.R. ____, the Startup Capital Modernization Act of 2014 (discussion draft).
      • Amendments to various provisions of Regulation A.
      • Expansion of definition of "exempted transactions" under '33 Act to include resale of securities acquired in an exempted transaction.
    • H.R. 2629, the Fostering Innovation Act.
      • Amendments to public float thresholds of Rule 12b-2 regarding non-accelerated filers and exemptions form securities laws and Sarbanes-Oxley.
    • Bill text and Committee Memorandum available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=378782

Too Big to Fail

Volcker Rule

  • House of Representatives passes H.R. 4167, the "Restoring Proven Financing for American Employers Act," by voice vote "to exclude certain debt securities of collateralized loan obligations" from prohibition on investment in hedge funds or private equity funds.

Bank Closings

  • None. 

Congressional Action

Upcoming Events

  • May 15
    • SEC full Commission meeting.
  • May 19
    • FSOC conference on asset management industry and its activities.
  • May 29
    • FDIC San Francisco Region Bankers' Forum: The Development and Launch of a New Banking Product: A UDAP Primer.
  • June 2-4
    • OCC workshop, "Mastering the Basics: A Director's Challenge," Nashville TN.
  • Sept. 23-24

Regulatory Comment Deadlines

  • May 27 – CFPB: revisions to Reg E to allow certain international remittance providers to estimate fees and rates through July 21, 2020.  
  • May 27 – SEC: standards for covered clearing agencies.  
  • May 27 – CFTC: swap reporting and recordkeeping requirements under 17 CFR part 45.  
  • June 5 – CFPB: "small servicer" definition.  
  • June 9 – federal banking agencies: standards for asset management companies and state agencies.  
  • June 12 – OCC: increased assessments for national banks and federal thrifts over $40 billion.  
  • June 13 – federal banking agencies: changes to denominator of supplementary leverage ratio.  
  • June 13 – federal banking agencies: revisions to definition of eligible guarantee under advanced approaches risk-based capital rule.  
  • June 20 – FDIC: filing and disclosure requirements for securities issued by state savings associations.  
  • 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.  
  • July 8 – Federal Reserve: Dodd-Frank section 622 prohibition on financial company combination where resulting company liabilities exceed 10 percent of nationwide financial company liabilities.