Recognizing the slow-down in activity in both the agencies and Congress at the end of the summer, we have been on hiatus, but both the government and we are back in business.  As we review the accumulation of developments over the last several weeks, we would highlight for community banks today's Senate Banking Committee hearing, the CFPB's focus on mobile banking, and a proposal from FinCEN with new BSA/AML due diligence requirements.

The full set of developments is as follows: 

The Economy

  • Report on the Economic Well-Being of U.S. Households released by Federal Reserve (Aug. 7).
    • "Overall, the survey found that as of September 2013 many households were faring well, but that sizable fractions of the population were at the same time displaying signs of financial stress. Over 60 percent of respondents reported that their families were either "doing okay" or "living comfortably" financially; although one-fourth said that they were "just getting by" financially and another 13 percent said they were struggling to do so. The effects of the recession also continued to be felt by many households, with 34 percent reporting that they were somewhat worse off or much worse off financially than they had been five years earlier in 2008 and 34 percent reporting that they were about the same."
    • Report available at

Monetary Policy

  • Federal Open Market Committee meeting, July 29-30.
    • Per FOMC statement, "information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable."
    • Monthly bond purchases reduced: beginning in August, monthly purchases of $10 billion of agency MBS (down from $15 billion) and $15 billion of longer-term Treasury securities (down from $20 billion).
    • Current target range of 0 to ¼% for federal funds rate maintained.
    • Statement available at
  • Federal Open Market Committee minutes for July 29-30 meeting released (Aug. 20).
    • Meeting participants generally viewed the rebound in real GDP in the second quarter and the ongoing improvement in labor market conditions as supporting their expectations for continued moderate economic expansion with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. Although most participants continued to view the risks to the outlook for economic activity and the labor market as nearly balanced, some pointed to possible sources of downside risk, including persistent weakness in the housing sector, a continued slow rise in household income, or spillovers from developments in the Middle East and Ukraine. Participants noted that inflation had moved somewhat closer to the Committee’s 2 percent longer-run objective and generally saw the risks of inflation running persistently below their objective as having diminished somewhat.
    • Minutes available at
  • Re-evaluating Labor Market Dynamics, Jackson Hole Symposium (Aug. 21-23).

Community Banks

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  • FinCEN issues proposal to strengthen due diligence of the beneficial owners of companies that banks and other financial institutions service (July 30).
    • Four core elements:
      • identifying and verifying the identity of customers;
      • identifying and verifying the beneficial owners of legal entity customers;
      • understanding the nature and purpose of customer relationships; and
      • conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.
    • Financial institutions would be required to use a standardized form to identify and verify any individual who owns 25 percent of more of a legal entity, and any individual who controls the legal entity.
    • Proposed regulation available at
  • NY Dep't of Financial Services announces consent order with Standard Chartered involving anti-money laundering compliance failures (Aug. 19).
  • NY Dep't of Financial Services announces settlement agreement with PricewaterhouseCoopers (Aug. 18) arising from alterations to historical transaction review of wire transfers by Bank of Tokyo Mitsubishi on behalf of sanctioned countries and entities.
    • PwC suspended for 24 months from accepting consulting engagements on behalf of NYDFS-regulated financial institutions.
    • $25 million penalty.
    • Internal reforms.
    • Consent order and related materials available at
  • BancorpSouth withdraws merger applications, citing regulatory scrutiny of BSA/AML program (Aug. 1).


  • Banking agencies finalize and announce plans to propose several new capital requirements for the largest banking organizations.  See Too Big to Fail below.


  • Agencies propose changes to CRA Questions and Answers (Sept. 8).
    • Examiners' evaluation of alternative systems for delivering retail banking services, including mobile banking.  Factors include:
      • Ease of access, whether physical or virtual.
      • Cost to consumers, as compared with other delivery systems.
      • Range of services delivered.
      • Ease of use.
      • Rate of adoption.
      • Reliability of the system.
    • Community development
      • Expansion of purpose test to provide CRA credit for job creation, support of small businesses or farms, or government economic development initiatives.
      • No change to dollar ceilings.
    • Community development loans
      • CRA credit available for financing "green initiatives" that support low- to moderate-income communities.
    • Large banks – innovative or flexible lending practices
      • Small dollar loan programs eligible for CRA credit – if conducted in a safe and sound manner, with reasonable terms, and offered in conjunction with outreach initiavies that include financial literacy or a savings component.
      • Use of "alternative credit histories" in underwriting mortgage or consumer loans in a manner that benefits low- to moderate-income individuals.
    • Proposal available at
    • Comment deadline: 60 days from publication in Federal Register.

Consumer Debt Sales

  • OCC issues guidance on application of consumer protection requirements and safe and sound banking practices to consumer debt-sale arrangements with third parties that intend to pursue collection of underlying obligations (Aug. 4).

Consumer Leasing

Credit Cards

Credit Rating Agencies

Credit Risk Retention

Debit Cards

Debt Settlement

Financial Literacy

Lease Financing


  • House Financial Services Committee marked up the following bills on July 29-30:
    • H.R. 5018, the Federal Reserve Accountability and Transparency Act of 2014.
    • H.R. 4329, the Native American Housing Assistance and Self-Determination Reauthorization Act of 2014.
    • H.R. 3240, the Regulation D Study Act.
    • H.R. 3913, to amend the Bank Holding Company Act of 1956 to require agencies to make considerations relating to the promotion of efficiency, competition, and capital formation before issuing or modifying certain regulations.
    • H.R. 4042, the Community Bank Mortgage Service Asset Capital Requirements Study Act of 2014.
    • H.R. 5148, the Access to Affordable Mortgages Act of 2014.
    • Text of legislation available at


  • Banking agencies finalize liquidity coverage ratio for large and internationally active banking organizations.  See Too Big to Fail below.


Merchant Processing

Mobile Payments

Money Market Funds

Money Transmitters

Mortgage Foreclosures

Mortgage Lending

  • Settlements with Bank of America over various mortgage lending-related activities, totaling approximately $16.65 billion (Aug. 21).
    • Global settlement and other Justice Department, FDIC, and SEC materials available at
    • Settlement amounts:
      • Justice Department
        • $5 billion civil penalty.
        • $1.8 billion to settle federal fraud claims.
      • FDIC: $1.031 billion.
      • SEC: $135.84 million.
      • State claims
        • California: $300 million.
        • Delaware: $45 million.
        • Illinois: $200 million.
        • Kentucky: $23 million.
        • Maryland: $75 million.
        • New York: $300 million.
      • $7 billion in form of relief to certain homeowners, including principal reductions, new loans to credit worthy borrowers, community donations, and financing for affordable rental housing.
      • $490 million to tax relief fund if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act f 2007.  
  • CFPB announces consent order with mortgage lender for alleged deceptive bait-and-switch scheme (Aug. 12).

Mortgage Servicing

Payday Lending

Payment Processing

  • FDIC removes lists of merchant categories from guidance on account relationships with third-party payment processors (July 28). 
    • No merchant categories prohibited or discouraged.
      • Categories originally listed included payday lenders, firearms dealers, coin dealers, escort services, telemarketing and Internet merchant businesses.
    • FDIC continues to require adequate due diligence, underwriting, and ongoing monitoring of account relationships.
    • FIL-41-2014, available at
    • Existing guidance revised: FIL-127-2008, FIL-3-2012, FIL-43-2013, and "Managing Risks in Third-Party Relationships," Summer 2011, Supervisory Insights.




Swaps and Derivatives

  • Banking agencies, FHFA, and Farm Credit Administration re-propose margin requirements for uncleared swaps (Sept. 3).

Student Loans

  • CFPB criticizes lenders for lack of transparency in agreements with universities on marketing to students (Aug. 6)

Too Big to Fail

  • House Judiciary Committee approves Financial Institution Bankruptcy Act of 2014 (Sept. 10).
  • Federal Reserve announces plan to propose graduated common equity risk-based capital surcharges on U.S. global systemically important banking organizations.
    • Surcharge formula would take into account reliance on short-term wholesale funding.
    • Surcharge would be higher than Basel-required levels.
  • Supplementary Leverage Ratio: banking agencies adopt changes to calculation of denominator.
  • Liquidity Coverage Ratio: regulators announce final LCR for largest banks (Sept. 8).
    • For banks with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposures, sufficient "high quality liquid assets" to cover difference between expected cash outflows and inflows over a  30-day stress period.
    • For banks with $50 billion or more in total consolidated assets, stress period is 21 days, and calculation is slightly less rigorous.
    • Standard takes full effect on Jan. 1, 2017.
    • Final rule available at
  • Short-term wholesale funding: various efforts underway, per Governor Tarullo testimony before Senate Banking Committee (Sept. 9) :
    • Incorporate reliance on such funding in risk-based capital surcharge.
    • Strengthen net stable funding ratio requirements when bank acts as provider of short-term funding.
    • Establish numerical floors for collateral haircuts in securities financing transactions, including repos and securities lending and borrowing transactions.
    • Reduce reliance by borrowers in tri-party market on intraday credit.
    • Increase regulatory charges on forms of credit and liquidity support that banks provide to shadow banks.
    • Testimony available at
  • Subordinated debt: Federal Reserve and FDIC working on requirement that U.S. GSIBs hold a minimum amount of long-term unsecured debt at parent holding company level, per Governor Tarullo testimony.  
  • Swaps and derivatives: U.S. and foreign regulators working to address possibility that early termination rights of derivative counterparties to GSIBs would survive in resolution of failed GSIB, per Governor Tarullo testimony.   
  • Eligible guarantees under advanced approaches rule: banking agencies publish final rule that eliminates requirement that eligible guarantee be provided by eligible guarantor (Aug. 5).
  • Large Bank Holding Companies: Expectations of Government Support, GAO Report 14-621 (July 31).
    • "GAO’s analysis … suggests that large bank holding companies had lower funding costs than smaller ones during the financial crisis but provides mixed evidence of such advantages in recent years. However, most models suggest that such advantages may have declined or reversed."
    • Report available at
  • Federal Reserve announces no objection to resubmitted capital plan from Bank of America (Aug. 6).
  • Resolution plans

Truth in Lending

Unfair or Deceptive Credit Practices

Virtual Currency

  • Risks to consumers posed by virtual currencies, CFPB Consumer Advisory issued Aug. 11.
  • NY Dep't of Financial Services proposes regulatory framework for virtual currency firms.
    • License would be required for any "Virtual Currency Business Activity", which encompasses activities involving a New York resident, including receiving virtual currency for transmission or transmitting such currency, control of virtual currency on behalf of others, buying and selling virtual currency as a customer business, retail conversion services (including conversions with fiat currency), or controlling, administering, or issuing a virtual currency.
    • Proposal available at
    • Comment deadline: Sept. 6.

Bank Closings

  • None.

Congressional Hearings – Upcoming

  • Sept. 17
    • House Financial Services Committee, "Oversight of the Financial Stability Oversight Council".
    • Senate Banking Committee, "Who is the Economy Working For?  The Impact of Rising Inequality on the American Economy".

Congressional Hearings – Recent

Upcoming Events

  • Sept. 15-17
    • OCC workshop, Mastering the Basics: A Director's Challenge, Pittsburgh PA.
  • Sept. 19
    • The Community Reinvestment Act (CRA) – Intermediate Small Bank, FDIC teleconference.
  • Sept. 23-24
    • Community Banking in the 21st Century, Federal Reserve System/CSBS Second Annual Community Banking Research Conference. 
  • Sept. 30
    • Best Practices for Effective Liquidity Risk and Funds Management, FDIC New York Region regulatory teleconference.
  • Oct. 7
    • Public meeting of OCC Minority Depository Institutions Advisory Committee.
  • Oct. 16-17
    • FDIC annual Consumer Research Symposium.

Regulatory Comment Deadlines

  • 60 days from publication in Federal Register – FDIC: changes to risk-based deposit insurance assessment system.  
  • Oct. 14 – SEC: references to credit ratings in money market rules.  
  • Oct. 22 – CFPB: HMDA reporting requirements.  
  • 60 days from publication in Federal Register – Federal Reserve: repeal of Regulation AA.  
  • 60 days from publication in Federal Register – Federal Reserve/OCC/FDIC/FHFA/Farm Credit Administration: margin requirements for uncleared swaps.  
  • 60 days from publication in Federal Register – Federal Reserve/OCC/FDIC: additions to CRA Q&As.