A variety of developments emerged last week from the agencies and Congress.  Perhaps most notably, the CFPB issued a proposal for additional regulation of prepaid cards.  Elsewhere, following up on the agencies' recent criticism of leveraged lending practices, the FDIC issued FAQs that attempt to provide more detail on the regulators' view.  In the BSA/AML sphere, Treasury and FinCEN issued statements to the effect that BSA/AML requirements do not compel banks to terminate relationships with money services businesses.  For large banks, the Financial Stability Board issued the long-awaited rule on "temporary liquidity absorption capacity," and international regulatory enforcement actions against certain banks relating to foreign exchange trading were announced.

On Capitol Hill, the banking committees are back in action with a number of hearings scheduled this week; the Senate Banking Committee's hearing on regulatory capture is likely to attract the most attention. Rep. Luetkemeyer announced FDIC and Justice Department preliminary investigations into Operation Choke Point.

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


  • Treasury Department and FinCEN issue statements that a bank need not automatically terminate account relationships with a money services business but should manage risks as appropriate with individual clients (Nov. 10).
  • Legislative and regulatory recommendations of interagency AML Task Force discussed by Treasury Under Secretary Cohen at ABA/ABA Money Laundering Enforcement Conference (Nov. 10).
    • Two statutory changes to expand SAR safe harbor and safe harbor for information sharing by financial institutions on illicit activity.
    • Regulatory changes to extend various AML programs and/or suspicious activity reporting requirements to investment advisers, retail foreign exchange dealers, commodity pool operators, credit card system operators, and check cashers.
    • Remarks available at http://www.treasury.gov/press-center/press-releases/Pages/jl2692.aspx.


  • Enforcement actions against five banks relating to manipulation of global foreign exchange benchmark rates (Nov. 12).  See Foreign Exchange Trading below.

Corporate Culture/Tone at the Top

  • Enforcement actions relating to manipulation of global foreign exchange benchmark rates emphasize duty to create an environment of compliance.  See Foreign Exchange Tradingbelow.

Credit Risk Cards


Deposit Insurance

Financial Stability Oversight Council

Flood Insurance

  • House Financial Service Committee hearing on private flood insurance market scheduled for Nov. 19.

Foreign Exchange Trading

  • OCC, CFTC, and international regulators announce enforcement actions against several international banks relating to manipulation of foreign exchange benchmark rates (Nov. 12).
    • OCC actions against Bank of America, Citibank, and JPMorgan Chase.
    • CFTC actions against Citigroup, HSBC, JPMorgan Chase, Royal Bank of Scotland, and UBS.
    • UK Financial Conduct Authority actions against Citigroup, HSBC, JPMorgan Chase, Royal Bank of Scotland, and UBS.
    • Swiss Financial Market Supervisory Authority action against UBS.
      • Civil money penalty of CHF 134 million.
      • Actions against 11 individuals have been initiated.
      • Three other Swiss banks investigated but shortcomings addressed in nonpublic supervisory actions.

Leveraged Lending

  • Interagency Guidance on Leveraged Lending: Frequently Asked Questions released by federal banking agencies (Nov. 13).
    • Follow up to Interagency Guidance on Leveraged Lending (Mar. 22, 2013) and recent Shared National Credits report.
    • "The agencies expect institutions to originate loans with a sound business premise, a sustainable capital structure, and the capacity to repay the loan or to de-lever to a sustainable level over a reasonable period."
    • "The agencies have criticized institutions that originate or purchase participations in non-pass leveraged loans. Leveraged loans originated with a non-pass risk rating at inception would be inconsistent with safe-and-sound lending standards and the risk management criteria outlined in the Guidance."
    • FDIC FIL-53-2014 available at https://www.fdic.gov/news/news/financial/2014/fil14053.html.


Monetary Policy

  • "Monetary Policy Accommodation, Risk-Taking, and Spillovers," remarks by Federal Reserve Governor Powell at the Global Research Forum on International Macroeconomics and Finance, Washington, D.C. (Nov. 14).
  • "U.S. Monetary Policy and its Global Implications," remarks of FRBNY President Dudley at the Central Bank of the United Arab Emirates (Nov. 13).
    • "Although patience is appropriate, if all goes well, I anticipate that we will begin to raise short-term rates sometime next year."
    • "We need to be mindful that this shift in policy most likely will be accompanied by some degree of market turbulence."
    • Text of remarks available at http://www.newyorkfed.org/newsevents/speeches/2014/dud141113.html.

Mortgage Lending

  • CFPB posts updated compliance guides on ability to repay and small servicers (Nov. 3).
    • Ability to Repay/Qualified Mortgage compliance guide for compliance with mortgage rules.
      • Nonprofit lenders allowed to make certain "soft second" loans that do not count against 200 mortgage loans annual cap that is a condition for an exemption for such organizations from the ability-to-repay rule. 
      • Under certain conditions and within 210 days of consummation, a lender may cure a mortgage that it belatedly discovers exceeds the points and fees cap on qualified mortgages.
    • Mortgage Servicing guide.
      • Small servicer exemption expanded for certain nonprofit organizations that service more than 5,000 mortgage loans.
    • Revised guides available at http://www.consumerfinance.gov/regulatory-implementation/title-xiv/.
  • Steering: CFPB announces enforcement action against Franklin Loan Corporation for bonus payments to loan officers to steer borrowers into higher rate loans in violation of Federal Reserve's Loan Originator Compensation Rule (Nov. 13).

Mortgage Servicing

Operation Choke Point

Payday Lending

Prepaid Products

Reserve Requirements/Regulation D

  • Federal Reserve finalizes annual adjustments to Regulation D thresholds (Nov. 13).
    • Reserve requirement exemption amount: $14.5 million, up from $13.3 million.
    • Low reserve tranche: $103.6 million, up from $89 million.
    • Nonexempt deposit cutoff level: $325.4 million, up from $306.7 million.
    • Reduced reporting limit: $1.824 billion, up from $1.719 billion.
    • Final rule available at http://www.federalreserve.gov/newsevents/press/bcreg/20141113a.htm.

Swaps and Derivatives

Too Big to Fail


  • Lame duck session began Nov. 13.  
  • Pending legislation that could become law during lame duck session.
    • S. 1369
      • Exempting depository institutions primarily engaged in business of insurance from capital requirements of Collins Amendment.
    • H.R. 5461, passed House Sept. 16, 2014.
      • Amending Collins Amendment to allow Federal Reserve to apply insurance-based (rather than bank-based) capital standards to systemically important insurance companies.
      • Amending Volcker Rule to exempt collateralized loan obligations.
      • Amending Title VII to exempt end-users from margin requirements under the swaps rules.
      • Amending CFPB qualified mortgage rule with respect to the calculation of certain points and fees.
    • Renewal of Terrorism Risk Insurance Act.  Note that absent legislation TRIA will expire on Dec. 31, 2014.  Senate and House bills differ.
      • S. 2244 passed Senate on July 17.
      • H.R. 4871 reported out of House Financial Services Committee on July 16.
  • Senate Banking Committee
    • Sen. Richard Shelby (R-AL) to become Chairman of Senate Banking Committee in 2015.  Term limited to 2 years under party rules.
    • Committee agenda to be determined.
    • Ranking Member from among the Democrats to be determined.

Congressional Hearings – Last Week

Congressional Hearings – Upcoming

  • House Financial Services Committee
    • Nov. 18: "The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers, Part II."
    • Nov. 19: "Opportunities for a Private and Competitive Sustainable Flood Insurance Market."
  • Senate Banking Committee
    • Nov. 19: "The Federal Housing Finance Agency."
    • Nov. 21: "Improving Financial Institution Supervision: Examining and Addressing Regulatory Capture."

Upcoming Events

  • Nov. 18
    • FDIC Board meeting: revisions to deposit insurance assessment system.
  • Nov. 18-19
    • OCC director workshops, Compliance Risk and Credit Risk: A Director's Focus, in Newton, MA.
  • Nov. 20
    • FDIC San Francisco Region Bankers' Forum, Consumer Protection and Hot Topics.
  • Dec. 1-3
    • OCC director workshop, Mastering the Basics: A Director's Challenge in Phoenix, AZ.
  • Dec. 2
    • Regulatory review outreach meeting at Los Angeles branch of Federal Reserve Bank of San Francisco.
  • Dec. 11
    • FDIC: Alliance for Economic Inclusion Meeting in Kansas City MO.
  • Dec. 17
    • FDIC Chicago Region Regulatory Conference Call, "Identifying and Mitigating UDAP Risk."
  • Jan. 13, 2015
    • Treasury Department public forum on money services businesses and banking access.

Regulatory Comment Deadlines

  • Nov. 24 – Federal Reserve/OCC/FDIC/FHFA/Farm Credit Administration: margin requirements for uncleared swaps.  
  • Dec. 2 – CFTC: margin requirements for uncleared swaps for swap dealers and major swap participants.  
  • Dec. 8 – CFPB: definition of "larger participant" in nonbank auto lending market.  
  • Dec. 23 – FDIC: restrictions on sales of assets by FDIC under part 340.  
  • Dec. 29 – Federal Reserve/FDIC/OCC/NCUA/Farm Credit Administration: revisions to flood insurance regulations.  
  • Jan. 12, 2015 – FHFA: FHLB membership to require 1% of assets in home mortgage loans.  
  • 90 days after publication in Federal Register – CFPB: revisions to Regulations E and Z covering prepaid cards.