It was a busy week in the bank regulatory world with several CFPB and BSA/AML enforcement orders. For community banks in particular, items of interest include statements by the Chair and another Governor of the Federal Reserve supportive of the community banking sector. In the FinTech realm, the OCC released a new booklet on de novo chartering, which will figure in the development of a specialized FinTech charter, and the SEC announced a forum on FinTech on November 14.

The full set of developments over the past week includes:

The Economy

  • "Why Study Economics?" remarks of Federal Reserve Vice Chairman Fischer at the convocation of the Howard University economics department (Sept. 27).

Community Banks

  • "Community Banking in the 21st Century," Fourth Annual Community Banking Research and Policy Conference, sponsored by the Federal Reserve System and CSBS (Sept. 28-29).
  • "Trends in Community Bank Performance over the Past 20 Years," remarks of Federal Reserve Governor Powell at the conference (Sept. 29).
    • Number of community banks has decreased over last 20 years as a result of the disappearance of banks with less than $100 million in assets.
      • The number of banks with between $1 billion and $10 billion in assets has doubled since 1995.
      • Banks ranging in size from $300 million to $1 billion have also roughly doubled in number over the past 20 years.
      • Number of community banks with less than $100 million in assets has declined by two-thirds over last 20 years.
    • "A key difference between the past few years and the late 1990s is that the recent acceleration in the rate of decrease in the number of community banks is due in large part to a decline in new bank charters rather than an increase in the annual number of exits."
    • A 2014 study "suggests that slow economic growth and low interest rates in the post-crisis environment can explain about 75 percent of the decline in new bank charters. The authors were not able to isolate the effect of regulatory changes on the rate of new bank formation, but note that regulation may also play a role."
    • "Banks in the size range from $300 million to $1 billion in assets have been the most consistently profitable group among community banks, although their profit levels still lag those for the largest banks." These banks "remained profitable, on average, even in 2009."
    • "The key question for policymakers is whether the recent acceleration in the rate of decline in the number of small banks is primarily a structural change attributable to increasing economies of scale--or, perhaps more accurately, diseconomies of very small scale--or whether recent efforts by the FDIC and others to encourage more chartering of new banks, combined with a return to higher interest rates and stronger economic growth, will mitigate the decline in numbers."
    • Remarks available at
  • Statement of Federal Reserve Chair Yellen before the House Financial Services Committee hearing on the Federal Reserve's supervision of the financial system (Sept. 28).
    • Description of stress testing and resolution planning.
    • Discussion of supervision tailored to community banks.
    • "Community banks are significantly healthier. More than 95 percent are now profitable, and capital lost during the crisis has been largely replenished. Loan growth is picking up, and problem loans are now at levels last seen early in the financial crisis."
  • Statement available at

Alternative Lending

  • CFPB enters into consent order with LendUp for unfair and deceptive practices, FCRA violations, and TILA violations (Sept. 27).
    • Violations include:
      • Misleading advice about borrower improving credit history to qualify for lower-priced loans.
      • Inaccurate information about cost of credit.
      • Non-disclosure of reversals in pricing of loans.
      • Understatement of APR.
      • Failure to report credit information to credit reporting agencies.
    • Remedies:
      • $1.83 million in redress to consumers.
      • Various corrective actions.
      • $1.8 million civil money penalty.
    • Order available at

Auto Title Lending


De Novos

  • Remarks of Federal Reserve Governor Powell at community banking conference (Sept. 29).
  • OCC releases revised "Charters" booklet in the Comptroller's Licensing Manual (Sept. 28).
    • Although not emphasized as such, two policy considerations may be particularly important for a FinTech charter:
      • If bank would be sponsored by an existing company, relationship between bank and sponsor.
      • New banks that would operate solely electronically, including concern about potential liquidity risks.
    • Revised booklet attempts to integrate processes for obtaining national bank or federal savings association charters, although differing statutory authorities lead to some unavoidable differences.
    • Booklet available at



  • Brief remarks of Federal Reserve Chair Yellen before the "Banking and the Economy: A Forum for Minority Bankers" (Sept. 29).
    • "Diversity in its various forms is a source of strength."
    • "The Federal Reserve supports an ongoing role for community banks in part because diversity among financial institutions promotes a stable and healthy financial system, spurring competition and ensuring that customers of all types have access to a wide variety of services."
    • "Diversity also strengthens organizations by making it possible to have a wide variety of views available."
    • "My organization, the Federal Reserve, is also committed to a diverse workforce and to diversity in our senior leadership."
    • Remarks available at

Financial Literacy


  • SEC to hold forum on financial technology innovation in the financial services industry on Nov. 14 in Washington DC.
    • Forum designed "to foster greater collaboration and understanding among regulators, entrepreneurs and industry experts into Fintech innovation and evaluate how the current regulatory environment can most effectively address these new technologies."
    • Agenda not yet available.
    • Announcement available at


Money Transfers

Mortgage Loans

Qualified Financial Contracts

  • OCC emphasizes proposed rule to restrict exercise of default rights of QFC holders in the event of failure of a systemically important national bank (Oct. 3).
    • QFC would be required to:
      • Contain a contractual stay-and-transfer provision analogous to statutory stay-and-transfer provision imposed in Title II of Dodd-Frank.
      • Limit exercise of default rights based on insolvency of affiliate of covered bank.
    • Bulletin 2016-31 with link to proposed rule available at
    • Comment deadline: Oct. 18.


Student Loans

Too Big to Fail

  • OCC publishes final guidelines for large bank recovery plans (Sept. 29).
    • Recovery plan requirements:
      • Identify indicators of risk or existence of severe financial stress.
        • Escalation stress issue to senior management or board.
      • "Wide range of credible options" to restore financial strength and viability.
      • Integrated into overall risk governance framework and coordinated with holding company's recovery and resolution planning.
    • Board of directors and management responsibilities:
      • Board or board committee must review plan annually and as needed to address significant changes identified by management.
        • Management must review plan annually and in response to material event.
        • Management to make changes to reflect material changes in bank's size, risk profile, activities, and complexity.
    • Guidelines enforceable under FDIA.
      • Evaluations to be the subject of OCC examinations.
    • Guidelines available at
  • Federal Reserve proposes changes to capital planning and stress testing rules for 2017 cycle to reduce requirements for large and noncomplex banking firms (Sept. 29).
    • Affected banking firms are those with between $50 and $250 billion in assets, on-balance sheet foreign exposures of less than $10 billion, and nonbank assets of less than $75 billion.
    • Elimination of Federal Reserve's qualitative assessment in the Comprehensive Capital Analysis and Review.
      • However, cap on capital distributions outside of approved capital plan without prior Fed approval reduced from one percent to 0.25 percent.
    • Reduced reporting requirements.
    • Proposal available at
    • Comment deadline: Nov. 25.
  • "Next Steps in the Evolution of Stress Testing," remarks of Federal Reserve Governor Tarullo at the Yale University School of Management Leaders Forum (Sept. 26).

Congressional Activity – Recent.

Upcoming Events

  • Oct. 13
    • FDIC Community Banking Initiative: De Novo Outreach Meeting, New York NY.
  • Oct. 19
    • FDIC Money Smart Train-the-Trainer Online Live Meeting.
  • Oct. 27-28
    • OFR and Center on Finance, Law, and Policy, Big Data: Improving the Scope, Quality, and Accessibility of Financial Data, Ann Arbor, MI.
  • Oct. 28
    • FDIC 6th Annual Consumer Research Symposium.
  • Nov. 9
    • OCC Directors Workshop, "Compliance Risk", Cincinnati OH.
  • Nov. 10
    • OCC Directors Workshop, "Operational Risk", Cincinnati OH.
  • Nov. 14
    • SEC FinTech forum, Washington DC.
  • Nov. 29
    • FDIC Community Banking Initiative: De Novo Outreach Meeting, Atlanta GA.

Regulatory Comment Deadlines

  • Oct. 14 – Federal Reserve, FDIC, OCC: streamlined call report for small banks.
  • Oct. 18 – CFPB: changes to required Know Before You Owe mortgage lending disclosures.
  • Oct. 18 – OCC: mandatory contractual stay requirements for QFCs.
  • Oct. 24 – FinCEN: extension of BSA/AML requirements to banks without a federal functional regulator.
  • Oct. 27 – FDIC: third-party lending guidance.
  • 45 days after publication in NYS Register – NY Dep't of Financial Services: cybersecurity requirements.
  • Nov. 14 – OCC: receiverships of uninsured national banks (with implications for possible FinTech charter).
  • Nov. 14 – OCC: prohibition from dealing and investing in industrial and commercial metals.
  • Nov. 25 – Federal Reserve: changes to capital planning and stress testing for large, noncomplex banking firms.
  • Dec. 22 – Federal Reserve: limits on physical commodity activities of financial holding companies.