Notwithstanding yet one more snowfall on Monday, March 17, three decisions came out of Washington this past week that could affect all segments of the banking industry. 

  • The Federal Open Market Committee met on March 18 and 19, and, while it formally continued the current policy of reducing its bond-buying program in $10 billion monthly increments, it suggested that it could allow interest rates to rise sooner than the markets may have expected. 
  • Banks issuing credit cards won a major victory on Friday, March 21, when the D.C. Circuit upheld the Federal Reserve's debit card interchange rule (implementing the Durbin Amendment) virtually in its entirety, requiring only that the Federal Reserve review its decision on the issuers' charge for transaction monitoring costs. 
  • The crisis in the Ukraine may be making its first inroads into the banking industry.  On March 20, the President issued an order freezing the U.S. assets of 20 Russian individuals and Rossiya Bank.  On the same day, OFAC added the 20 individuals and the bank to the SDN lists, which forbids any business dealings by any U.S. companies or banks with the designated entities.  While Rossiya Bank's U.S. presence is modest (if it exists at all), the designation caused Visa and MasterCard to stop all services to the Bank with respect to the cards that the Bank has issued.

Today, the Federal Reserve released a report on mobile payments. The significance of the report (summarized below under Mobile Payments) lies less in its findings (which are unexceptional) than in the fact of its production - evidencing the Federal Reserve's interest in this segment of the banking industry.

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

The Economy

  • Federal Open Market Committee meeting (Mar. 18-19).
    • "The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term."
    • "The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions."
    • "The Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate."
    • "The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."
    • "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
    • Continues monthly $10 billion reduction in bond buying program for April.
      • Longer term Treasury securities: $30 billion, down from $35 billion in March.
      • Agency MBS: $25 billion, down from $30 billion.
    • FOMC Statement available at http://www.federalreserve.gov/newsevents/press/monetary/20140319a.htm.
    • Federal Reserve Bank of New York Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Back Securities available at http://www.newyorkfed.org/markets/opolicy/operating_policy_140319.html.      

Russia/Ukraine

Appraisals

  • Appraisal management companies – proposed rule from federal agencies (Mar. 24)
    • Requirements for asset management companies.
    • Standards for state agencies to register and supervise asset management companies.
    • States not explicitly required to set up a regulatory framework for these companies, but a company may not provide appraisal management services for federally related transactions in a state that has not established such a regulatory framework.
    • Issued pursuant to Dodd-Frank section 1473.
    • Text available at http://www.federalreserve.gov/newsevents/press/bcreg/20140324a.htm.
    • Comment deadline: 60 days after publication in Federal Register.

CFPB

Community Development/Crowdfunding

Debt Collection

Interchange Fees

  • Federal Reserve rule on Durbin Amendment upheld by D.C. Circuit
    • NACS v. Board of Governors, No. 12-5270 (D.C. Cir. Mar. 21, 2014), available at http://www.cadc.uscourts.gov/internet/opinions.nsf.
      • One issue to be remanded to Federal Reserve: whether issuers may charge "transaction monitoring" costs in addition to fraud prevention adjustment, but in the meantime current rule remains fully in effect.
    • For reference, the district court opinion, which was reversed, in Civil Action No. 2011-2075 (July 31, 2013), is available at https://ecf.dcd.uscourts.gov/cgi-bin/Opinions.pl?2013

Mobile Payments

  • Consumers and Mobile Financial Services 2014, Federal Reserve report, released Mar. 25
    • Findings
      • Mobile phones are in widespread use.
      • The ubiquity of mobile phones is changing the way consumers access financial services.
      • Among consumers who do not use mobile financial services, the principal reasons cited for not using the services are perceptions of limited usefulness and benefits, and concerns about security.
      • Smartphones are changing the way people shop and make financial decisions.
    • Report available at http://www.federalreserve.gov/newsevents/press/other/20140325a.htm.

Monetary Policy

  • Incorporating Financial Stability Considerations into a Monetary Policy Framework, Remarks by Federal Reserve Governor Stein at the International Research Forum on Monetary Policy (Mar. 21).

Payday Lending

Swaps and Derivatives

  • OCC Supplemental Examination Procedures for End-User Derivatives and Trading Activities.
    • Procedures include:
      • Minimum scope procedures for the policies, procedures, systems, controls, and governance structures related to end-user derivatives and trading activity, including internal audit, the board of directors’ risk committee, market risk management, valuation, and model governance.
      • Ongoing monitoring of portfolios with end-user derivatives and trading positions to identify new and changing risks.
    • OCC Bulletin 2014-8 (Mar. 24), available at http://www.occ.gov/news-issuances/bulletins/2014/bulletin-2014-8.html.
  • Reporting and recordkeeping – CFTC seeks public comment on reporting rules in 17 CFR part 45.
  • Impact of the Dodd-Frank Act on Commodity Futures and Swaps Markets

Too Big to Fail.

  • Supervisory stress tests – Federal Reserve releases results of both supervisory and company-run tests for 30 U.S. bank holding companies (Mar. 20).
  • Corrections to stress test results issued Mar. 21 and 24.
  • CCAR results to be released Mar. 26.

Truth in Lending Act

  • Notice of right of rescission
    • Notice based on Model Form H-8, which provides notice of the right of rescission within three "business days", is not clear and conspicuous where there is uncertainty about the treatment of Saturday as a business day.
    • Simmons v. CitiMortgage, Inc., Case No. 2:11-CV-11 (D. Utah, Jan. 3, 2014), available at https://ecf.utd.uscourts.gov/cgi-bin/opinions.pl

Volcker Rule

Bank Closings

  • None.

Congressional Events

  • Senate Banking Committee
    • No hearings.
  • House Financial Services Committee
    • No hearings.

Upcoming Events

  • Mar. 24-25
    • Federal Reserve, 2014 Financial Innovations Roundtable
      • Strategies and Innovations for Health-Related Community Investing
      • Invitation only.
  • Mar. 25
    • House Financial Services Committee hearing, "Why Debt Matters."
  • Mar. 26
    • Senate Banking Committee hearing, "Are Alternative Financial Products Serving Consumers?"
    • House Financial Services Committee hearing, "The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System."
  • Mar. 30 – Apr. 2
    • Federal Reserve Bank of San Francisco, 2014 National Interagency Community Reinvestment Conference, Chicago
      • Fully booked
  • Mar. 31
  • Apr. 3
    • CFTC public roundtable on effect on commercial end-users of Dodd-Frank rules.
  • Apr. 4

Regulatory Comment Deadlines

  • Mar. 24 – SEC: amendments to Regulation A.
  • Mar. 28 – OCC: heightened expectations for large national banks and federal savings associations.
  • Mar. 31 – Federal Reserve: amendments to Policy Statement on Payment System Risk and to Regulation HH (financial market utilities) to reflect international Principles for Financial Market Infrastructures.
  • April 1 – CFPB: supervision of larger international money transmitters.
  • April 11 – BCBS: Basel III: The Net Stable Funding Ratio.
  • April 15 – Federal Reserve: repeal of Regulation P.
  • April 16 – Federal Reserve: advance notice of proposed rulemaking on physical commodity holdings by financial holding companies.
  • April 21 – Federal Reserve: modification of definition of “creditor” in Identity Theft Red Flags Rule.
  • April 21 – Federal Reserve: repeal of Regulation DD.
  • May 2 – Federal Reserve: Application of Regulation CC to electronic checks and electronic returned checks.
  • 60 days after publication in the Federal Register – SEC: standards for covered clearing agencies.
  • 60 days after publication in the Federal Register – CFTC: swap reporting and recordkeeping requirements under 17 CFR part 45.
  • 60 days after publication in the Federal Register - Federal Reserve, OCC, FDIC, CFPB, NCUA, FHFA: regulation of asset management companies.