The past week has seen several events, but as a whole these developments have been relatively modest.  Community banks nevertheless should read with care two sets of releases, both of which affect IT functions: FFIEC's warnings about ATM fraud and denial-of-service attacks as well as three re-issued FDIC booklets on outsourcing technology services. In addition, community banks with investment interests in CLOs now have until July 21, 2017, to conform their holdings to the Volcker Rule. Conformance seems likely to mean divestiture.

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

The Economy

  • March jobs report
  • "What the Federal Reserve Is Doing to Promote a Stronger Job Market," remarks by Federal Reserve Chair Yellen at the 2014 National Interagency Community Reinvestment Conference (Chicago, IL, Mar. 31).
    • "By keeping interest rates low, we are trying to make homes more affordable and revive the housing market. We are trying to make it cheaper for businesses to build, expand, and hire. We are trying to lower the costs of buying a car that can carry a worker to a new job and kids to school, and our policies are also spurring the revival of the auto industry."
    •  "The U.S. economy is still considerably short of the two goals assigned to the Federal Reserve by the Congress. The first of those goals is maximum sustainable employment, "
    • "Earlier this month, the Fed reiterated its overall commitment to maintain extraordinary support for the recovery for some time to come. This commitment is strong, and I believe the Fed's policies will continue to help sustain progress in the job market."
    • Remarks available at


  • Supplementary leverage ratios for bank holding companies with at least $700 billion in total consolidated assets or at least $10 trillion in assets under management and their bank subsidiaries.
    • Expected requirements:
      • 5% supplementary leverage capital for covered bank holding companies.
      • 6% for their subsidiary banks.
    • FDIC to:
    • Federal Reserve likely to act on April 8 as well; OCC to follow.
  • Basel III-based amendments to risk-based and leverage capital requirements and methodologies for calculating risk-weighted assets under standardized and advanced approaches.
    • FDIC to approve final rule at meeting on April 8.


Community Banking

Cyber Security

  • FFIEC Advisory Letter with two statements on cyber-attacks (April 2).
    • Cyber-attacks on Financial Institutions' ATM and Card Authorization Systems. Notice of recent increase in large dollar value cash-out fraud, known as "Unlimited Operations". Supervisory expectations for banks to:
      • Conduct ongoing information security risk assessments.
      • Perform security monitoring, prevention, and risk mitigation.
      • Protect against unauthorized access.
      • Implement and test controls around critical systems regularly.
      • Conduct information security awareness and training programs.
      • Test incident response plans.
      • Participate in industry information sharing forums.
    • Distributed Denial-of-Service (DDoS) Cyber-Attacks, Risk Mitigation, and Additional Resources. Supervisory expectations for banks to:
      • Maintain an ongoing program to assess information security risks.
      • Monitor Internet traffic to the bank's website to detect attacks.
      • Activate incident response plans and notify service providers if bank suspects that a DDoS attack is occurring.
      • Ensure sufficient staffing for the duration of the DDoS attack and consider hiring pre-contracted third-party servicers.
      • Consider sharing information with organization and law enforcement because attacks can change rapidly.
      • Evaluate and address any gaps in the response following attacks and in ongoing risk assessments.
    • Statements available at

Community Development

Debit Cards

Housing Reform

  • HOME Forward Act of 2014 introduced by House Financial Services Committee Ranking Member Maxine Waters (D-CA) (Mar. 27).
    • Fannie Mae and Freddie Mac replaced with Mortgage Securities Cooperative, sole issuer of securities guaranteed by new Mortgage Insurance Fund.
      • 5-year wind-down of Fannie and Freddie.
    • Maintain 30-year fixed rate mortgage.
    • New regulator – National Mortgage Finance Agency
    • Materials available at


Swaps and Derivatives


  • Modified Dutch auctions for all of Treasury's preferred stock and sub debt in four institutions.  Auctions closed at 6 pm on April 3.
    • Community First, Inc. (Columbia, TN).
    • Freeport Bancshares, Inc. (Freeport, IL)
    • Great River Holding Company (Baxter, MN)
    • Patriot Bancshares, Inc. (Houston, TX)

Third Party Vendors

  • FDIC issues letter, Technology Outsourcing: Informational Tools for Community Bankers(April 7).
    • Described as "informational tools," rather than examination procedures or official guidance.
    •  Re-issues three booklets, all originally released in 2001:
      • "Effective Practices for Selecting a Service Provider."
      • "Tools to Manage Technology Providers' Performance Risk Service Level Agreements."
      • "Techniques for Managing Multiple Service Providers."
    • FIL-13-2014, including attachments, available at

Too Big to Fail

Volcker Rule

  • Federal Reserve extends by two additional years the compliance date for conformance of investments in collateralized loan obligations to Volcker Rule.  Conformance likely to mean divestiture.
    •  Compliance deadline now July 21, 2017.  Until then,
      • Bank not required to include CLO ownership interests in determining investment limits under Volcker.
      • Bank not required to deduct CLO investments from tier 1 capital.
    • Limited to CLOs in place as of Dec. 21, 2013.
    • Affects primarily securitization vehicles backed predominantly by commercial loans.
    • Announcement available at

Bank Closings

  • None.

Congressional Events.

Upcoming Events

  • April 8
    • FDIC Board meeting
      • Final rule – supplementary leverage ratio
      • Final rule – amendments to capital requirements and methodologies for calculating risk weighted assets.
      • Proposed rule – Basel Committee revisions to denominator for supplementary leverage ratio.
      •  Materials available at
    • Nomination hearing – Senate Banking Committee
      • Nani Coloretti to be Deputy Secretary of HUD
    • House Financial Services Committee hearing, "Who's in Your Wallet: Examining How Washington Red Tape Impairs Economic Freedom"
  • April 9
    • FDIC Advisory Committee on Community Banking meeting
    • House Financial Services Committee hearing, "Legislative Proposals to Enhance Capital Formation for Small and Emerging Growth Companies"
  • April 29
    • Senate Banking Committee mark-up of Johnson-Crapo bill.
    •  OCC Mutual Savings Association Advisory Committee meeting.
  • May 19
    • FSOC conference on asset management industry and its activities.

Regulatory Comment Deadlines

  • 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.  
  • April 25 – CFTC: interim final rule on access to counterparty data for swap executed anonymously.  
  • April 28 – SEC: asset-backed securities; dissemination of potentially sensitive asset-level data.  
  • May 2 – Federal Reserve: Application of Regulation CC to electronic checks and electronic returned checks.  
  • May 27 – SEC: standards for covered clearing agencies.  
  • May 27 – CFTC: swap reporting and recordkeeping requirements under 17 CFR part 45.  
  • 60 days after publication in Federal Register – federal banking agencies: standards for asset management companies and state agencies.