A number of important developments for banks occurred last week, which motivates this last issue of the year, even though we recognize that many of our readers have begun to turn their attention elsewhere for the next two weeks.  As to those developments: in addition to the decision of the Federal Open Market Committee to begin the lift-off of the federal funds rate, the OCC issued its semi-annual risk perspective, and the banking agencies jointly issued a warning about CRE lending.  The CFPB also completed several interesting enforcement actions. For large banks, the Federal Reserve issued consolidated guidance on capital planning.

          The developments over the past week included:

The Economy

  • Federal funds rate: FOMC raises target range for federal funds rate 25 basis points to ¼ to ½ percent (Dec. 16).
    • "Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation."
    • "In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal."
    • "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."
    • FOMC statement available  at http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm.
    • Economic projections available athttp://www.federalreserve.gov/newsevents/press/monetary/20151216b.htm.


  • Federal Reserve and NY Dep't of Financial Services enter into consent orders with Habib Bank Limited (Pakistan) and its limited NY branch regarding anti-money laundering compliance and failure to comply fully with 2006 written agreement (Dec. 15).
    • Structural reforms: changes to corporate governance and management oversight; revised programs subject to agency approval for compliance, customer due diligence, suspicious activity monitoring and reporting, and OFAC compliance; and new policies and procedures for interaction with regulators.
    • Independent reviews of compliance generally and compliance of dollar clearing activity with OFAC regulations.
    • New limits on dollar clearing activities.
    • No financial penalty.
    • Federal Reserve order available at http://www.federalreserve.gov/newsevents/press/enforcement/20151217a.htm.
    • NYDFS order available at http://www.dfs.ny.gov/about/press/pr1512171.htm.


Credit Underwriting

  • OCC releases Semiannual Risk Perspective for Fall 2015 (Dec. 16).  Highlights include:
    • Strategic challenges to growing revenues to meet target rates of return in a slow-growth, low interest rate environment.
    • Easing of credit underwriting standards and practices, including structure, terms, pricing, collateral, guarantors, and loan controls in response to competitive pressures and growth objectives. Easing particularly evident in high-growth loan segments, such as indirect auto, commercial and industrial, and multifamily.
    • Reaching for yield by loosening underwriting and extending asset duration trends.
    • Cyber threats, reliance on service providers, and resiliency planning.
    • Bank Secrecy Act risk.
    • Risk Perspective and remarks of Comptroller Curry available at http://www.occ.gov/news-issuances/news-releases/2015/nr-occ-2015-161.html.

CRE Lending

  • Federal Reserve, OCC, FDIC release "Statement on Prudent Risk Management for Commercial Real Estate Lending" (Dec. 18).
    • Agencies note substantial growth in CRE lending and emphasize previous warnings about need for underwriting discipline, prudent risk management, and adequate capital.
    • Statement follows up on concerns stated in OCC's Semiannual Risk Perspective for Fall 2015 (Dec. 16) and 21st annual Survey of Credit Underwriting Standards (Dec. 9).
    • Statement available at http://www.occ.gov/news-issuances/news-releases/2015/nr-ia-2015-163.html.

Credit Reporting

Debt Collection

  • CFPB releases Compliance Bulletin 2015-07, In-Person Collection of Consumer Debt (Dec. 16).
  • CFPB enters into consent order with EZCORP, Inc. regarding illegal debt collection practices in connection with payday and installment loans (Dec. 16).
    • Violations:
      • Visits to consumers' homes and workplaces.
      • Contacts with third parties and with consumers at workplaces.
      • Threats of legal action.
      • False statements about not performing credit checks and about consumer rights to terminate electronic withdrawals, collection calls, and right to early repayment.
      • Mandatory debt repayment through pre-authorized checking account withdrawals.
      • Incurring bank fees for consumers.
    • Relief
      • Refunds of $7.5 million to consumers.
      • Civil money penalty of $3 million.
      • Cessation of collection of remaining payday and installment debt.
      • Cessation of illegal debt collection practices.
    • Consent order available at http://www.consumerfinance.gov/newsroom/cfpb-orders-ezcorp-to-pay-10-million-for-illegal-debt-collection-tactics/.

Mortgage Lending


Regulatory Reform

  • Federal banking agencies request comments on final three of twelve regulatory categories included in EGRPRA regulatory review process (Dec. 17).

Student Loans

Too Big to Fail

  • Federal Reserve releases guidance that consolidates capital planning expectations for large financial institutions and clarifies differences based on institution size and complexity (Dec. 21).

Congressional Activity – Recent

Regulatory Comment Deadlines

  • Jan. 5, 2016 – FDIC: increase in DIF reserve ratio to 1.35% through surcharge on larger banks.
  • Feb. 1, 2016 – Federal Reserve: long-term debt rule.
  • Feb. 1, 2016 – NY Dep't of Financial Services: BSA/AML programs and certification.
  • Feb. 2, 2016 – Federal Reserve: disclosure of liquidity information by large banking firms.
  • Mar. 11, 2016 – Basel Committee: second consultative report on "Revisions to the Standardized Approach for Credit Risk."
  • 90 days after publication in the Federal Register – SEC: derivatives rules for BDCs and registered funds.
  • 90 days after publication in the Federal Register – Federal Reserve, OCC, FDIC: EGRPRA categories of rules of procedure, safety and soundness, and securities