The federal regulatory agencies have been notably busy over the past two weeks.  Earlier today, the FDIC Board proposed a new methodology for determining insurance assessments on established small banks, once the Deposit Insurance Fund's reserve ratio reaches 1.15%. (Ratio reported at year end 2014 was 1.01%.) The FDIC expects the methodology to be revenue neutral. Other important developments include:  

  • Release of an interagency policy statement on standards for measuring diversity at banks and other financial institutions.  These standards are likely to be covered in examinations, and community banks should review their employment practices.   
  • Issuance by the Federal Reserve of standards for the disclosure of stress test results by mid-size banks ($10 - $50 billion).  
  • In the mortgage lending area, two CFPB actions for violations of the Loan Originator Compensation Rule and a final decision in the CFPB's first adjudicated case, this one involving RESPA.  
  • Publication by the OCC of a revised Residential Real Estate Lending booklet to, among other things, incorporate the CFPB mortgage rules.   
  • Four different BSA/AML enforcement actions that warrant attention.  
  • Issuance by the New York Department of Financial Services of the first set of regulations specifically governing issuers of virtual currency, as well as the grant of the state's first BitLicense.

The full set of events over the past two weeks is as follows:

 The Economy

  • Federal Reserve issues June 2015 Beige Book (June 3).
    • "Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded during the reporting period from early April to late May."
    • "Manufacturing activity generally held steady or increased over the reporting period, except for in the Dallas District where it was slightly weaker and in the Kansas City District where it fell markedly."
    • "Home prices continued rising and low home inventories continued to constrain sales activity in some areas of the country. "
    • "Overall loan demand increased, with particular strength noted in the New York District. Credit quality and delinquency rates were stable or improved. Credit standards were mostly unchanged, except for scattered reports of easing in the Philadelphia, St. Louis, Atlanta, and San Francisco Districts."
    • "Employment levels were up slightly over the reporting period, with some reports of layoffs. Wages rose slightly. Prices were stable or ticked up, although manufacturers in some districts cited lower input prices."
    • Beige Book available at  
  •  GDP and related estimates from Bureau of Economic Analysis (May 29).
    • Real GDP decreased at annual rate of 0.7% in first quarter.  In fourth quarter of 2014, real GDP grew by 2.2%.
    • "The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from personal consumption expenditures (PCE), private inventory investment, and residential fixed investment."
    • Estimate available at   
  • "The U.S. Economic Outlook and Implications for Monetary Policy," remarks by Federal Reserve Governor Brainard at the Center for Strategic and International Studies (June 2).
    • "[Recent financial] data are presenting a mixed picture that lends itself to materially different readings."
    • "My own reading is that earlier, more optimistic growth projections may have placed too much weight on the boost to spending from lower energy prices and too little weight on the negative implications for aggregate demand of the significant increase in the foreign exchange value of the dollar and large decline in the price of crude oil."
    • "Starting this month, with the end of calendar-based forward guidance, the decisions of the Federal Open Market Committee (FOMC) regarding the level of the federal funds rate will depend on the evolution of incoming economic data. While the date of liftoff will not be predetermined, the conditions governing the decision to lift off have been clearly stated."
      • "First …  reasonable confidence that inflation will be on track to reach its target of 2 percent over the medium term."
      • "Second … further improvement in the labor market with solid further employment growth and further evidence of a narrowing of resource utilization gaps based on various indicators, including the unemployment rate, the labor force participation rate, the percentage of employees who are working part time for economic reasons, and faster wage growth."  
    • Remarks available at

Community Banking

  • FDIC proposes new methodology for determining assessments on small banks once the Deposit Insurance Fund's reserve ratio reaches 1.15% (June 16).  See Deposit Insurance below.  
  • All banks and bank  holding companies become subject to diversity standards under interagency policy statement released by banking agencies, CFPB, and SEC (June 9). SeeDiversity Standards below.


Auto Lending

  • CFPB finalizes rule on supervision of "larger participants" in auto lending market (June 10).
    • Jurisdiction over all nonbank auto finance companies that make, acquire, or refinance 10,000 or more auto loans or leases in a year.
      • Rule takes effect 60 days after publication in the Federal Register.
    • Updated examination procedures for larger banks and nonbanks engaged in auto lending also released.  Issues to be covered in examinations include:
      • Fair marketing practices and accurate disclosures of loan terms.
      • Provision of accurate information to credit bureaus.
      • Fair debt collection practices.
      • Compliance with ECOA and other consumer protection requirements.
    • Rule and examination procedures available at


  • Treasury Department releases two risk assessments on money laundering and terrorist financing (June 12).
    • National Money Laundering Risk Assessment.
      • "The United States has effectively kept pace with innovation, such that criminals pursuing money laundering opportunities rely on costly and burdensome methods to mask their identities from financial institutions in order to open and maintain accounts."
      • "U.S. framework for anti-money laundering and counter terrorist financing effectively narrows many of the most significant vulnerabilities that money launderers seek to exploit through a core set of tools, including targeted financial sanctions, law enforcement investigations and prosecutions and regulatory preventive measures, and by working to enhance international standards."  
    • National Terrorist Financing Risk Assessment.
      • "A decrease in the use of the U.S banking system for terrorist financing-related transactions, as terrorists are forced into more expensive and less efficient methods to facilitate terrorist financing, such as cash smuggling."
    • Assessments available at
  • Government actions against Bank of Mingo settled (June 15).
  • FinCEN imposes civil money penalties for BSA/AML violations.
    • Northern Mariana Islands casino (June 3).
      • Failure to establish AML program.
      • Failure to file CTRs.
      • Accommodation of money laundering requests.
      • Civil penalty of $75 million.
      • Announcement and order available at
    • Michigan money service business, King Mail & Wireless, Inc., for failure to maintain money laundering program and engaging in high-risk transactions in the form of wire transfers to Yemen (June 1).
  • Federal Reserve and Massachusetts Division of Banks announce written agreement with State Street Corporation (June 1).
  • Statement from Egmont Group of Financial Intelligence Units on the global fight against terrorism (June 12).



  • CFPB Director Cordray issues first decision in an adjudicated case (June 9).
    • In the Matter of PHH Corporation involved violations of RESPA.
    • See RESPA below.

Deposit Insurance

  • FDIC board proposes changes to deposit insurance assessments for small banks (June 16).
    • FDIC defines small bank as, with some exceptions, a bank with less than $10 billion in total assets.
    • Per the FDIC, proposal would:
      • Determine assessment rates for all established small banks (those that are not new) using financial measures and supervisory ratings derived from a statistical model estimating the probability of failure over three years.
      • Eliminate risk categories, but subject assessment rates to minimums and maximums based upon a bank’s CAMELS composite rating.
      • Maintain the range of assessment rates that will apply once the DIF reaches 1.15 percent; thus, under the NPR, as under current regulations, initial deposit insurance assessment rates will fall once the reserve ratio reaches 1.15 percent.
      • Be revenue neutral; that is, in a manner that leaves aggregate assessment revenue collected from small banks approximately the same as it would have been absent the proposal.
      • To help established banks evaluate the effect of the proposed rule, the FDIC will place an assessment calculator on the FDIC's website that will allow banks to estimate their assessment rates under the proposal.
    • Comment deadline: 60 days after publication in Federal Register.
    • FIL-25-2015 available at
    • Statement of Chairman Gruenberg available at
    • Staff memorandum available at

Diversity Standards

  • Interagency policy statement on diversity standards published by banking agencies, CFPB, and SEC (June 9).
    • Standards provide "framework for regulated entities to create and strengthen their diversity policies and practices."  Elements of framework include:
      • Organizational commitment to diversity.
      • Workforce and employment practices.
      • Procurement and business practices.
      • Practices to promote transparency of organizational diversity and inclusion within the entities' U.S. operations.
    • Statement is effective immediately.
    • Information collection standards also proposed.
    • Comment deadline: August 10.
    • Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies, 80 Fed. Reg. 33016 (June 9, 2015), available at

Financial Literacy

Global  Economy

Interest Rate Risk

  • Basel Committee issues consultative document, Interest rate risk in the banking book (June 8).
    • Objectives: to ensure adequate capital in a low-interest rate environment and to limit capital arbitrage between the banking book and the trading book.
    • Two options for capital treatment of interest rate risk:
      • Uniform quantitative Pillar 1 measurement.
      • Quantitative disclosure of interest rate risk based on Pillar 1 measurement.
    • Comment deadline: Sept. 11.
    • Document available at

Investment Advisers

Mobile Banking

Mortgage Lending

  • OCC issues revised "Residential Real Estate Lending" booklet in Comptroller's Handbook(June 15).
    • Booklet:
      • Provides updated guidance to examiners on assessing the quantity of risk associated with residential real estate lending and the quality of lending risk management.
      • Includes wholesale changes to the functional areas of production, servicing, and collections and foreclosure to incorporate recent lessons learned and regulatory changes.
      • Addresses recent amendments to Regulation X and Regulation Z issued by the CFPB.
    • Booklet available at

Mortgage Lending – Loan Originator Compensation Rule

Mutual Funds

  • SEC proposes five changes to reporting requirements for investment companies (May 20).
    • New Form N-PORT would require reports on monthly portfolio holdings in a structured data format.
    • Regulation S-X would be amended to require standardized enhanced disclosure about derivatives in investment company financial statements.
    • New Rule 30e-3 would permit but not require RICs to transmit periodic reports to shareholders by making reports accessible on a website, subject to certain conditions.
    • New Form N-CEN would require RICs, other than face amount certificate companies, to report annually certain census-type information in a structured data format.
    • Rescission of Forms N-Q and N-SAR.
    • Proposal available at
    • Comment deadline: 60 days after publication in the Federal Register.


  • CFPB Director Cordray issues final decision in adjudicated case concerning violation of RESPA by PHH Corp. and related entities (June 4).
    • Decision holds that PHH accepted kickbacks on certain closed loans in the form of mortgage reinsurance premiums that mortgage insurers paid to a PHH subsidiary.
    • PHH ordered to disgorge all such reinsurance premiums to CFPB, totaling $109 million.
    • PHH also prohibited from referring any consumer to a provider of a real estate settlement service if the provider has agreed to purchase any service from, or make any payment to, PHH, and if the purchase or payment is triggered by the referral.
    • PHH and other respondents may file a petition for review in any U.S. Court of Appeals within 30 days.
    • Decision and order in In the Matter of PHH Corporation available at

Reverse Mortgages

Shadow Banking

Stress Tests

  • Public disclosure requirements for medium-sized financial companies that conduct stress tests reiterated by federal banking agencies (June 2).
    • Companies with between $10 and $50 billion in assets are required to assess potential impact of three scenarios on consolidated losses, revenues, balance sheet, and capital.
    • Annual public disclosure of the following information from the severely adverse scenario also required.
      • Description of the types of risks included in the stress test;
      • Summary description of methodologies used;
      • Estimates of aggregate losses, pre-provision net revenue, provisions for loan and lease losses, and net income; and
      • Pro forma regulatory capital ratios along with an explanation of the most significant causes for the change in regulatory capital ratios.
    • Agencies do not approve or disapprove these tests and will not comment publicly.
    • Statement available at

Too Big to Fail

Unfair,  Deceptive, or Abusive Acts or Practices

  • CFPB alleges in suit filed in federal district court that violations of Loan Originator Compensation Rule constitute violation of the prohibition on unfair, deceptive, or abusive acts or practices (June 4).
    • See Mortgage Lending – Loan Originator Compensation Rule above.

Virtual Currency

Volcker Rule

  • Joint venture exclusion: agencies post new FAQ to clarify that joint venture is a covered fund if it raises money from a small number of investors primarily for the purpose of investing in securities, whether the securities are intended to be graded frequently held for a longer duration, held to maturity, or held until the dissolution of the entity (June 12).

Bank Closings

  • None.

Congressional Activity – Upcoming

Congressional Activity – Recent

Upcoming Events

  • Jun. 14 – 17
    • ABA National Regulatory & Compliance Conference.
  • June 16
    • FDIC Board meeting.
    • OCC Director Workshop, Risk Governance, Jacksonville, FL.
  • June 16-17
    • FOMC meeting.
  • June 17
    • OCC Director Workshop, Compliance Risk, Jacksonville, FL.
    • FDIC Chicago Region regulatory conference call, "Intermediate Small Ban k CRA: Maximizing Your Bank's Success."
  • June 18
    • FDIC teleconference, San Francisco Region Bankers' Forum, "Tips for Transitioning to Intermediate Small Bank or Large Bank CRA Procedures."
    • FDIC webinar, "Money Smart for Older Adults Train-the-Trainer Online Live Meeting."
  • July 13-15
    • FDIC, 2015 Interagency Minority Depository Institution and CDFI Conference, Washington, DC.
  • July 14
    • OCC Director Workshop, Risk Governance, Des Moines, IA.
  • July 15
    • OCC Director Workshop, Compliance Risk, Des Moines, IA.
  • Oct. 15-16
    • FDIC, 5th Annual Consumer Research Symposium, Arlington, VA.
  • Nov. 19-20
    • National Community Investment Fund, 2015 Development Banking Conference, Chicago, IL.

Regulatory Comment Deadlines

  • June 23 – CSBS/AARMR: prudential regulatory standards for non-bank mortgage servicers.  
  • July 24 – Federal Reserve: inclusion of certain general obligation state and municipal bonds in high-quality liquid assets for the purpose of the liquidity coverage ratio.  
  • 60 days after publication in Federal Register – SEC:  new and amended reporting requirements for investment advisers.  
  • 60 days after publication in Federal Register – SEC: new and amended reporting requirements for mutual funds.  
  • August 10 – Federal Reserve/FDIC/OCC/NCUA/CFPB/SEC: information collection relating to interagency diversity standards.  
  • 90 days after publication in Federal Register – FDIC: ANPR on deposit account recordkeeping by large banks.  
  • 90 days after publication in Federal Register – Federal Reserve/FDIC/OCC: EGRPRA review, phase 3.  
  • Sept. 11 – Basel Committee: consultative document on interest rate risk.