The last two weeks of 2014 were, as is customary this time of year, relatively quiet. The marginally noteworthy developments were adjustments to various dollar thresholds under the Truth in Lending Act and the Community Reinvestment Act and a quick effort by the agencies to assure community banks that recently proposed revisions to the Basel III capital rules would not likely affect them, or at least not any time soon.
The full set of developments over the past two weeks is as follows:
- Real gross domestic product increased at annual rate of 5.0% in third quarter 2014 (Dec. 22).
- Announcement available at http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm.
- BCBS releases consultative paper, Revisions to the Standardized Approach for credit risk (Dec. 22, 2014).
- Bank exposures: would no longer be risk-weighted by reference to the bank's external credit rating or that of its sovereign of incorporation, but would instead be based on two risk drivers: the bank's capital adequacy and its asset quality.
- Corporate exposures: would no longer be risk-weighted by reference to the borrowing firm's external credit rating, but would instead be based on the firm's revenue and leverage. Further, risk sensitivity and comparability with the IRB approach would be increased by introducing a specific treatment for specialised lending.
- Retail category: would be enhanced by tightening the criteria to qualify for a preferential risk weight, and by introducing an alternative treatment for exposures that do not meet the criteria.
- Residential real estate: would no longer receive a 35% risk weight. Instead, risk weights would be based on two commonly used loan underwriting ratios: the amount of the loan relative to the value of the real estate securing the loan (i.e. the loan-to-value ratio) and the borrower's indebtedness (i.e. a debt-service coverage ratio).
- Commercial real estate: two options are currently under consideration: (a) treating the exposures as unsecured with national discretion for a preferential risk weight under certain conditions; or (b) determining the risk weight based on the loan-to-value ratio.
- Credit risk mitigation: the framework would be amended by reducing the number of approaches, recalibrating supervisory haircuts and updating the corporate guarantor eligibility criteria.
- Paper available at http://www.bis.org/bcbs/publ/d307.htm.
- Federal Reserve, FDIC and OCC response (Dec. 22).
- Proposed revisions "are intended to apply primarily to large, internationally active banking organizations and not community banking organizations."
- Agencies "will consider the proposals outlined in the consultative paper with the goal of developing a stronger and more transparent risk-based capital framework for the largest institutions."
- Response available at https://www.fdic.gov/news/news/press/2014/pr14113.html.
Community Reinvestment Act
- Asset size thresholds for categories of institutions adjusted based on changes to Consumer Price Index (Dec. 17).
- Small bank or small savings association: assets of less than $1.221 billion.
- Intermediate small bank or savings association: assets of at least $305 million but less than $1.221 billion.
- 79 Fed. Reg. 77852 (Dec. 20, 2014), available at https://www.federalregister.gov/articles/2014/12/29.
Financial Stability Oversight Council
- Request for comment on whether asset management products and activities may pose potential risks to the U.S. financial system in the areas of liquidity and redemptions, leverage, operational functions, and resolution, or in other areas (Dec. 18).
- Comment deadline: Feb. 23.
- 79 Fed. Reg. 77488 (Dec. 24, 2014) available at https://www.federalregister.gov/articles/2014/12/24.
- CFPB adjusts asset-size exemption threshold in line with Consumer Price Index (Dec. 15).
- Insured depository institutions with assets of less than $44 million exempt from data collection requirements.
- 79 Fed. Reg. 77854 (Dec. 29, 2014) available at https://www.federalregister.gov/articles/2014/12/29.
- Federal Reserve adjusts dollar amount used to determine whether a small loan is exempt from the special appraisal requirements that apply to higher-priced mortgage loans (Dec. 23).
- Ceiling for exemption now $25,500.
- Adjustment available at http://www.federalreserve.gov/newsevents/press/bcreg/20141223a.htm.
Physical Commodity Derivatives
- CFTC publishes extension of comment deadline for certain issues related to proposed rules on position limits for physical commodity derivatives and aggregation (Jan. 2).
- Issues Still open for comment: exemptions for bona fide hedging positions.
- Also open for comment are issues on CFTC Agricultural Advisory Committee's Dec. 4 agenda and issues raised at Dec. 4 meeting.
- New comment deadline: Jan. 22.
- Notice available at 80 Fed. Reg. 200 (Jan. 5, 2015), https://www.federalregister.gov/articles/2015/01/05/2014-30831/position-limits-for-derivatives-and-aggregation-of-positions.
- CFPB publishes report, The extension of high-cost credit to service members and their families (Dec. 29).
- Report urges Defense Department to broaden Military Lending Act rules to cover deposit advance products and additional types of payday, auto title, and installment loans.
- Report available at http://www.consumerfinance.gov/newsroom/cfpb-report-finds-loopholes-in-military-lending-act-rules-rack-up-costs-for-servicemembers/.
Too Big to Fail
- FSOC requests comment on asset management and systemic risk. See Financial Stability Oversight Council above.
Truth in Lending
- CFPB adjusts asset-size threshold for certain creditors to qualify for exemption from escrow account requirement for higher-priced mortgage loan, in line with Consumer Price Index (Dec. 15).
- Creditors with total assets of less than $2.06 billion may qualify.
- 79 Fed. Reg. 77855 (Dec. 29, 2014) available at https://www.federalregister.gov/articles/2014/12/29.
Congressional Hearings – Upcoming
- None scheduled.
- OCC Community Bank Director Workshops, full 2015 schedule available at http://www.seiservices.com/occ2015/default.aspx/eurl.axd/535dadfc0f8b0b46aa59a491ad7e75c1.
- Jan. 13
- Treasury Department public forum on money services businesses and banking access.
- Feb. 4
- EGRPRA outreach meeting, Dallas TX.
- Feb. 23-25
- OCC Workshop, Building Blocks for Directors: Keys to Success, Miami FL.
- Mar. 3, 2015
- FDIC New York Region Regulatory Conference Call, BSA Today – Regulatory Tips, Trends, and Hot Topics.
- Mar. 10
- OCC Workshop, Risk Governance: Improve Director Effectiveness, Morristown NJ.
- Mar. 11
- OCC Workshop, Credit Risk: You Can Make a Difference, Morristown NJ.
- Mar. 16-18
- OCC Workshop, Building Blocks for Directors: Keys to Success, San Antonio TX.
- May 4, 2015
- EGRPRA outreach meeting, Boston MA.
- Dec. 2, 2015
- EGRPRA outreach meeting, Washington DC.
Regulatory Comment Deadlines
- Jan. 12 – FHFA: FHLB membership to require 1% of assets in home mortgage loans.
- Jan. 22 – CFTC: position limits on exempt and agricultural commodity futures, options, and economically equivalent physical commodity swaps.
- Jan. 26 – FDIC: filing requirements and processing procedures for Change in Bank Control Act notices.
- Feb. 2 – Federal Reserve: enhanced prudential standards for GE Capital.
- Feb. 16 – CSBS: Model Regulatory Framework for virtual currency.
- Feb. 17 – Federal Reserve/OCC/FDIC: revisions to capital rules for advanced approaches banks.
- Feb. 23 – FSOC: asset management and systemic risk.
- Feb. 29 – Federal Reserve: application of common equity tier 1 capital rules to holding companies organized in forms other than stock corporations.
- Mar. 2 – Federal Reserve: methodology for determining capital surcharge on U.S. GSIBs.
- Mar. 3 – Federal Reserve/OCC: recognition under capital and liquidity rules of netting or collateral agreements involving swaps and derivatives.
- Mar. 23 – CFPB: revisions to Regulations E and Z covering prepaid cards.