Of the events last week, community banks may wish to review the testimony at and the archived webcast of the Senate Banking Committee hearing on the state of community banking, which gave the industry an opportunity to describe their concerns with the nature and scope of regulation and supervision.  Legislation is unlikely, but at least the banking agencies heard the concerns.  The industry also should review the CFPB's (and the FTC's) actions on auto, payday, and student lending.  The litigation and enforcement actions are not against banks, but the principles will inform supervision of these operations.

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

Monetary Policy

  • FOMC Statement after meeting, Sept. 16-17.
    • "Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. On balance, labor market conditions improved somewhat further; however, the unemployment rate is little changed and a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective. Longer-term inflation expectations have remained stable."
    • "The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year."
    • Reduction in pace of monthly asset purchases continues.  Beginning in October,
      • Agency MBS: $5 billion (down from $10 billion).
      • Longer-term Treasury securities: $10 billion (down from $15 billion).
    • Fed funds target range of 0 to ¼% to continue.
    • "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."
    • Statement available at http://www.federalreserve.gov/newsevents/press/monetary/20140917a.htm.
    • Economic projections available at http://www.federalreserve.gov/newsevents/press/monetary/20140917b.htm
  • FOMC issues "Policy Normalization Principles and Plans" (Sept. 17).  Steps include:
    • Fed funds rate: raising target range for federal funds rate primarily by adjusting rate Federal Reserve pays on excess reserve balances.  Overnight reverse repo facility may also be established temporarily.
    • SOMA portfolio: ceasing or phasing out reinvestments after increases in target range occur.  Sales of agency MBS are unlikely as part of normalization process.
    • Over long run, Federal Reserve will hold securities only as necessary to implement monetary policy and will hold primarily Treasury securities.
    • Statement available at http://www.federalreserve.gov/newsevents/press/monetary/20140917c.htm.

Community Banks

Auto Lending


  • House of Representatives passes H.R. 5461 (Sept. 17).
    • Title I, the Insurance Capital Standards Clarification Act of 2014, exempts insurance companies subject to Federal Reserve supervision from leverage and risk-based capital requirements that apply to banking organizations.
    • Bill text available at http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.5461

Collateralized Loan Obligations

  • House of Representatives passes H.R. 5461 (Sept. 17).
    • Title II, the Restoring Proven Financing for American Employers Act, amends Volcker Rule to extend divestiture deadline to July 21, 2017, and to exclude from indicia of ownership the power to participate in removal of investment manager or adviser for cause.
    • Bill text available at http://thomas.loc.gov/cgi-bin/query/z?c113:H.R.5461:

Debit Cards/Interchange Fees

Financial Literacy



  • House of Representatives passes H.R. 5461, an Act to clarify the application of certain leverage and risk-based requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act, to improve upon the definitions provided for points and fees in connection with a mortgage transaction, and for other purposes (Sept. 17).

Mortgage Lending

Mortgage Loan Repurchases

  • FHFA IG criticizes FHFA changes to loan repurchase standards by Fannie Mae and Freddie Mac that would ease underwriting and repayment requirements for repurchases (Sept. 17).

Payday Lending


  • SEC finalizes changes to Regulation AB (Sept. 4).
    • For RMBS and auto-related ABS, specific asset-level data now required in prospectuses for public offerings.
    • Filing deadlines revised to provide investors more time to consider  asset-level data.
    • New ABS-specific registration forms.
    • Shelf eligibility criteria revised to remove references to credit ratings and to establish new eligibility criteria.
    • Final rule available at http://www.sec.gov/rules/final.shtml.

Student Loans

Swaps and Derivatives

  • House of Representatives passes H.R. 5461, (Sept. 16).

Too Big to Fail

  • House of Representatives passes H.R. 5461 (Sept. 16). Title I would exempt designated insurance companies from capital requirements.  See Capital above.  
  • OCC issues heightened standards for national banks, federal savings associations, and Federal branches with total consolidated assets of $50 billion or more (Sept. 2).

Truth in Lending

  • Points and fees provisions would be amended by H.R. 5461, passed by House of Representatives (Sept. 17).  See Mortgage Lending above.

Bank Closings

  • None.

Congressional Hearings – Upcoming

  • None scheduled.

Congressional Hearings – Recent

Upcoming Events

  • Sept. 23-24
    • Community Banking in the 21st Century, Federal Reserve System/CSBS Second Annual Community Banking Research Conference. 
  • Sept. 30
    • Best Practices for Effective Liquidity Risk and Funds Management, FDIC New York Region regulatory teleconference.
  • Oct. 7
    • Public meeting of OCC Minority Depository Institutions Advisory Committee.
  • Oct. 16-17
    • FDIC annual Consumer Research Symposium.
  • Oct. 28-29
    • OCC director workshops, Credit Risk and Risk Assessment, in Cleveland, OH.
  • Nov. 5-6
    • OCC director workshops, Compliance Risk and Credit Risk: A Director's Focus, in Kansas City, MO.

Regulatory Comment Deadlines

  • Sept. 22 – FDIC: changes to risk-based deposit insurance assessment system.  
  • Oct. 14 – SEC: references to credit ratings in money market rules.  
  • Oct. 22 – CFPB: HMDA reporting requirements.  
  • Oct. 27 – Federal Reserve: repeal of Regulation AA.  
  • Oct. 28 – FHFA: housing goals for Fannie Mae and Freddie Mac.  
  • 60 days from publication in Federal Register – Federal Reserve/OCC/FDIC/FHFA/Farm Credit Administration: margin requirements for uncleared swaps.  
  • Nov. 10 – Federal Reserve/OCC/FDIC: additions to CRA Q&As.  
  • Nov. 10 – SEC: circulation of price quotes of security-based swaps that may be purchases only by eligible contract participants not deemed an offer to sell.  
  • Nov. 12 – FHFA: FHLB membership to require 1% of assets in home mortgage loans.  
  • 60 days from publication in Federal Register – CFPB: definition of "larger participant" in nonbank auto lending market.