Community banks – week in review - October 14, 2014

It was a mixed bag of developments over the past week.  The Comptroller's discussion of bank culture and the need for senior bank management to set an appropriate tone should be of the broadest interest.  The CFPB concluded another enforcement matter, this one involving checking accounts, and, together with other regulators, the CFPB discussed enforcement priorities in the mortgage area at a conference reported on in the American Banker.  Lawyers involved or about to become involved in bank mergers and acquisitions should review new FAQs released by the Federal Reserve on the agencies' and the Justice Department's approach to the analysis of the competitive effects of a proposed transaction. 

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

 Checking Accounts

• Free checking: CFPB announces consent order regarding allegedly deceptive marketing of free checking accounts (Oct. 9).
  • In re Manufacturers and Traders Trust Company available at http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-mt-bank-for-deceptively-advertising-free-checking/.
• Account screening: CFPB Forum on Access to Checking Accounts (Oct. 8).
  • Discussion of checking account screening policies and practices.
  • Prepared remarks of CFPB Director Cordray available at http://www.consumerfinance.gov/newsroom/director-richard-cordray-remarks-at-the-cfpb-forum-on-checking-account-access/.

 Culture/Tone at the Top

• "Unwritten Rules: The Importance of a Strong Risk Culture," opinion paper by Comptroller Curry in The Clearing House, Banking Perspective Q3 2014.
  • Reciting advice from the first Comptroller, Hugh McCulloch, in Dec. 1863.
  • Enhanced standards for largest banks intended to incorporate principles of prudent bank culture.
  • Paper available at https://www.theclearinghouse.org/publications/2014/banking-perspective-q32014/unwritten-rules-the-importance-of-a-strong-risk-culture.
• "Workshop on Reforming Culture and Behavior in the Financial Services Industry" sponsored by Federal Reserve Bank of NY on Oct. 20.
  • Closed to public, but agenda available at http://www.ny.frb.org/newsevents/events/banking/2014/1020_2014.html.

 Financial Literacy

• FDIC/CFPB publish Spanish language version of Money Smart for Older Adults (Oct. 7).
  • Electronic module available at https://www.fdic.gov/consumers/consumer/moneysmart/olderadult.html.
  • Pdf and order form for hard copy available at http://promotions.usa.gov/cfpbpubs.html#anuncios. 

 Financial Stability Oversight Council

• Council meeting (Oct. 6).
  • Closed session covered risks presented by asset management industry and designations of nonbank financial companies.
  • Readout available at http://www.treasury.gov/initiatives/fsoc/council-meetings/Pages/readouts.aspx.
  • Minutes of Sept. 4 meeting approved and available at http://www.treasury.gov/initiatives/fsoc/council-meetings/Pages/meeting-minutes.aspx. 

 Mergers and Acquisitions

• Federal Reserve issues FAQs on analysis of competitive effects under Bank Holding Company Act, Bank Merger Act, and Home Owners Loan Act (Oct. 9).
  • FAQs available at http://www.federalreserve.gov/bankinforeg/competitive-effects-mergers-acquisitions-faqs.htm.

 Monetary Policy

• Minutes of FOMC meeting on Sept. 16-17 released.
  • Minutes available at http://www.federalreserve.gov/newsevents/press/monetary/20141008a.htm. 

 Mortgage Lending

• HUD request for comment on streamlined discussion of refinancing in FHA Handbook.
  • 79 Fed. Reg. 61020 (Oct. 9), available at https://www.federalregister.gov/articles/2014/10/09.
  • Comment deadline: Nov. 10.
• American Banker report on discussion of mortgage-related enforcement priorities at Walters Kluwer Financial Services conference (Oct. 7; subscription required).
  • Redlining.
  • Pricing based on investor preference.
  • OCC reviewing mortgage modifications more carefully.
• FDIC teleconference scheduled for Oct. 22 on implementation of Ability-to-Repay/Qualified Mortgage and the Loan Originator Compensation final rules.
  • FIL-52-2014, available at https://www.fdic.gov/news/news/financial/2014/fil14052.html?source=govdelivery&utm_medium=email&utm_source=govdelivery.

 Mortgage Servicing

• Servicing of default portfolios focused on by CFPB.  Part of American Banker report on mortgage conference under Mortgage Lending above. 

 Savings Associations

• OCC applies certain guidance for national banks to federal savings associations (Oct. 1).
  • Bulletin 2014-49 available at http://www.occ.gov/news-issuances/bulletins/2014/bulletin-2014-49.html#app-a.

Swaps and Derivatives

• 18 major international banks sign ISDA Resolution Stay Protocol (Oct. 11).  See Too Big to Fail below.

 Too Big to Fail

• Financial Stability Board releases proposals on cross-border resolutions (Sept. 29).
  • Elements to be included in a jurisdiction’s statutory cross-border recognition framework.
  • Contractual approaches for stays on early termination and cross-default rights and the bail-in of debt instruments governed by laws of a jurisdiction other than law of issuer’s home country.
  • Proposals available at http://www.financialstabilityboard.org/press/pr_140929.htm.
• 18 major international banks sign ISDA Resolution Stay Protocol (Oct. 11).
  • Amendments to ISDA Master Agreements to incorporate recognition of stays required under various statutory resolution regimes.
  • Provision for stays on cross-default rights in context of US bankruptcy proceeding do not take effect until U.S. regulators issue regulations on the issue.
  • Information available at http://www2.isda.org/newsroom/press-releases/.
  • Joint press release of Federal Reserve and FDIC available at http://www.federalreserve.gov/newsevents/press/bcreg/20141011a.htm.
• American Banker summary of remarks of Federal Reserve Governor Tarullo on upcoming sub debt requirement for large banks (Oct. 10; subscription required.)  
• U.S. and U.K. regulators hold exercise on resolution of a globally systemically important bank (Oct. 13).
  • Announcement available at https://www.fdic.gov/news/news/press/2014/pr14084.html.

 Volcker Rule

• SEC updates FAQs (Sept. 10).
  • New FAQs available at http://www.sec.gov/divisions/marketreg/faq-volcker-rule-section13.htm.

 Bank Closings

• None.

 Congressional Hearings – Upcoming

• None scheduled.

 Congressional Hearings – Past Week

• None.

 Upcoming Events

• Oct. 16-17
  • FDIC annual Consumer Research Symposium.
• Oct. 20
  • Federal Reserve Bank of New York conference on bank culture.
• Oct. 22
  • FDIC teleconference on Ability-to-Repay/Qualified Mortgage and Loan Originator Compensation rules.
• 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.
• Nov. 6
  • FDIC Interagency CRA Workshop for Banks (Waukesha, WI).

 Regulatory Comment Deadlines

• 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.  
• Nov.10 – Federal Reserve/OCC/FDIC: additions to CRA Q&As.  
• Nov. 10 – HUD: streamlined discussion of refinancing in FHA handbook on single family loans.  
• Nov. 10 – SEC: circulation of price quotes of security-bases swaps that may be purchases only by eligible contract participants not deemed an offer to sell.  
• Nov. 24 – Federal Reserve/OCC/FDIC/FHFA/Farm Credit Administration: margin requirements for uncleared swaps.  
• Dec. 2 – CFTC: margin requirements for uncleared swaps for swap dealers and major swap participants.  
• Dec. 8 – CFPB: definition of "larger participant" in nonbank auto lending market.  
• Jan. 12, 2015 – FHFA: FHLB membership to require 1% of assets in home mortgage loans.