After a break for the week of July 4th, we are back in business.  The most notable events are somewhat mundane but nevertheless important for most banks: the FFIEC finalized changes to the call report, and the FDIC issued revised FAQs on brokered deposits and a new Information Technology Risk Examination (InTREx) Program

          The full set of developments over the last two week includes:

The Economy

  • Jobs report for June 2016 released (July 8).
    • Unemployment rate rises to 4.9% from 4.7% in May 2016.
    • 287,000 nonfarm payroll jobs created.
    • Report available at http://www.bls.gov/.
  • Federal Open Market Committee releases minutes of meeting on June 14-15 (July 6).
    • Target range for federal funds rate unchanged at ¼ to ½ %, approved unanimously.
    • "Meeting participants agreed that information received over the intermeeting period indicated that the pace of improvement in the labor market had slowed while growth in economic activity appeared to have picked up. Although the unemployment rate had declined, job gains had diminished. Growth in household spending had strengthened. Since the beginning of the year, the housing sector had continued to improve and the drag from net exports appeared to have lessened, but business fixed investment had been soft."
    • "Inflation had continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations were little changed, on balance, in recent months."
    • "Participants generally expected that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace and labor market indicators would strengthen. Inflation was expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipated and the labor market strengthened further."
    • "Most participants expected to see continued progress toward the Committee’s 2 percent inflation objective.  They viewed the firming in some measures of core inflation, the evidence that wage growth was picking up, the ongoing tightening of resource utilization, the recent firming in oil prices, and the stabilization of the foreign exchange value of the dollar this year as factors likely to boost inflation over time."
    • "However, other participants were less confident that inflation would return to its target level over the medium term. They thought that progress could be very slow, particularly in light of the likelihood that tighter resource utilization may impart only modest upward pressure on prices. They also saw important downside risks, including persistent disinflationary pressures from very low inflation and weak economic growth abroad as well as the softening in some survey-based measures of longer-term inflation expectations and market-based measures of inflation compensation."
    • "Most participants judged that, in the absence of significant economic or financial shocks, raising the target range for the federal funds rate would be appropriate if incoming information confirmed that economic growth had picked up, that job gains were continuing at a pace sufficient to sustain progress toward the Committee’s maximum-employment objective, and that inflation was likely to rise to 2 percent over the medium term."
    • "However, some other participants were uncertain whether economic conditions would soon warrant an increase in the target range for the federal funds rate."
    • Minutes available at http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.
  • "Recent Economic Developments, Monetary Policy Considerations and Longer-term Prospects," remarks of Federal Reserve Governor Powell at the Chicago Council on Global Affairs (June 28).

Brokered Deposits

  • FDIC finalizes updates to brokered deposit FAQs, FIL-42-2016 (June 30).
    • Updates related to:
      • Business professionals and deposit referral programs.
      • Deposits gathered though "dual hatted," "dual" and "call center" employees (as explained in the FAQs), or contractors.
      • Deposits underlying government-sponsored prepaid or debit card programs.
      • Whether certain nonmaturity deposits are brokered.
      • Actions an IDI should take if it holds certain brokered deposits and falls below well capitalized for PCA purposes.
    • FIL-42-2016 available at https://www.fdic.gov/news/news/financial/2016/fil16042.html.

Call Reports

  • FFIEC approves revisions to call reports proposed by banking agencies in September 2015 (July 1).
    • Revisions include:
      • Deletions of data items relating to troubled debt restructurings, loans covered by FDIC loss-sharing agreements, and unused commitments to asset-backed commercial paper conduits with an original maturity of one year or less.
      • Increases in existing reporting thresholds in Schedules RI-E, RC-D, RC-F, RC-G, and RC-Q and the establishment of a new threshold for certain data items in schedule RC-S.
      • Instructional revisions pertaining to the reporting of gains (losses) on certain equity securities and the custodial bank deduction for assessment purposes.
      • New and revised data items and information, some of which are of limited applicability.
    • Call report changes discussed in FDIC FIL-44-2016 and FIL-45-2016, available at https://www.fdic.gov/news/news/financial/2016/. 

Civil Money Penalties

  • OCC issues interim final rule adjusting maximum amounts of CMPs to account for inflation (July 1).

CRA

  • Remarks by Comptroller Curry before the Community Development Corporation of Long Island Annual Lender Forum (June 30).
    • Remarks focus on housing rehabilitation.
    • OCC to finalize guidance on specific risk management controls that will allow a national bank to offer loans with an LTV above 100% on a program basis to help stabilize and revitalize communities.
    • National bank will be required to notify OCC of higher LTV program.
    • Guidance will include requirement for notices to borrowers of financial risks over the life of a higher LTV loan.
    • Guidance originally proposed in late 2015.
    • Remarks available at http://www.occ.gov/news-issuances/news-releases/2016/nr-occ-2016-75.html. 

Consumer Loans

Information Technology

  • FDIC releases Information Technology Risk Examination (InTREx) Program (June 30).

Mergers and Acquisitions

  • Federal Reserve releases annual determination of aggregate consolidated liabilities of financial companies in the United States (June 30).
    • Aggregate consolidated liabilities as of July 1, 2016, equal approximately $21.8 trillion.
    • Determination part of Dodd-Frank prohibition on combinations of financial institutions where liabilities of resulting institution would exceed 10% of aggregate consolidated liabilities.
    • Consolidations would be barred where liabilities of resulting institution exceed $2.18 trillion.
    • Announcement available athttp://www.federalreserve.gov/newsevents/press/bcreg/20160630a.htm. 

Mortgage Lending

Small Business Lending

Too Big to Fail

  • Federal Reserve releases Comprehensive Capital Analysis and Review 2016: Assessment Framework and Results (June 29).
    • Results are for sixth CCAR, in which Federal Reserve evaluates capital planning processes and capital adequacy of largest U.S.-based bank holding companies, including planned capital actions such as dividend payments and share buybacks and issuances.
    • Federal Reserve has no objection to capital plans of 30 banking holding companies participating in CCAR.
    • Federal Reserve objects to plans of two bank holding companies, Deutsche Bank Trust Company and Santander Holdings USA.
    • No objection to plan of Morgan Stanley, but firm required to address certain weaknesses and resubmit plan by Dec. 31, 2016.
    • Results available athttp://www.federalreserve.gov/newsevents/press/bcreg/20160629a.htm.

Trading

  • OCC releases Quarterly Report on Bank Trading and Derivatives Activities for first quarter 2016 (June 30).
    • Trading revenue for quarter increased by 35.3% from fourth quarter 2015 but fell by 24.9% from first quarter 2015.
    • Increase in notional amount of derivatives held by insured U.S. commercial banks.
      • Four banks hold 91% of this amount.
    • Trading risk exposure, as measured by value-at-risk, increased in first quarter 2016.
    • Report available at http://www.occ.gov/news-issuances/news-releases/2016/nr-occ-2016-76.html.

Volcker Rule

  • Federal Reserve formally extends conformation period until July 21, 2017, for banking entities to divest ownership in certain legacy investment funds and terminate relationships with funds that are prohibited under the Rule (July 7).
    • Legacy investments generally are those made before Dec. 31, 2013.
    • Announcement does not affect separate authority of Federal Reserve to extend for five years the conformance period for investments in illiquid funds where banking entity had commitment to invest before May 1, 2010.
    • Announcement available athttp://www.federalreserve.gov/newsevents/press/bcreg/20160707a.htm.

Congressional Activity – Recent

Congressional Activity – Upcoming

Upcoming Events

  • July 19
    • OCC Director Workshop, "Compliance Risk," Sioux Falls SD.
  • July 20
    • OCC Director Workshop, "Operational Risk."
    • FDIC Money Smart Train-the-Trainer Online Live Meeting.
  • July 21
    • FDIC New York Region Teleconference, "Commercial Real Estate – Risks and Effective Risk Management."
  • July 26
    • OCC Director Workshop, "Credit Risk," Tampa FL.
  • July 27
    • OCC Director Workshop, "Operational Risk," Tampa FL.
  • Aug. 4
    • FDIC 2016 Joint Mutual Forum, Arlington VA.

Regulatory Comment Deadlines

  • July 22 – Banking agencies et al.: incentive-based compensation limits.
  • Aug. 2
    • Federal Reserve: ANPR on capital rules for certain insurance companies.
    • Federal Reserve: proposed enhance prudential standards for systemically important insurance companies.
    • FinCEN: imposition of special measures against North Korea.
  • Aug. 5 
    • Federal Reserve/FDIC/OCC: net stable funding ratio.
    • Federal Reserve: amendment of QFCs to prevent immediate cancellation in event of bankruptcy or other resolution.
  • Aug. 8 – Treasury/IRS: foreign-owned, single-owner entities required to obtain EIN.
  • Aug. 22 – CFPB: ban on mandatory arbitration clauses.
  • Aug 29 – FDIC: replacement of references to credit ratings in international banking regulations.
  • Aug. 30 – OCC: adjustment of maximum CMPs to account for inflation.
  • Sept. 14 – CFPB: payday loans.