The past two weeks have not surprisingly seen some slowdown in agency activity as we enter the holiday season and approach the end of the year. The most notable event happened today, as the five federal financial regulatory agencies approved a final regulation implementing the Volcker Rule. Community banks are not wholly exempt from the Rule and may have to undertake new compliance work. The range of developments over the past two weeks included:

The Economy

  • November Jobs Report released Dec. 6 and available here.
    • Unemployment rate fell to 7.0% from 7.3%.
    • Media reports suggest that improvement may cause the Federal Reserve to unwind its bond program earlier than expected.
  • Beige Book (Nov. 2013) released and available here.
    • "Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November."


  • Subordinated debt: Federal Reserve clarifies criteria for including subordinated debt in Tier 2 capital. Rule available here.
    • Acceleration by holder of note permissible only in the event of receivership, insolvency, liquidation, or similar proceeding.
  • Market risk capital rule issued by Federal Reserve and available here.
    • Technical changes to align rule with capital rules issued by federal banking agencies in June 2013.


  • Valedictory: Statement of Chairman Gensler before the Financial Stability Oversight Council (Dec. 9), available here.
  • "Setting Priorities and Fixing Broken Rules Must be Commission's First Order of Business in 2014," Keynote Address by Commissioner O'Malia at the 9th Annual FIA Asia Derivatives Conference (Dec. 4). Text available here.

Consumer Protection

  • CFPB on consumer protection: Prepared Remarks of CFPB Director Cordray at the Consumer Federation of America (Dec. 5). Text available here.
  • OCC on consumer protection: Remarks by Comptroller Curry at the Consumer Federation of America (Dec. 6). Text available here.
  • SEC on investor protection: "Seeing Capital Markets Through Investor Eyes," Speech by Commissioner Aguilar at the Consumer Federation of America (Dec. 5), available here.


  • An International Review of OCC's Supervision of Large and Midsize Institutions: Recommendations to Improve Supervisory Effectiveness (Dec. 4), available here.
    • Peer review conducted at request of OCC

Financial Market Utilities

  • Federal Reserve issues final rule amending Regulation HH (Dec. 5), available here.
    • Requirements for a Reserve Bank to open and maintain accounts for and provide financial services to FMUs designated as systemically important by FSOC.
    • Reserve Banks authorized to pay interest on balances maintained by FMUs at the Banks.

Financial Stability Oversight Council

  • Meeting, Dec. 9
    • Minutes of Oct. 31 meeting released and available here.


  • Liquidity coverage ratio proposal for large banks published in Federal Register, 78 Fed. Reg. 71818 (Nov. 29, 2013)
    • OCC Bulletin 2013-35, available here.


  • Common Ground: The Need for a Universal Mortgage Loan Identifier, Office of Financial Research Working Paper #0012 (Dec. 5), available here.
    • "The establishment of a single, cradle-to-grave, universal mortgage identifier that cannot be linked to individuals using publicly-available data would significantly benefit regulators and researchers by enabling better integration of the fragmented data produced by the U.S. mortgage finance system."

Student Loans

  • CFPB issues final rule allowing it to supervise certain nonbank student loan servicers that it identifies as "large participants" in student loan market (Dec. 3). Rule text and factsheet available here.
    • Prepared remarks of CFPB Director Cordray at press call (Dec. 3), available here.

Third-Party Service Providers

  • Federal Reserve issues Guidance on Managing Outsourcing Risk, SR 13-19/CA 13-21 (Dec. 5), available here.
    • "Policies governing the use of service providers should be established and approved by the board of directors, or an executive committee of the board. These policies should establish a service provider risk management program that addresses risk assessments and due diligence, standards for contract provisions and considerations, ongoing monitoring of service providers, and business continuity and contingency planning."
    • "Senior management is responsible for ensuring that board-approved policies for the use of service providers are appropriately executed. This includes overseeing the development and implementation of an appropriate risk management and reporting framework that includes elements described in this guidance. Senior management is also responsible for regularly reporting to the board of directors on adherence to policies governing outsourcing arrangements."
    • Builds on FFIEC Outsourcing Technology Services Booklet
    • On Nov. 12, OCC issued guidance on the use of independent consultants, OCC Bulletin 2013-33.

Too Big to Fail

  • FDIC proposes “Single Point of Entry Strategy” for orderly liquidations under Title II of Dodd-Frank.  Proposal available here.

Unbanked and Underbanked

  • Remarks by FDIC Chairman Gruenberg at the Consumer Federation of America 26th Annual Financial Services Conference (Dec. 5), available here.

Volcker Rule

  • Final Volcker Rule approved by the Federal Reserve, FDIC, OCC, SEC, and CFTC (Dec. 10).  Text of rule, preamble, and supporting materials available here.
    • Community banks are not explicitly exempt but certain exceptions available to all institutions may protect most current activities, as follows:
      • Permitted trading activities include trading in certain government, agency, State or municipal bonds or other obligations; trading for the purpose of liquidity management, satisfying a debt previously contracted or risk-mitigating hedging; and entering into repos or securities lending transactions.
      • Investing in hedge funds or private equity funds: while most community banks do not invest in what are commonly regarded as hedge or private equity funds, the definition sweeps broadly and includes investments in asset-backed securities that do not meet certain criteria.  Investments in CLOs and CDOs may have to be divested.
    • Compliance program is necessary for any community bank engaged in any activity covered by the Volcker Rule, even if the Rule permits the particular activity.
    • No compliance program necessary if Volcker-covered activities are limited to trading in certain government, agency, State and municipal obligations.
    • Compliance not required until July 21, 2015.

Bank Closings

  • None

Congressional Activity

  • House Financial Services Committee hearing ◦“Examining Regulatory Relief Proposals for Community Financial Institutions" (before the Subcommittee on Financial Institutions and Consumer Credit) (Dec. 4).
    • Written testimony and archived webcast available here.

Upcoming Events

  • December 10
    • Senate Banking Committee hearing, "Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System"
  • December 11 ◦Senate Banking Committee hearing, "Rebuilding American Manufacturing"
    • House Financial Services Committee hearing, "The Annual Testimony of the Secretary of the Treasury on the State of the International Finance System"
    • Meeting of FDIC Advisory Committee on Systemic Resolution
  • December 12
    • Senate Banking Committee hearing, "Assessing the P5+1 Interim Nuclear Agreement with Iran: Administration Perspectives"
    • House Financial Services Committee hearing, "Rethinking the Federal Reserve's Many Mandates on its 100-Year Anniversary"

Regulatory Comment Deadlines

  • Dec. 10 – Federal Reserve, FDIC, OCC: Loans in Areas Having Special Flood Hazards.
  • Dec. 24 – CFPB, Federal Reserve, OCC, FDIC, NCUA, SEC: Standards for assessing diversity policies and practices.
  • Jan. 14, 2014 – CFTC: Position limits and aggregation of positions.
  • Jan. 31, 2014 – Federal Reserve OCC, FDIC: liquidity coverage ratio.
  • Feb. 3, 2014 -- SEC: Regulation Crowdfunding.
  • Feb. 10, 2014 – CFPB: Debt collection (advance notice of proposed rulemaking).
  • Mar. 17, 2014 – CFPB: Regulation E, list of countries qualifying for safe harbor.
  • 60 days after publication in the Federal Register – FDIC: Single point of entry strategy for orderly liquidations.