Although the regulators' work sometimes slows during the summer, three events are noteworthy for banks of all sizes.  The OCC published its Semiannual Risk Perspective, with warnings about growing credit risk, strategic risk, and operational risk.  The banking agencies finalized changes to the CRA FAQs, which cover a range of community development items.  The CFPB fined Santander Bank for violations involving its overdraft services committed through a third-party telemarketer.  The important lesson from the CFPB's action may be less the substance of the violations than the need for management of third-party service providers.

          The full set of developments over the past week includes:

The Economy

  • Federal Reserve publishes July Beige Book (July 13).
    • "Economic activity continued to expand at a modest pace across most regions from mid-May through the end of June."
    • "Employment continued to grow modestly since the previous report."
    • "Wage pressures remained modest to moderate in most Districts."
    • "Price pressures remain slight."
    • "Overall consumer spending was positive but with signs of softening. However, the outlook for consumer spending activity in the months ahead was predominantly optimistic across most reporting Districts."
    • "Manufacturing activity was mixed since the previous report. The reporting Districts noted that the outlook remained positive but deteriorated."
    • "Residential real estate activity continued to strengthen since the previous period."
    • "Commercial sales and leasing activity remained stable or improved in almost all Districts."
    • "Overall loan demand increased, although reports on the pace of growth varied."
    • "Agricultural activity was mixed but improving on average."
    • Book available at

Bank Secrecy Act

  • FinCEN fines California casino (July 15).
    • Violations include failure to verify customer identities and file suspicious activity reports.
    • Customer transactions structured to evade reporting requirements.
    • Order available at


  • "United Kingdom Referendum Roils Markets," Office of Financial Research Financial Markets Monitor (July 14).


  • Banking agencies release final revisions to Interagency Questions and Answers Regarding Community Investment (July 15).
    • Revisions address:
      • Availability and effectiveness of retail banking services.
      • Innovative or flexible lending practices.
      • Community development-related issues, including: (i) economic development; (ii) community development loans and activities that revitalize or stabilize underserved nonmetropolitan middle-income geographies; and (iii) community development services.
      • Responsiveness and innovativeness of an institution's loans, qualified investments, and community development services.
    • Revised FAQs available at


 De Novos

Financial Literacy

Mergers and Acquisitions

  •  Federal Reserve approves KeyCorp acquisition of First Niagara (July 12).
    • Extensive discussion of competitive effects in Buffalo, NY market.
      • Application approved where HHI remained above 3000 points but increased less than 200 points, after divestiture of 18 of 55 First Niagara branches in market.
      • Thrift deposits weighted at 100%; credit union deposits at 50%.
    • Order available at

Overdraft Fees

Risk Management

  • OCC releases Semiannual Risk Perspective for Spring 2016 (July 11).
    • Highlights:
      • "Strategic risk remains high as banks struggle to execute their strategic plans and face challenges in growing revenue."
      • "Credit risk is increasing because of strong loan growth combined with easing in underwriting standards.  An increase in concentrations and risk layering, continues as banks strive for yield in an increasingly competitive environment.  This is particularly evident in indirect auto, commercial and industrial, and commercial real estate."
      • "Operational risk concerns include increasing cyber threats, reliance on third-party service providers, and resiliency planning."
      • "Banks face challenges meeting the integrated mortgage disclosure requirements and amended Military Lending Act regulatory requirements, the latter of which takes effect on October 3, 2016, and managing Bank Secrecy Act risks."
      • "Low energy prices, the potential for rising interest rates, and risks associated with banks partnering with marketplace lending firms are of concern and being monitored, as they may develop into broader system-wide issues."
    • Report and remarks of Comptroller Curry available at

Shadow Banking

  • Opening remarks of Federal Reserve Governor Tarullo at Center for American Progress and Americans for Financial Reform Conference (July 12).
    • "More productive is to focus on the characteristics of shadow banking-related financial activities and institutions that are most likely to pose risks to financial stability and to the economy more generally:  Front and center among these risks is that of runnable liabilities."
    • Remarks available at

Third-Party Service Providers

  • CFPB fines Santander Bank, N.A., for violations in offering overdraft services (July 14).
    • Violations committed through third-party telemarketer but apparently traceable to Santander.
    • For further detail, see Overdraft Fees above.

Too Big to Fail

Congressional Activity – Recent

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.  
  • Aug. 16
    • OCC Director Workshop, "Risk Governance," Kansas City MO.  
  • Aug. 17
    • OCC Director Workshop, "Credit Risk," Kansas City MO.

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 enhanced 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.