For community banks, announcements of regulatory developments still to come may constitute the highlights of the past week, although just yesterday the FDIC, the OCC, and the FHFA approved the final version of the credit risk retention rule.  One concrete development last week concerns student loans: the CFPB issued new materials to help distressed private student loan borrowers seek relief from their lenders.  The Treasury promised more guidance for banks that do business with international money transmitters, and the Supreme Court scheduled oral argument for December 1 in a case involving overtime pay for mortgage loan officers.  Two days ago, Apple launched the NFC-based Apple Pay.

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

The Economy

  • "Perspectives on Inequality and Opportunity from the Survey of Consumer Finances," speech by Federal Reserve Chair Yellen at the Conference on Economic Opportunity and Inequality, Federal Reserve Bank of Boston (Oct. 17).
    • "The extent of and continuing increase in inequality in the United States greatly concern me."
    • "It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity."
    • Speech available at
  • Federal Reserve Beige Book for October (Oct. 15).
    • "Reports from the twelve Federal Reserve Districts indicated that economic activity has expanded since the previous Beige Book report; however, none of the Districts pointed to a distinct shift in the overall pace of growth."
    • "General consumer spending grew in most Districts at rates ranging from slight to moderate, with few changes in the pace of growth compared with the last Beige Book."
    • "Activity among nonfinancial service sectors improved overall."
    • "Since the previous Beige Book, residential real estate activity, particularly sales of existing homes and construction of new homes, generally expanded or held steady in about half of the Districts."
    • "Overall, loan demand rose in eight Districts and held steady in one. Credit standards were largely unchanged."
    • "Reports regarding farm products were mixed; for some crops, high anticipated harvests have put downward pressure on prices and expected farm incomes."
    • "Generally, oil and gas production and demand for related activities continued to edge up from already high levels, while total coal production mostly held steady."
    • "Trends in employment, wages, and prices were relatively unchanged in the Federal Reserve Districts, with greater wage pressures reported in sectors where shortages of skilled labor persisted."
    • Book available at

Community Banking

Community Development

Corporate Governance/Tone at the Top

  • Workshop on Reforming Culture and Behavior in the Financial Services Industry, Federal Reserve Bank of NY (Oct. 20).
  • Basel Committee on Banking Supervision issues consultative document, Corporate governance principles for banks (Oct. 10).  Thirteen principles:
    • "The board has overall responsibility for the bank, including approving and overseeing the implementation of the bank’s strategic objectives, governance framework and corporate culture. The board is also responsible for providing oversight of senior management."
    • "Board members should be and remain qualified, individually and collectively, for their positions. They should understand their oversight and corporate governance role and be able to exercise sound, objective judgment about the affairs of the bank."
    • "The board should define appropriate governance structures and practices for its own work, and put in place the means for such practices to be followed and periodically reviewed for ongoing effectiveness."
    • "Under the direction and oversight of the board, senior management should carry out and manage the bank’s activities in a manner consistent with the business strategy, risk appetite, incentive compensation and other policies approved by the board."
    • "In a group structure, the board of the parent company has the overall responsibility for the group and for ensuring that there is a clear governance framework appropriate to the structure, business and risks of the group and its entities. The board and senior management should know and understand the bank’s operational structure and the risks that it poses."
    • "Banks should have an effective independent risk management function, under the direction of a Chief Risk Officer (CRO), with sufficient stature, independence, resources and access to the board."
    • "Risks should be identified, monitored and controlled on an ongoing bank-wide and individual entity basis. The sophistication of the bank’s risk management and internal control infrastructure should keep pace with changes to the bank’s risk profile, to the external risk landscape and in industry practice."
    • "An effective risk governance framework requires robust communication within the bank about risk, both across the organisation and through reporting to the board and senior management."
    • "The bank’s board of directors is responsible for overseeing the management of the bank’s compliance risk. The board should approve the bank’s compliance approach and policies, including the establishment of a permanent compliance function."
    • "The internal audit function provides independent assurance to the board and supports board and senior management in promoting an effective governance process and the long-term soundness of the bank. The internal audit function should have a clear mandate, be accountable to the board, be independent of the audited activities and have sufficient standing, skills, resources and authority within the bank."
    • "The bank’s compensation structure should be effectively aligned with sound risk management and should promote long term health of the organisation and appropriate risk-taking behaviour."
    • "The governance of the bank should be adequately transparent to its shareholders, depositors, other relevant stakeholders and market participants."
    • "Supervisors should provide guidance for and supervise corporate governance at banks, including through comprehensive evaluations and regular interaction with boards and senior management, should require improvement and remedial action as necessary, and should share information on corporate governance with other supervisors."
    • Document available at
    • Comment deadline: Jan. 9, 2015.

Credit Risk Retention

  • FDIC, OCC, and FHFA approved final rule on Oct. 21.  SEC approved final rule and Federal Reserve expected to approve on Oct. 22.
    • Implements section 941 of Dodd-Frank, which essentially requires a sponsor of asset-backed securities to retain not less than 5% of credit risk of  underlying assets.
      • Rule permits sponsor to hold credit risk in combinations of eligible vertical or horizontal interests.
      • Portions of credit risk may be transferred to certain (but not all) originators by contract.
      • Exception for “qualified residential mortgage” follows CFPB definition of “qualified mortgage."
    • Materials, including FDIC staff memorandum, available at


Executive Compensation

International Money Transmitters

Liquidity Coverage Ratio

Mobile Banking

Mortgage Lending

Stress Testing

  • Federal Reserve finalizes modifications to capital planning and stress testing rules.

Student Loans

Swaps and Derivatives

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

Too Big to Fail

Bank Closings

Congressional Action

  • Letter from Senate Banking Committee Chairman and Ranking Member to bank regulators on cybersecurity issues. See Cybersecurity above.

Upcoming Events

  • 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).
  • Nov. 18-10
    • OCC director workshops, Compliance Risk and Credit Risk: A Director's Focus, in Newton, MA.

Regulatory Comment Deadlines

  • 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-based swaps that may be purchased 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.