• OCC Extends Lending Limit Compliance Deadline for Derivatives

The OCC announced on January 4 that it has extended from January 1, 2013 to July 1, 2013 the temporary exception for the application of federal lending limits to certain credit exposures arising from derivative transactions and securities financing transactions. The OCC noted that it has the ability to address credit exposures that present undue concentrations on a case-by-case basis through its existing safety and soundness authorities, notwithstanding the extension.

Nutter Notes: Section 610 of the Dodd–Frank Act added certain credit exposures arising from derivatives and securities financing transactions to the statutory definition of loans and extensions of credit for purposes of federal lending limits. The OCC’s interim final rule implementing the statutory change for national banks and federal and state savings associations gave institutions until January 1, 2013 to comply.

  • Division of Banks Releases Form for Loan Modification Reporting

The Division of Banks has issued a Semi-Annual Loan Modification Report worksheet that Massachusetts banks must use to report the final outcome of each loan modification for all loans covered under Chapter 244, Section 35B of the General Laws of Massachusetts, recently added by Chapter 194 of the Acts of 2012. The first report should be filed by February 8, 2013, according to the Division.

Nutter Notes: Under the new law, banks must report the final outcome of each loan modification on all loans for which a notice of the right to request a modified mortgage loan was sent under Section 35B. Reports must be submitted semi-annually to the Division of Banks, beginning with the period ending on December 31, 2012.

  • FFIEC Proposed Risk Management Guidance on the Use of Social Media

The FFIEC released proposed guidance on January 22 on the applicability of consumer protection and compliance laws, regulations, and policies to activities conducted using social media by banks, savings associations, and credit unions, as well as nonbank entities supervised by the CFPB and state regulators. Comments on the proposed guidance are due by March 25.

Nutter Notes: The proposed guidance recommends that each financial institution should develop and implement a risk management program that allows it to identify, measure, monitor, and control the risks related to social media. Those risks include risk of harm to consumers, compliance and legal risks, operational risks, and reputation risks, according to the proposed guidance.

  • Federal Reserve Issues Supplemental Guidance on Internal Audits

The Federal Reserve issued a policy statement on January 23 recommending that banking organizations adopt professional audit standards and other authoritative guidance, including those issued by the Institute of Internal Auditors. The policy statement, Supplemental Policy Statement on the Internal Audit Function and Its Outsourcing, released with Supervision and Regulation Letter No. SR 13-1, does not apply to banking organizations with total consolidated assets of $10 billion or less.

Nutter Notes: The policy statement supplements the Federal Reserve’s 2003 guidance, Amended Interagency Guidance on the Internal Audit Function and its Outsourcing, released with Supervision and Regulation Letter No. SR 03-5. The policy statement explains changes over the past several years in banking regulations related to auditor independence.