Last week saw several enunciations of federal policy on community banking in the form of an FDIC study and a number of speeches, which are detailed immediately below.  The most publicity was reserved, however, for the announcement yesterday of the plea agreement and related consent orders involving Credit Suisse and its alleged participation in evasions of U.S. income tax laws.           

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

Community Banking

  • Long-term Trends in Rural Depopulation and Their Implications for Community Banks, FDIC Quarterly, Vol. 8, No. 2 (May 2014).
    • "Community banks in depopulating rural areas have been resilient in meeting the challenges posed by diffi­cult demographic trends. In the years leading up to the financial crisis and recession, community banks in depopulating rural areas reported earnings and asset quality performance that was relatively similar to the performance of banks located in more economically vibrant areas. Through the recession and its aftermath, the community banks in depopulating rural areas outperformed their peers, thanks to the strong agricul­tural economy, which kept agricultural loan portfolios from feeling the adverse shocks received by C&D and CRE portfolios. Even the banking structure in depopu­lating rural areas has been more stable than in metro areas in terms of the number of charters."
    • "The data brought to bear in this study indicate that community bankers in depopulating rural areas will most likely have to continue managing their institu­tions with the prospect of weak or negative growth from their local communities. Although searching for growth opportunities in other geographies is possible, it has its own set of challenges, as seen by the institutions that branched into metro areas before the recession. All in all, the conclusion of the 2004 FDIC study is equally applicable to this study: Although there may in fact be far fewer rural banks in the future, the rural banking system will most likely remain intact and strong."
    • Report available at   http://www.fdic.gov/news/news/press/2014/pr14035.html
  • Small Businesses and the Economy, Remarks by Federal Reserve Chair Yellen at National Small Business Week Event (May 15).
  • Dual banking system – Remarks by Comptroller Curry before the Conference of State Bank Supervisors (May 14).
  • OCC Central District reports overall improvement in financial condition in national banks and federal savings associations in the district (May 13).
  • OCC announces workshop, "Mastering the Basics: A Director's Challenge," for directors of national community banks and federal savings associations, June 23-25, St. Louis MO.

Community Development

Cyber Security

  • Remarks by Comptroller Curry before the New England Council (May 16).

Foreign Banks/U.S. Tax Issues

  • U.S. authorities settle criminal and civil claims against Credit Suisse regarding alleged participation in tax evasion scheme (May 19).
    • Justice Department
    • Federal Reserve Board
    • New York Department of Financial Services
      • Claims based on the "operation of an illegal cross-border banking business, which aided thousands of U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS and New York authorities."
      • $715 civil money penalty.
      • Independent auditor required.
      • No proceedings to revoke New York license.
      • Consent order available at http://www.dfs.ny.gov/about/press2014/pr1405191.htm.
    • Settlement with SEC on related matters on Feb. 21, 2014. 

Housing Finance Reform

M&A

  • Federal Reserve warns that banks may be ignoring limits on leveraged financing for bank acquisitions.
  • Federal Reserve proposes rule to implement Dodd-Frank section 622 prohibition on combinations between financial companies if the ratio of the resulting company's liabilities exceeds 10 percent of aggregate consolidated liabilities of all financial companies.
    • Liabilities are difference between risk-weighted assets (adjusted to reflect deductions from regulatory capital) and total regulatory capital.
    • Federal Reserve to determine aggregate consolidated liabilities of all financial companies annually, based on two-year average.
    • Proposal available athttp://www.federalreserve.gov/newsevents/press/bcreg/20140508a.htm.
    • Comment deadline: July 8.

Monetary Policy

Student Loans

Bank Closings

  • AztecAmerica Bank (Berwyn IL) (May 16). 
    • FDIC purchase and assumption agreement with Republic Bank of Chicago for all deposits.

Congressional Action

Upcoming Events

  • May 20
    • House Financial Services Committee hearings.
      • "Examining the Dangers of the FSOC's Designation Process and Its Impact on the U.S. Financial System."
      • "Legislative Proposals to Reform Domestic Insurance Policy."
  • May 21
    • House Financial Services Committee hearings.
      • "Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, Part Two."
      • "Legislative Proposals to Improve Transparency and Accountability at the CFPB."
  • May 22
  • May 29
    • FDIC San Francisco Region Bankers' Forum: The Development and Launch of a New Banking Product: A UDAP Primer.
  • May 30
    •  FDIC webinar, Innovation at Work: Financial Empowerment Programs.
  • June 2-4
    • OCC workshop, Mastering the Basics: A Director's Challenge, Nashville TN.
  • June 23-25
    • OCC workshop, Mastering the Basics: A Director's Challenge, St. Louis MO.
  • Sept. 23-24

Regulatory Comment Deadlines

  • May 27 – SEC: standards for covered clearing agencies.  
  • May 27 – CFTC: swap reporting and recordkeeping requirements under 17 CFR part 45.  
  • June 6 – CFPB: revisions to Reg E to allow certain international remittance providers to estimate fees and rates through July 21, 2020.  
  • June 9 – federal banking agencies: standards for asset management companies and state agencies.  
  • June 12 – OCC: increased assessments for national banks and federal thrifts over $40 billion.  
  • June 13 – federal banking agencies: changes to denominator of supplementary leverage ratio.  
  • June 13 – federal banking agencies: revisions to definition of eligible guarantee under advanced approaches risk-based capital rule.  
  • June 20 – FDIC: filing and disclosure requirements for securities issued by state savings associations.  
  • July 1 – SEC: recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants.  
  • July 7 - CFPB: "small servicer" definition.
  • July 7 – CFPB: correction or cure of debt-to-income overages and credit extension limit for small creditor definition.  
  • July 8 – Federal Reserve – Dodd-Frank section 622 concentration limits on large financial companies.