Over the past several days, there have been a number of interesting developments in the bank regulatory world, some well-publicized, including the BNP Paribas settlement. Of most immediate importance to community banks, however, was the release today of interagency guidance on HELOCs and the Justice Department's continuing commitment to Operation Choke Point.

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

Community Banking

  • New interagency guidance for HELOCs; see HELOCs below.  
  • OCC issues Semiannual Risk Perspective for Spring 2014 (June 25).
    • "Competition for limited lending opportunities is intensifying, resulting in loosening underwriting standards, particularly in indirect auto and leveraged lending. Easing in underwriting and increased risk layering is also occurring in commercial loans."
    • "The prolonged low interest rate environment continues to lay the foundation for future vulnerability. Banks that extend asset maturities to pick up yield, especially if relying on the stability of non-maturity deposit funding in a rising rate environment, could face significant earnings pressure and potential capital erosion depending on the severity and timing of interest rate moves."
    • "Many banks continue to re-evaluate their business models and risk appetites to generate returns against the backdrop of slow economic growth and low interest rates. OCC examiners will focus on banks’ strategic business and new product planning to ensure appropriate risk management processes are established."
    • "Cyber-threats continue to evolve, requiring heightened awareness and appropriate resources to identify and mitigate the associated risks."
    • "Financial asset prices have experienced very low volatility for an extended period. As a result, measures of price risk, such as value-at-risk, are at very low levels. The reduced willingness of dealers to hold securities in inventory, due to capital and other concerns such as a change in monetary policy, could contribute to greater price swings going forward and increased price risk."
    • "Bank Secrecy Act and Anti-Money Laundering risks remain prevalent as money-laundering methods evolve, and electronic bank fraud increases in volume and sophistication. Banks work to incorporate appropriate controls to oversee higher risk customers and new products and services."
    • Report available at http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-91.html.


Capital Planning and Stress Testing

  • Federal Reserve extends deadline for "resubmission" of capital plans by four large banking firms from June 26, 2014, to Jan. 5, 2015 (June 24).
    • Effect is to require that any changes in rejected plan be incorporated in next annual capital plan.
    • No increase in capital distributions permitted until capital plan approved.
    • Affected firms are Citigroup, Inc., HSBC North America Holdings, Inc., RBS Citizens, Inc., and Santander Holdings USA, Inc.
    • Statement available at http://www.federalreserve.gov/newsevents/press/bcreg/20140624a.htm.
  • Stress Testing after Five Years, remarks by Governor Tarullo at the Federal Reserve Third Annual Stress Test Modeling Symposium (June 25).


Cyber Security

Dark Pools



  • Federal Reserve invokes unfair and deceptive practices prohibition in enforcement action. See Student Loans below.

Federal Housing Finance Authority

  • IG recommends that FHFA consider litigation by Fannie and Freddie against servicers and force-placed insurance providers for damages caused by past abuses in force-placed insurance market.
    • FHFA to complete assessment within 12 months.
    • IG report, FHFA's Oversight of the Enterprises' Lender-Placed Insurance Costs (June 25, 2014), available at http://fhfaoig.gov/.

Financial Stability Oversight Council

Global Sanctions


  • Federal banking agencies and CSBS issue Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Periods (July 1).
    • Examiners to consider five risk management principles:
      • Prudent underwriting for renewals, extensions, and rewrites.
      • Compliance with pertinent existing guidance, including but not limited to the Credit Risk Management Guidance for Home Equity Lending [FRB SR Letter 05-11]and the Interagency Guidelines for Real Estate Lending Policies [12 CFR part 208, subpart E and App. C].
      • Use of well-structured and sustainable modification terms.
      • Appropriate accounting, reporting, and disclosure of troubled debt restructurings.
      • Appropriate segmentation and analysis of end-of-draw exposure in allowance for loan and lease losses (ALLL) estimation processes.
    • Ten additional management expectations.
    • Guidance available at http://www.federalreserve.gov/newsevents/press/bcreg/20140701a.htm.

Mortgage Lending


  • OCC to host public meeting of the Mutual Savings Association Advisory Committee, July 23.
    • Meeting in conjunction with OCC/FDIC 2014 Joint Mutual Forum, July 23-24.

Operation Choke Point

  • Justice Department to continue investigations of financial institutions that facilitate consumer scams or process fraudulent transactions.

Student Loans

Swaps and Derivatives

  • SEC adopts final rules on cross-border security-based swap activities (June 25). Highlights include:
    • An explanation of when a cross-border transaction needs to be counted toward the requirement to register as a security-based swap dealer or major security-based swap participant, including transactions guaranteed by a U.S. person and transactions by a “conduit affiliate” (a foreign affiliate of a U.S. person that could be used to evade the requirements of Title VII of the Dodd-Frank Act).
    • Procedures for foreign regulators or market participants to apply for substituted compliance, which would permit market participants to comply with U.S. requirements by complying with foreign requirements.
    • An anti-fraud rule that addresses the scope of the Commission’s cross border anti-fraud enforcement authority, clarifying that the authority applies where the fraud occurs or is felt within the U.S.
    • Final rules available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542163722.
    • Commissioner statements available at http://www.sec.gov/News/Page/List/Page/1356125649549.

Too Big to Fail

  • Banking Organization Systemic Risk Reports for 33 large U.S. bank holding companies now available.


Virtual Currency

Bank Closings

Congressional Events

Upcoming Events

  • July 2
    • SEC closed meeting.
  • July 8-9
    • OCC bank director workshops, "Risk Assessment" and "Credit Risk" (Seattle WA).
  • July 9
    • FDIC Atlanta Region webinar, "Bankers' Export Financing Resources."
  • July 22-23
    • OCC bank director workshops, "Compliance Risk" and "Risk Assessment" (Minneapolis MN).
  • July 23
    • OCC Mutual Savings Association Advisory Committee public meeting.
  • July 23-24
    • Joint Mutual Forum hosted by FDIC and OCC.
  • July 28-30
    • OCC bank director workshop, "Mastering the Basics: A Director's Challenge" (Columbus OH).
  • July 29
    • Don't Forget About Deposit Regulations, FDIC Chicago Region regulatory conference call.
  • Sept. 23-24
    • Community Banking in the 21st Century, Federal Reserve System/CSBS Second Annual Community Banking Research Conference.
  • Oct. 16-17
    • FDIC annual Consumer Research Symposium.

Regulatory Comment Deadlines

  • July 1 – SEC: recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants.  
  • July 7 – CFPB: correction or cure of debt-to-income overages and credit extension limit for small creditor definition; "small servicer" definition.  
  • July 8 – Federal Reserve: Dodd-Frank section 622 concentration limits on large financial companies.  
  • Aug. 4 – FHFA: Fannie and Freddie guarantee fees.  
  • 30 days from publication in Federal Register – CFTC: position limits on physical commodity derivatives and aggregation.  
  • Aug. 11 – OCC: integration of national bank and federal savings association rules on corporate activities and transactions.  
  • Aug. 11 – Federal Reserve: shift in 12-month cycle for capital planning and stress testing.  
  • Sept. 2 – Federal Reserve/FDIC/OCC: regulatory burden with respect to applications and reporting, powers and activities, and international operations.  
  • Sept. 2 – OCC/FDIC: shift in 12-month cycle for capital planning and stress testing.  
  • Sept. 10 – CFPB: request for information on mobile financial services.