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On November 7, the OCC, FDIC, and Federal Reserve issued a proposal to streamline regulatory reporting for qualifying small institutions to implement Section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Specifically, the joint proposal would permit depository institutions with less than $5 billion in assets—previously set at $1 billion—that do not engage in certain complex or international activities to file the FFIEC 051 Call Report, the most streamlined version of the Call Reports. Additionally, the proposal would reduce the existing reportable data items in the FFIEC 051 Call Report by approximately 37 percent for the first and third calendar quarters. The proposal also includes similar provisions for uninsured institutions with less than $5 billion in total consolidated assets that are supervised by the Federal Reserve and the OCC. Comments on the proposal must be received within 60 days of publication in the Federal Register.
On November 2, the Federal Reserve Board (Board) finalized a new supervisory rating system for large financial institutions that is aligned to the core areas supporting qualifying institutions’ safety and soundness and is effective February 1, 2019. Supervisors will use the new rating system to assign confidential ratings for “all domestic bank holding companies and non-insurance, non-commercial savings and loan holding companies with $100 billion or more in total consolidated assets”—an increase from the $50 billion threshold proposed originally. The Board stated that the new rating system “will also apply to U.S. intermediate holding companies of foreign banking organizations with $50 billion or more in total consolidated assets.” The new rating system is designed to (i) better align with current Board supervisory programs and practices; (ii) “[e]nhance the clarity and consistency of supervisory assessments and communications of supervisory findings and implications”; and (iii) “provide transparency related to the supervisory consequences of a given rating.”
According to the Board, supervisors will continue to apply the existing rating system to bank holding companies with less than $100 billion in total consolidated assets, as well as to non-insurance, non-commercial savings and loan holding companies who do not meet the $100 billion total consolidated asset minimum threshold.
On October 30, the CFPB released an updated HMDA Small Entity Compliance Guide to reflect Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) and the 2018 HMDA interpretive and procedural rule. As previously covered by InfoBytes, on August 31, the CFPB issued an interpretive and procedural rule to implement Section 104(a) of the Act, which amends section 304(i) of HMDA by adding partial exemptions from some of HMDA’s reporting requirements for certain insured depository institutions and insured credit unions.
On October 31, the OCC published in the Federal Register proposed changes to its “stress test” rules for covered financial institutions, as required by the Dodd-Frank Act. The proposal would, among other things, (i) revise the OCC reporting requirements to mirror the Federal Reserve Board’s proposed Comprehensive Capital Analysis and Review (CCAR) reporting form FR Y-14A for covered institutions with total consolidated assets of $100 billion or more; (ii) implement the revised asset threshold mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act; and (iii) remove the Retail Repurchase worksheet. Comments on the proposed changes must be received by December 31.
On October 31, the Federal Reserve announced a proposed rulemaking to more closely match certain regulations for large banking organization with their risk profile. The proposal would establish four risk-based categories for applying the regulatory capital rule, the liquidity coverage ratio rule, and the proposed net stable funding ratio rule for banks with $100 billion or more in assets. Specifically, the Federal Reserve proposes to establish the four categories using risk-based indicators, such as size, cross-jurisdictional activity, weighted short-term wholesale funding, nonbank assets, and off-balance sheet exposure. According to the proposal, the most significant changes will be for banks are in the two lowest risk categories:
- Banks with $100 billion to $250 billion in total consolidated assets would generally fall into the lowest risk category and would (i) no longer be subject to the standardized liquidity requirements; (ii) no longer be required to conduct company-run stress tests, and (iii) be subject to supervised stress tests on a two-year cycle.
- Banks with $250 billion or more in total consolidated assets, or material levels of other risk factors, that are not global systemically important banking institutions (GSIBs), would (i) have reduced liquidity requirements; and (ii) only be required to perform company run stress tests on a two-year cycle. These banks would still be subject to annual supervised stress tests.
Banks in the highest two risk categories, including GSIBs, would not see any changes to capital or liquidity requirements. A chart of the proposed requirements for each risk category is available here.
Comments on the proposal must be received by January 22, 2019.
Additionally, the Federal Reserve released a joint proposal with the OCC and FDIC that would tailor requirements under the regulatory capital rule, the Liquidity Coverage Ratio and the proposed Net Stable Funding Ratio to be consistent with the prudential standard changes.
On October 25, the Federal Reserve Board announced the annual indexing of the reserve requirement exemption amount and the low reserve tranche for 2019 under Regulation D. For 2019, Regulation D is amended to set the reserve requirement exemption amount at $16.3 million (an increase from 2018’s $16 million) and the low reserve tranche at $124.2 million (an increase from 2018’s $122.3 million). The new low reserve tranche and reserve requirement exemption amount will apply to the fourteen-day reserve maintenance period that begins January 17, 2019. The final amendments are effective 30 days after publication in the Federal Register.
On October 25, the FDIC published a proposed rule in the Federal Register to rescind the annual disclosure requirement applicable to all state nonmember banks and insured state-licensed branches of foreign banks (collectively, “banks”). Specifically, the FDIC is proposing to eliminate 12 CFR Part 350, which, in general, required banks to prepare annual disclosure statements consisting of (i) required financial data comparable to specified schedules in the Call Reports filed for the previous two years; (ii) information that the FDIC may request, such as enforcement actions; and (iii) other information the bank chooses to disclose. According to the proposal, the FDIC has determined that the regulation is “outdated and no longer necessary,” because, with widespread access to the internet, information about the financial condition and performance of individual banks is now “reliably and directly offered to the public through the FDIC’s and the Federal Financial Institutions Examination Council’s (FFIEC) websites” in the form of Call Reports and Uniform Bank Performance Reports. This eliminates the need for the annual disclosure statement requirements. Similar disclosure requirements have already been rescinded in recent years by the Federal Reserve Board and OCC. Comments on the proposed rule must be received by November 26.
On October 26, the CFPB announced it expects to publish proposed rules reconsidering the ability-to-repay provisions of the rule covering Payday, Vehicle Title, and Certain High-Cost Installment Loans (the Rule) in January 2019. The Bureau does not intend to reconsider the payment provisions of the Rule, noting that the ability-to-repay provisions “have much greater consequences for both consumers and industry than the payment provisions.” Under the current Rule, it is an unfair and abusive practice for a lender to make a covered short-term loan or a covered longer-term balloon payment loan without reasonably determining that the consumer has the ability to repay the loan (see the Buckley Sandler Special Alert for more detailed coverage on the Rule). The Bureau also intends to address the compliance date for the Rule, which is currently set at August 19, 2019.
On October 22, the Federal Housing Administration (FHA) issued Mortgagee Letter 2018-08, streamlining documentation requirements for Home Equity Conversion Mortgage (HECM) servicers when assigning FHA-insured reverse mortgages to HUD for claims payments. Effective immediately, servicers may now submit alternative supporting documentation, such as (i) documentation from a current hazard insurance provider in lieu of a declaration page; and (ii) alternative evidence of a borrower’s death, such as an obituary or healthcare documents in lieu of a death certificate. Servicers must now also submit evidence that any mobile home is “real property” under the laws of the particular state for which the home is located. FHA reminds servicers that claims for insurance benefits must be filed within 60 calendar days after receiving preliminary title approval, and notes that servicers must now provide a detailed explanation of all pre-due and payable corporate advances in the compliance package, including the date of the disbursement, the expense that was paid, and any information related to received repayments. According to a FHA’s press release, streamlining the requirements and reducing the documentation burden will help accelerate the claim payments process for servicers.
On October 17, the Federal Reserve Board issued CA 18-8, which announces revised interagency examination procedures for Regulation CC, the implementing regulation to the Expedited Funds Availability Act. The revised procedures reflect amendments to Regulation CC that were effective on July 1, which, among other things (i) creates a framework for electronic check collection and return; (ii) establishes certain indemnities for electronically-created checks; (iii) applies traditional-check-equivalent warranties to electronic checks; and (iv) modifies the requirements for the expeditious return of checks and expeditious-return liability. The revised procedures also incorporate amendments from the Economic Growth, Regulatory Relief, and Consumer Protection Act. CA 18-8 supersedes the examination procedures referenced in CA 04-9, “Revised Regulation CC Examination Procedures - Check Clearing for the 21st Century.”
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Jeffrey P. Naimon and Jonice Gray Tucker to discuss "Enforcement and litigation trends" at the American Bankers Association General Counsel Meeting
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- David S. Krakoff to discuss "The DOJ corporate enforcement policy and your disclosure calculus one year in: Are companies benefitting?" at the American Conference Institute International Conference on the Foreign Corrupt Practices Act
- Moorari K. Shah to discuss "Legal & regulatory issues" at the Opal Group Marketplace Lending & Alternative Financing Summit
- Jonice Gray Tucker to discuss "Hot topics in consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss "Anti-money laundering/OFAC compliance" at the Institute of International Bankers U.S. Regulatory/Compliance Orientation Program