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Comptroller Curry Discusses Importance of Effective Supervision Before Clearing House Annual Conference
In prepared remarks delivered on November 30 before The Clearing House Annual Conference in New York City, Comptroller of the Currency Thomas J. Curry discussed lessons from the 2008 financial crisis. Curry noted that he was “often disappointed how quickly some forget the lessons of more recent events, particularly what brought the financial system to the cliff in 2008 and what has put our banks and our economy on much firmer ground since.” His remarks emphasized the value of strong capital, the need for ample liquidity, and the importance of effective supervision.
In discussing capital, Curry noted that since the beginning of 2009, there has been a $700 billion increase in common equity capital. Such levels would allow the 33 largest bank holding companies to be well capitalized and continue lending even under the most severe scenario used by the banking agencies’ stress tests. He cautioned, however, that “[w]eakening the ratio through special exclusions only undermines our original intent and weakens the protection against excessive leverage.” Comptroller Curry similarly noted that the Liquidity Coverage Ratio and the proposed Net Stable Funding Ratio complement each other to push covered banks to hold ready resources to meet short-term cash outflows and to shift to more stable, longer-term funding.
On the subject of supervision, Curry noted the importance of “holistic supervision based on the CAMELS rating system.” He also added that while a periodic reassessment of banking laws and regulations is appropriate, “we must never settle for ‘light-touch’ supervision.” And, in concluding, Curry stressed that community banks and their examiners, in order to “remain strong and healthy,” need to “focus on strategic risk, rising credit risk from stretching for yield while relaxing underwriting standards, expansion of new technologies, and compliance issues.”
OCC Issues Updated Guidance for Managing Bank Premises and Equipment
On November 29, the OCC announced the release of a revised Bank Premises and Equipment booklet of the Comptroller’s Handbook. The revised booklet, which replaces the booklet of the same title issued in March 1990, applies to examinations of all national banks and federal savings associations engaged in the acquisition, management, and disposal of bank premises and equipment. According to the accompanying OCC Bulletin, the revised booklet incorporates updated statutory and regulatory citations and revised examination procedures since the integration of the Office of Thrift Supervision into the OCC in 2011. The bulletin explains that the booklet also replaces the "Investment in Bank Premises" booklet of the Comptroller’s Licensing Manual and the "Fixed Assets" section of the former Office of Thrift Supervision Examination Handbook.
FSB Releases Updated Lists of Global Systemically Important Banks and Insurers
On November 21, the Financial Stability Board, in consultation with the Basel Committee on Banking Supervision and national authorities, released its updated 2016 list of G-SIBs and 2016 list of G-SIIs. Each of the new 2016 lists comprise the same banks/insurers as those on their respective 2015 list. The Basel Committee also released the following additional information related to its 2016 G-SIB assessment: (i) a list of all the banks in the assessment sample; (ii) the denominators of each indicator used to calculate the banks' scores; (iii) the cutoff score that was used to identify the G-SIBs in the updated list; (iv) the thresholds used to allocate G-SIBs to buckets for the purpose of calculating the specific higher loss absorbency requirements; and (v) links to disclosures of all banks in the assessment sample.
FDIC Amends FOIA Regulations in Accordance with FOIA Improvement Act
The FDIC published a Notice of an Interim Final Rule and Request for Comment in the November 22 edition of the Federal Register. The new rule amends FDIC regulations in accordance with requirements set forth in the FOIA Improvement Act of 2016. The new rule also codifies changes brought about by prior amendments that had already been incorporated into agency practice. To meet the Act’s statutory deadline, the interim rule was adopted without prior notice and comment and became effective immediately upon publication on November 22. Comments on the interim rule are due on January 23, 2017, after which the FDIC will remove the interim designation.
Fed Extends Post-Employment Restrictions for Senior Examiners
In a press release on November 18, the Fed announced revised post-employment restrictions that more than double the number of senior staff examiners barred from leaving a Federal Reserve Bank and going right to work for a bank they had supervised. By law, senior bank examiners are prohibited for one year from accepting paid work from a financial institution that they had primary responsibility for examining in their last year of Reserve Bank employment. This post-employment restriction has previously applied only to central points of contacts (CPCs) at firms with more than $10 billion in assets. The revised policy expands this post-employment restriction to deputy CPCs, senior supervisory officers (SSOs), deputy SSOs, enterprise risk officers, and supervisory team leaders, which has the effect of more than doubling the number of senior examiners covered. The policy—which takes effect January 2, 2017—does not apply to senior examiners responsible for multiple unaffiliated banks.
In addition, another new Fed policy prohibits former Fed Bank officers from representing financial institutions and other third parties in matters before the Fed for one year after leaving their Federal Reserve position. This policy takes effect on December 5.
FDIC Board Approves Final Rule on Deposit Account Recordkeeping Requirements to Facilitate Timely Payment of Insured Deposits in Large Bank Failures
On November 15, the FDIC approved a final rule establishing systems and recordkeeping requirements for large FDIC-insured institutions to facilitate the prompt payment of insured deposits to customers upon the failure of any such depository institution. The final rule requires each insured depository institution that has two million or more deposit accounts to: (i) configure its IT system so that it is capable of calculating insured and uninsured amounts in each deposit account by ownership right and capacity; and (ii) maintain complete and accurate records with all information needed by the FDIC to determine deposit insurance coverage with respect to each deposit account. The final rule will become effective April 1, 2017.
FDIC Vice-Chairman Speaks On Strengthening Global Capital
FDIC Vice-Chairman Thomas M. Hoenig spoke at the 22nd Annual Risk USA Conference in New York on November 9. He delivered prepared remarks on “Strengthening Global Capital: An Opportunity Not To Be Lost.” Hoenig discussed his views on key factors at the core of the debate over what defines adequate capital. Specifically, he discussed the controversy over alternative measurements for judging adequate capital currently being considered by the Basel Committee, which he believes will weaken current standards and ultimately justify lower levels of capital. According to Hoenig, “[m]omentum is developing within the Basel Committee to undermine measures that could increase bank capital levels, and some jurisdictions are threatening to walk away if the measures are thought too strict.” Hoenig recommended that the United States “should avoid joining this race to the bottom.”
OCC Proposes Revisions to Stress Test Information Collection
On November 15, the OCC published a notice and request for comment on proposed changes to its rules requiring certain covered financial institutions, including national banks and federal savings associations with assets over $50 billion, to report certain financial information as part of stress testing. The proposed revisions to the OCC’s reporting requirements are “intended to promote consistency with” the Fed’s proposed changes to its form FR Y-14A, and consist generally of clarifying instructions, shifting the “as-of date”, adding data items, deleting data items, and redefining existing data items—including an expansion of the information collected in the scenario schedule. The proposed revisions also reflect the implementation of the final Basel III regulatory capital rule, which is set to revise and replace the OCC’s risk-based and leverage capital requirements to be consistent with agreements reached by the Basel Committee on Banking Supervision in ‘‘Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems’’ (Basel III). All comments must be received by January 19, 2017.
OCC Seeks Comments on Volcker Rule Reporting, Recordkeeping, and Disclosure Requirements
On November 18, OCC published a notice seeking comments on various reporting, recordkeeping, and disclosure requirements associated with its regulations that implemented the Volcker Rule. Among other things, the OCC is seeking comments on: (i) whether the information sought is necessary for the OCC to perform its supervisory functions; (ii) the accuracy of the OCC’s estimate of the information collection burden; (iii) ways to enhance the quality, utility, and clarity of the information to be collected while also minimizing the collection burdens on respondents; and (iv) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide the information. Comments must be submitted on or before January 17, 2017.
Supreme Court Hears Oral Arguments On Whether Federal Jurisdiction Exists Based on Presence of Fannie Mae as a Party
The Supreme Court heard oral arguments in Lightfoot v Cendant Mortgage Corp., the latest in a line of cases assessing the boundaries of the jurisdiction of the federal courts over Federal agencies and instrumentalities. In Lightfoot, the questions before the Court are whether (i) the phrase "to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal" in Fannie Mae's charter confers original jurisdiction on the federal courts over every case brought by or against Fannie Mae, pursuant to 12 U.S.C. § 1723a(a); and (ii) the majority’s decision in Am. Nat'l Red Cross v. S.G., 505 U.S. 247 (1992) (5-4 decision), should be reversed.