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OCC Refines Consideration of BSA/AML Examination Findings
On September 28, the OCC issued Bulletin 2012-30 to refine how examiners consider Bank Secrecy Act/Anti-Money Laundering (BSA/AML) examination findings in the FFIEC Uniform Ratings System and the OCC’s risk assessment system for national banks and federal savings associations, and in the Risk Management, Operational Controls, Compliance, and Asset Quality ratings and risk assessment system for federal branches and agencies of foreign banking organizations. To align OCC practices with those of other federal regulators, OCC examiners no longer consider BSA/AML findings when assigning consumer compliance ratings. However, the findings still are considered when assessing overall compliance risk. Additionally, the current practice of considering such findings in the safety and soundness context will continue, and serious compliance deficiencies create a presumption that a bank’s management component rating will be hurt. Similarly, current practices regarding consideration of findings with regard to foreign banks remain applicable.
Federal Regulators Host Webinar on SCRA Compliance
On September 10, federal banking regulators, the CFPB, and the FHFA conducted a webinar on federal servicemember financial protections, recent changes to the Servicemembers' Civil Relief Act (SCRA), and recent changes to Fannie Mae and Freddie Mac short sale procedures for servicemembers and loan modification options for servicemembers. The event featured compliance and enforcement updates from the CFPB, the DOJ, and the OCC. Ann Thompson from the CFPB Office of Nonbank Supervision described recent joint agency guidance regarding servicemembers with Permanent Change of Station (PCS) Orders as an extension of the CFPB's mortgage servicing exam procedures. Ms. Thompson explained that the CFPB will look at bank and nonbank servicers' policies and procedures to determine their adequacy for handling servicemembers with PCS orders. If there are deficiencies, the CFPB may take supervisory or enforcement actions to support implementation of the guidance. Eric Halperin from the DOJ's fair lending unit provided an update on enforcement activity and described a recent SCRA enforcement action against a national bank that covered all aspects of SCRA, not just foreclosure protections, as the model for the DOJ moving forward. Finally, Kimberly Hebb from the OCC offered some considerations for institutions seeking to comply with SCRA. She explained that the SCRA compliance process need not stand alone. For example, with regard to the law's rate reduction requirements, compliance steps could be incorporated into existing processes for error resolution. Ms. Hebb also stressed documentation and record keeping, pointing out that while the law does not include a specific record retention requirement, examiners will want to see the full scope of compliance processes documented for use in determining compliance.
OCC Names New Enforcement and Compliance Director
On September 5, the OCC announced the promotion of Ellen M. Warwick to Director for Enforcement and Compliance, responsible for conducting investigations, recommending administrative actions, and litigating enforcement actions. Ms. Warwick previously served as Assistant Director for Enforcement and Compliance and as Assistant Director for Litigation, among other positions with the OCC. She also has been a litigation attorney in private practice, a trial attorney with the DOJ, and a prosecutor in the Essex District Attorney’s Office of Massachusetts.
OCC Proposes Stress Test Reporting Requirements for Large Banks
On August 16, the OCC published a notice that describes the reports and information the OCC proposes to collect to implement the Dodd-Frank Act’s annual stress tests for banks with consolidated assets of $50 billion or more. The information that the OCC proposes to collect includes documentation regarding income statements, balance sheets, capital statements, retail projections, securities, trading risk, counterparty credit risk, operational risk, and pre-provision net revenue. The OCC proposed rules to implement the stress tests earlier this year. A separate notice regarding reports for institutions with consolidated assets between $10 billion and $50 billion will be published at a later date. The OCC is accepting comments on the instant notice through October 15, 2012.
OCC Chief Counsel Announces Retirement
On August 13, OCC Chief Counsel Julie Williams announced her departure from her current position effective September 30, 2012 and her retirement from federal service at the end of 2012. Ms. Williams has been with the OCC for eighteen years and twice served as acting Comptroller. While the agency conducts its search for a permanent replacement for Ms. Williams, Deputy Chief Counsel Daniel Stipano will serve as acting Chief Counsel from October 1, 2012 to December 31, 2012 and Deputy Chief Counsel Karen Solomon will serve from January 1, 2013 through March 31, 2013.
Banking Regulators Extend Comment Period for Three Proposed Capital Rules
On August 8, the Federal Reserve Board, the FDIC, and the OCC announced an extension of the comment period for three proposed regulatory capital rules. The proposed rules were announced in June with a comment period closing September 7, 2012. The regulators are now giving interested parties until October 22, 2012 to submit comments.
OCC and Federal Reserve Board Extend Independent Foreclosure Review Program Deadline
On August 2, the Federal Reserve Board and the OCC announced that the deadline for borrowers to seek review of their mortgage foreclosures under the Independent Foreclosure Review program has been extended to December 31, 2012. Under the program, an eligible borrower can have his or her foreclosure reviewed by independent consultants to determine whether the borrower was financially injured due to errors, misrepresentations, or other deficiencies in the foreclosure process. An injured borrower may be eligible for compensation or other remedies. The program originally was scheduled to close April 30, 2012, but has been extended numerous times over the past year.
OCC and DOJ Announce SCRA Enforcement Action Against a National Bank
On July 26, the OCC and the DOJ announced resolution of actions brought against a national bank for alleged violations of the Servicemembers Civil Relief Act (SCRA). The DOJ filed a complaint and consent order in the U.S. District Court for the Eastern District of Virginia, simultaneously bringing and resolving allegations that over a roughly five year period the bank failed to provide sufficient protections to servicemembers (i) denying valid requests for interest rate reductions because the servicemembers’ military orders did not include specific end dates for the period of military service, (ii) foreclosing without a court order, (iii) repossessing motor vehicles without a court order, and (iv) obtaining default judgments without first filing accurate affidavits. Under the DOJ settlement, the bank must pay $12 million in damages to servicemembers. Concurrently, the OCC released consent orders resolving similar allegations. Under both the DOJ and OCC orders, the bank must take specific actions to enhance compliance with SCRA, including with regard to vendor management, training, and internal reporting. The OCC also is requiring that the bank report periodically to the OCC, and conduct a look-back review of its servicemember accounts. The DOJ notes that the bank already has adopted enhanced SCRA policies on its own initiative, including extending a four percent interest rate to qualifying servicemembers and giving an additional one-year grace period before de-enrolling servicemembers from the reduced interest rate program.
FDIC Finalizes Rule and Guidance Regarding Assessment of Risk Capital Requirements
On July 24, the FDIC published a final rule that prohibits any insured savings association from acquiring or retaining a corporate debt security unless the association first determines that the issuer has adequate capacity to meet its obligations through the projected life of the security. An issuer would satisfy this requirement if it presents a low risk of default and is likely to make a full and timely repayment of principal and interest. The final rule is largely identical to the rule as proposed, but makes one change to clarify the rule and harmonize it with parallel OCC regulations. In conjunction with the final rule, the FDIC also finalized guidance meant to assist savings associations in conducting due diligence to determine whether a security is eligible under the final rule. The finalized guidance is substantially similar to the proposed version. The final rule took effect July 21, 2012.
OCC Releases Bank Accounting Advisory Series Update
On July 25, the OCC released an update to its Bank Accounting Advisory Series, which provides accounting guidance for financial institutions. The updates are intended to address industry questions related to acquired loans, other real estate owned, troubled debt restructurings, nonaccrual, allowance for loan and lease losses, insurance claims, and debt discharged in bankruptcy.