InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
OCC issues State Small Business Credit Initiative 2.0 FAQs
On January 8, the OCC issued Bulletin 2024-1, which provides responses to frequently asked questions regarding the state small business credit initiative (SSBCI). The SSBCI, run by the U.S. Department of the Treasury, facilitates access to capital for small businesses, supports credit and investment programs, and offers technical assistance for applying to SSBCI funding and other government programs. The FAQs address a variety of topics, including the types of credit and investment programs states may set up, including collateral support programs, capital access programs, and loan guarantee programs, among others; criteria to qualify as “underserved” for access to the credit; treatment of certain funds; program descriptions; and whether loans made through the program could be considered for Community Reinvestment Act purposes.
Agencies adjust civil money penalties for 2024
Recently, the CFPB, NCUA, FDIC, FTC, and OCC provided notice in the Federal Register of adjustments to the maximum civil money penalties due to inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Each notice or final rule (see CFPB here, FDIC here, OCC here, FTC here, and NCUA here) adjusts the maximum civil money penalties available and documents the inflation-adjusted maximum amounts associated with the penalty tiers for each type of violation within a regulator’s jurisdiction. For violations occurring on or after November 2, 2015, the OCC’s adjusted maximum penalties go into effect as of January 8; the CFPB and FDIC’s adjustments go into effect January 15; and the FTC and NCUA’s adjustments go into effect January 10.
Agencies update the Uniform Rules of Practice and Procedure
On December 28, 2023, the Fed, OCC, FDIC, and NCUA published a final rule amending the Uniform Rules of Practice and Procedure to recognize the use of electronic communications and enhance the efficiency and equity of administrative hearings. The agencies have implemented measures recognizing the role of electronic communications across all facets of administrative proceedings. Among other things, the final rule (i) defines “electronic signature” in the Uniform Rules; (ii) codifies permitting electronic service and filings for administrative actions; (iii) allows for remote depositions; (iv) includes Equal Access to Justice Act procedures based on the 2019 Administrative Conference of the United States Model Rule; (v) adds provisions on when parties must pay civil money penalties; (vi) adds specific provisions pertaining to the forfeiture of a national bank, federal savings association, or federal branch or agency charter or franchise due to certain money laundering or cash transaction violations; (vii) modifies the discovery rules to recognize electronic documents and allow for electronic production; (viii) establishes new rules for expert and hybrid fact-expert witnesses; and (ix) consolidates the Uniform Rules and Local Rules for national banks and federal savings associations.
Additionally, the OCC has revised its specific administrative practice and procedure regulations to harmonize rules for national banks and federal savings associations. Furthermore, adjustments were made to the OCC’s regulations on organization and operations to encompass service of process considerations.
The rule is effective April 1, 2024.
OCC announces CRA bank asset-size threshold adjustments for 2024
On December 26, 2023, the OCC announced revisions to the asset-size thresholds used to define small and intermediate small banks and savings associations under the Community Reinvestment Act (CRA). Effective January 1, 2024, a small bank or savings association will mean an institution that, as of December 31 of either of the past two years, had assets of less than $1.564 billion. An intermediate small bank or savings association will mean an institution with assets of at least $391 million as of December 31 of both of the prior two years, and less than $1.564 billion as of December 31 of either of the prior two years. As previously covered by InfoBytes, the Fed and the FDIC also announced joint annual adjustments to the CRA asset-size thresholds used to define “small bank” and “intermediate small bank.”
FDIC proposes revisions to call reports
On December 27, 2023, the FDIC published its proposed revisions to the reporting forms and instructions for Call Reports and the FFIEC 002 report in a financial institution letter under the auspices of the FFIEC. Call Reports are also known as Consolidated Reports of Condition and Income, a set of financial reporting standards that banks in the U.S. must file with a regulatory agency. The proposed revisions are currently open for public comment until February 26, 2024.
The changes affect Call Reports FFIEC 031, FFIEC 041, and FFIEC 051, as well as the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002). The FFIEC’s proposed changes encompass reporting on (i) loans to non-depository financial institutions, (ii) structured financial products, and (iii) long-term debt requirements. The proposed changes are found in more detail in the Federal Register, and state detailed revisions for each FFIEC form. The changes will go into effect on June 30, 2024.
FFIEC agencies release 2022 CRA data
On December 20, FFIEC members released the 2022 CRA data on small business, small farm, and community development lending. (See fact sheet here and data table here.) The 711 lenders that provided the data reported they originated or purchased 8.9 million small-business loans totaling $284.6 billion. The total number of loans originated or purchased by reporting lenders decreased by 5.8 percent and the dollar amount of these small business loans originated decreased by 24.8 percent from 2021. Concerning community development lending activity, the agencies reported that based on data compiled from 633 banks, lending activity decreased by 1% from 2021 in terms of total dollar amount.
Agencies extend Regulation O relief for some companies controlled by funds
On December 15, the Fed, FDIC, and the OCC announced the issuance of an interagency statement to further extend the “Extension of the Revised Statement Regarding Status of Certain Investment Funds and their Portfolio Investments for Purposes of Regulation O and Reporting Requirements under Part 363 of FDIC Regulations.” The original statement was issued on December 22, 2022, with an expiration of January 1, 2024. The new interagency statement effectively extends the prior no-action position (covered by InfoBytes here) until either January 1, 2025 or the effective date of amendments to Regulation O that addresses the treatment of extensions of credit by a bank to fund complex–controlled portfolio companies that are bank insiders.
The agencies noted that they will refrain from acting against banks extending credit to complex-controlled portfolio companies that would otherwise violate Regulation O, provided the company controls (directly or indirectly) less than 15 percent of the bank’s voting securities (or 20 percent under certain circumstances) and does not plan to place representatives or exercise a controlling influence over the bank. Additionally, the agencies will not pursue action against insured depository institutions for failing to report credit extensions that would violate Regulation O but fall under the interagency statement’s coverage. The agencies explained how credit extensions must be on “substantially the same terms as those prevailing for comparable transactions with unaffiliated third parties” and may not “involve more than normal risk of repayment or present other unfavorable features.”
OCC reports on the federal banking system’s mortgage performance during the third quarter
On December 12, the OCC released a report on first-lien mortgage performance for the third quarter of 2023. The OCC compares the third quarter’s statistics to this year’s second quarter statistics, as well as a year-over-year analysis in comparison to the third quarter of 2022.
The OCC found that there was a 0.1 percent increase in “current and performing” mortgages and a 0.2 percent drop in mortgages that are seriously delinquent from the previous year. As for mortgage servicing, there were 7,436 loan modifications completed in the third quarter of 2023, which is a 13.8 percent decrease from the second quarter. The OCC notes that while the third quarter saw an increase in foreclosures from the previous quarter, such figures still represent a decrease from the number of foreclosures from last year. The report breaks down several statistics for each state, including the number of mortgage modification actions, the number of modification actions in combination actions, the changes in monthly principal and interest payments by state, and the number of re-defaults for loans modified six months previously.
OCC issues annual federal banking report for 2023
On December 11, the OCC published its 2023 Annual Report, which provides a comprehensive overview of the current state of the federal banking system, outlines the OCC’s strategic priorities and initiatives, and details the agency’s financial management and condition.
The OCC restated its supervisory priorities for the year, summarized proposed rules, guidance and other publications issued in FY 2023, reported on its licensing activities and summarized the results of enforcement actions against institutions and individuals, which netted over $100 million in civil money penalties. The report also highlighted the OCC’s efforts in “guarding against complacency, reducing inequality, adapting to digitalization, and acting on climate-related financial risks—which collectively focus the OCC’s efforts on maintaining the public’s trust in banking.” According to the “comptroller’s viewpoint” within the report, Acting Comptroller Michael J. Hsu proposed an annual survey to gauge the American public’s trust in banks and banking supervision over time. The survey will aim to collect diverse data on consumer trends to aid policymakers, regulators, and community groups in better understanding and enhancing trust in the banking system. Hsu also highlighted some actions he believes will help restore trust in the banking system: (i) bank supervisors acting in a timely and efficient manner; (ii) the strengthening of large bank resilience and resolvability regulations; (iii) updates to deposit insurance coverage; and (iv) preserving “the diversity of the banking system… as the industry evolves.” Among other points of the annual report, as part of its emphasis on climate-related financial risk, the OCC reported that it is conducting exploratory reviews of banks with $100 billion or note in assets, in an attempt to establish a baseline understanding of how banks manage financial risks related to climate change.
House Financial Services Committee questions financial agency representatives on technological implementations
On December 5, the U.S. House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion held a hearing on “Fostering Financial Innovation: How Agencies Can Leverage Technology to Shape the Future of Financial Services.” The Committee invited representatives to testify from the SEC, OCC, FDIC, CFPB, NCUA, and the Federal Reserve. The representatives fielded an array of questions focused on artificial intelligence, cryptocurrencies, and central bank digital currencies (CBDCs), and broadly focused on the need to balance technological innovation within the financial sector with managing risk.
On cryptocurrencies, congressional representatives posed questions on the nature of criminal activity among other risks. The discussion addressed bank risks related to crypto assets—while banks do not hold crypto assets, the representative from the Federal Reserve noted how banks may face liquidity risks when holding deposits from crypto-related companies. On CBDCs, the Committee asked for an update on the U.S. CBDC; the Federal Reserve representative mentioned the Fed’s current research on CBDC technologies but noted that the agency is still “a long way off from thinking about the implementation of anything related to a CBDC.”
On the topic of artificial intelligence, agency representatives discussed how banks are using the technology for fraud monitoring and customer service. The discussion addressed how artificial intelligence technology can create deepfakes using generative models to mimic an individual’s appearance or voice, and thus help scammers bypass traditional security checks. In response, some countries have implemented a secure digital ID that biometrically syncs to one’s smartphone, and the NCUA noted that it is currently evaluating this technology.