UK: Bank Regulatory News And Trends

This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.

Fed will release stress test results on June 21, CCAR results on June 27. The Federal Reserve Board announced on May 31 the dates it will be releasing results of two Dodd-Frank-mandated exercises. Results from the latest supervisory stress tests will be released on Friday, June 21, and the results from the related Comprehensive Capital Analysis and Review will be released on Thursday, June 27. Stress tests are intended to ensure that banks have sufficient capital to continue lending even in a recession, while CCAR evaluates capital planning and adequacy. In February, the Fed released its stress test and CCAR scenarios for the 2019 cycle, under which less-complex banks will no longer be subject to the stress test regime. That relief generally applies to firms with total consolidated assets between $100 billion and $250 billion.

CFPB to hold symposium on abusive acts." The CFPB will hold its first symposium in a planned series of such events, with the initial session focusing on the prohibition against abusive acts or practices in the selling of financial products. The symposium is scheduled for June 25 at 9 a.m., at the Bureau's headquarters at 1700 G St., NW, Washington, DC. It will also be webcast on the CFPB website. According to CFPB's June 11 announcement, the "symposium will provide a public forum for the Bureau and the public to hear various perspectives on the meaning of abusiveness." While "unfair or deceptive acts or practices" were banned under the Federal Trade Commission Act of 1914, the 2010 Dodd-Frank law also included "abusive" under the rubric of UDAAP (unfair, deceptive, or abusive acts and practices). "The meaning of abusiveness is less developed than the meaning of unfair or deceptive, which have been defined substantially" by the FTC Act, CFPB stated. Two panels of UDAAP experts will participate in the symposium, with the discussions touching on both the policy issues relating to the "abusive" standard and how that standard has been used in practice. CFPB Director Kathleen Kraninger and Deputy Director Brian Johnson will also provide remarks. Those interested in attending are asked to RSVP at this link.

CFPB official stresses market-based approaches, targeted enforcement and culture of compliance." Warning against equating consumer protection with "giving license to government actors to supplant consumer preferences with their own," CFPB Deputy Director Brian Johnson told a libertarian think-tank that the new leadership team at the bureau is oriented toward a free market-based approach to accomplish its mission. In a June 12 speech before the Cato Institute, Johnson said the agency's enforcement philosophy seeks to be both pro-consumer and pro-market, with "disclosure-based regulation" to ensure "consumers have access to truthful and understandable information," while "combatting unlawful acts or practices by market participants, including and especially those that are deceptive or discriminatory." But he said regulators should steer clear of a "market-replacing" approach that "restricts the prices, terms, and products that consumers can choose." Johnson cited the policy direction outlined by his boss, Director Kathleen Kraninger, of "enforcing the law and using our supervisory process to promote a culture of compliance" with fair lending and disclosure laws. He also highlighted the importance of the bureau's financial education programs, and "the use of rulemaking and guidance where appropriate to articulate clear rules of the road for regulated entities." Johnson was officially named last month to the post he had been filling in an acting capacity since last year.

FHFA's Calabria warns of risks from non-banks; seeks authority to charter new GSEs to compete with Fannie and Freddie. Federal Housing Finance Agency Director Mark Calabria offered a series of housing finance reform proposals, while pointing to the risks posed by non-banks' growing share of the mortgage market. In a June 13 speech at the 2019 Ginnie Mae Summit, Calabria noted that non-bank, non-depository institutions now account for 60 percent of all the mortgages sold to one of the government guarantee programs – up from 30 percent just six years ago. While recognizing that non-banks have brought in new capacity and provided needed liquidity, and that they will likely be a fixture in the mortgage market for the foreseeable future, Calabria said that "from a risk perspective there are some key differences between banks and non-banks that we need to address in a responsible way." Calabria said his agency is working with Fannie Mae and Freddie Mac to improve and modernize counterparty risk standards and management practices, with the goal of ensuring that loan originators are able to continue lending in a downturn. In FHFA's annual report to Congress, issued June 12, Calabria, in a cover letter to leaders of the financial services committees, called for Congress to act on housing finance reform, foster increased competition and grant FHFA stronger regulatory powers comparable to those of other regulatory agencies. Specifically, he requested that his agency be given chartering authority, similar to that of the OCC, to issue more GSE charters. "This would allow more competitors to enter the industry" to challenge Fannie's and Freddie's "duopoly," Calabria said.

Bipartisan AML/CFT legislation floated. Four senators, two Democrats and two Republicans, have announced their intention to introduce legislation to combat terror financing and money laundering. The four Senate Banking Committee members released a discussion draft and a detailed summary of the proposed legislation and are looking for public input on the measure. The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act would require shell companies to disclose their true owners, and update decades-old anti-money laundering (AML) and combating the financing of terrorism (CFT) policies, by giving Treasury and law enforcement added tools to fight criminal networks. Among its provisions, the bill would prevent foreign banks from obstructing money laundering or terrorist financing investigations by requiring these banks to produce reliable records for evidentiary purposes, and authorize contempt sanctions for banks that fail to comply. It would also ensure the inclusion of current and future payment systems in the AML-CFT regime by updating the definition of "coins and currency" to include digital currency. The bill's sponsors are Senators Tom Cotton (R-AR), Mark Warner (D-VA), Doug Jones (D-AL) and Mike Rounds (R-SD). Submissions can be made to Senator Warner's office at AML-BSAReform@warner.senate.gov by July 19, 2019.

FDIC tries to clear up confusion on websites: .com vs .gov. The FDIC is warning its customers that "FDIConnect.com" is not affiliated with the FDIC, and that the correct address for the regulatory agency's secure internet channel is FDICconnect.gov. The dot-com site advertises itself as a bank-deposit broker that can obtain higher interest rates on bank deposits for consumers, and its website does include a caveat that it is not affiliated with FDIC. In its June 13 press release, FDIC notes that its dot-gov link is a secure electronic portal intended to connect banks with the agency. For customers, FDIC offers Bankfind to help locate FDIC-insured banks and savings institutions. California's Department of Business Oversight also issued a warning about the similar websites on May 29.

"Perspectives from Main Street" on CRA modernization. The Fed on June 13 published a summary of the feedback it has received from bankers, community groups and other regulators on the current state of and potential revisions to the Community Reinvestment Act. The 24-page document, titled " Perspectives from Main Street: Stakeholder Feedback on Modernizing the Community Reinvestment Act," compiles input provided by more than 400 participants during a series of 29 roundtable discussions convened by the Fed from last October through January of this year. CRA, enacted into law in 1977, was designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low and moderate-income neighborhoods.

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