United States: Bank Regulatory News And Trends - 29 July 2019

Last Updated: August 8 2019
Article by Jeffrey L. Hare, Christopher N. Steelman, Adam Dubin and Bethany Krystek

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

  • FinCEN, bank regulators clarify tailored, risk-based approach to BSA/AML examinations. The Treasury Department's Financial Crimes Enforcement Network joined with the four main federal bank regulatory agencies in issuing a joint statement emphasizing their risk-focused approach to Bank Secrecy Act/anti-money laundering compliance programs. The July 22 joint statement explains how BSA/AML examinations consider a bank's unique risk profile in an effort to better tailor examination plans and procedures, more effectively devote supervisory resources to higher-risk areas, improve transparency, and allow banks to better allocate compliance resources based on their own risk. The statement, which does not establish new requirements, is the third in a series issued by a working group created by Treasury's Office of Terrorism and Financial Intelligence and including FinCEN, the Fed, FDIC, OCC and
  • OFAC expands reporting requirements on blocked and unblocked property, rejected transactions. The Treasury Department's Office of Foreign Assets Control issued amended regulations, effective June 21, governing reporting and recordkeeping requirements, and license application and other procedures for OFAC-administered economic sanctions programs. The interim final rule, published in the Federal Register on the effective date, provides updated instructions and incorporates new requirements for "all US persons," including financial institutions, filing reports on blocked property, unblocked property, and rejected transactions. OFAC is revising §501.603 of its regulations covering reports on blocked property to provide greater detail about the information required on blocking reports, and expanding this section to cover reports on the release of property from blocked status (ie, unblocked property). The agency said the more detailed information would "reduce the need for follow up requests from OFAC and ... lessen the overall reporting burden for submitters." The rule also revises §501.604 to clarify that it applies broadly to all rejected transactions, not only funds transfers, but also to wire transfers, trade finance, securities, checks, foreign exchange, and goods or services. The reports on blocked and unblocked properties and rejected transactions must be filed within 10 business days of the event or transaction. OFAC is also revising §501.801 of the regs to include information regarding electronic license application procedures and to make other technical and conforming changes.
  • G-SIBs' living wills released by Fed, FDIC. The Federal Reserve Board and the FDIC have released the public sections of the resolution plans for eight of the largest US-based global systemically important banks. The July 23 joint statement from the two bank regulatory agencies notes that the plans, commonly referred to as living wills, are required by Dodd-Frank and are divided into public and confidential sections. "Resolution plans describe the company's strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure," the agencies state. The eight G-SIBs were required to submit their plans by July 1. They have been required to submit living wills on an annual basis, but under a proposal issued in April, that schedule would change to every two years, alternating between a full plan – comparable to the comprehensive living wills currently filed by banks – and a targeted plan – including only core elements, such as capital and liquidity. Upon final approval of that rule, the next rounds of living wills would be in the form of targeted plans in 2021 and full plans in 2023.
  • Regulators extend Volcker Rule relief for certain foreign funds another two years. The Fed, FDIC and OCC announced on July 17 that they will not take action for an additional two years on restrictions under the Volcker Rule for qualifying foreign funds, the agencies' third deferral of action on the matter. After implementation in 2013 of Section 619 of Dodd-Frank – the general prohibition on banks engaging in proprietary trading, named for former the former Fed chairman – US bank regulators heard concerns from foreign banks and governments about extraterritorial impact and other unintended consequences. Relief was first granted in July 2017 for a year, and another one-year extension was granted last year, which would have expired July 21. The latest extension continues until July 21, 2021. Under the terms of the latest extension, which are the same as the two previous ones, no action will be taken "against a foreign banking entity based on attribution of the activities and investments of a qualifying foreign excluded fund ... to the foreign banking entity, or against a qualifying foreign excluded fund as a banking entity, in each case where the foreign banking entity's acquisition or retention of any ownership interest in, or sponsorship of, the qualifying foreign excluded fund would meet the requirements for permitted covered fund activities and investments solely outside the United States." The banking agencies indicated that they had consulted with the SEC and CFTC on the matter.
  • FDIC adopts rules changes for banks in receivership. The FDIC board of directors has approved amendments to two rules intended to simplify the process for making insurance determinations when a bank is placed into receivership. The final rule amending Part 370 of the FDIC's rules and regulations, titled Recordkeeping for Timely Deposit Insurance Determination, will make changes and clarifications to recordkeeping requirements to facilitate rapid payment of insured deposits to customers if one of the 32 FDIC-insured institutions with more than two million deposit accounts were to fail. The FDIC's final rule amending Part 330, titled Joint Ownership Deposit Accounts, expands the types of evidence it would consider when determining whether joint accounts qualify for increased deposit insurance coverage and will apply to all insured depository institutions regardless of size. "Timely access to insured deposits is critical to maintaining public confidence in the banking system and the FDIC's ability to resolve these institutions," FDIC Chair Jelena McWilliams said. "Under the final rule, the FDIC can provide depositors at large failed banks the same rapid access to their insured funds as it does in smaller resolutions." McWilliams explained in a July 16 statement that Rule 370 was first adopted in 2017, and in light of "substantial progress toward compliance" improvements to the rule were developed. Changes to the two rules were proposed concurrently in April of this year and McWilliams said the final rule reflects public comments received.
  • FASB votes for three-year delay of CECL implementation for most lenders. The Financial Accounting Standards Board voted on July 17 in favor of a proposal to extend the implementation deadline of the current expected credit losses accounting standard to January 2023 for all private lenders and nonprofits, such as credit unions. Smaller public companies, those with a market cap below $250 million and annual revenue of less than $100 million, would also be granted the extension. But for large publicly traded banks, defined by FASB as SEC filers, CECL would still take effect at the beginning of 2020. CECL, which requires banks to record expected future losses immediately upon issuance of a loan, has been controversial since its adoption in 2016. Opponents, including the ABA and the US Chamber of Commerce, contend that CECL would discourage lending and reduce earnings and regulatory capital. "The delay should apply to banks of all sizes, and should be used to conduct a rigorous quantitative impact study to properly assess the effect this new standard will have on their ability to serve their customers and the broader economy, particularly during an economic downturn," said Rob Nichols, ABA president and CEO, in a July 17 statement. Legislation delaying CECL implementation has been introduced in Congress with bipartisan support. The proposed extension will undergo a 30-day public comment period in August and is expected to be finalized in the fall. Click here for the handout distributed at FASB's July 17 meeting.
  • CFPB urges banks to report suspected financial abuse of senior citizens. The CFPB on July 17 issued an updated advisory to financial institutions urging them to report to the appropriate authorities suspected cases of older adults being the targets or victims of financial exploitation, and to file Suspicious Activity Reports with the federal government when they have suspicions of elder financial exploitation (EFE). The new advisory updates the bureau's 2016 recommendations, incorporating its recent research on the issue, and provides voluntary best practices to help financial institutions prevent and respond to such exploitation and abuse. A recent CFPB report found that "EFE is widespread and damaging with an average loss of $41,800 among adults over the age of 70" who have been victimized. More than half of the states mandate reporting of EFE by financial institutions and professionals. "The Bureau is renewing its efforts to alert banks and credit unions to elder financial exploitation as they are uniquely positioned to detect that an older account holder has been targeted or victimized, and to take action," said CFPB Director Kathleen Kraninger. "The Bureau stands ready to work with federal, state and local authorities and financial institutions to protect older adults from abusive financial practices that rob them of their financial security."
  • Prospect of Fed-built real-time payments system spurs competing Congressional proposals. The ongoing consideration by the Federal Reserve of a proposal to develop a real-time payments system that could compete with or possibly replace the existing network created by a group of the nation's largest banks has unleashed a flurry of activity on Capitol Hill, and among organizations representing the banking industry.

    • Senate and House Democrats have introduced legislation that "would clarify that the Federal Reserve has the existing authority to build a real-time payments system and requires the Fed to implement its own process." Senators Chris Van Hollen (D-MD) and Elizabeth Warren (D-MA), both members of the Banking Committee, joined with Representatives Ayanna Pressley (D-MA) and Jesús (Chuy) García (D-IL), both of whom serve on the Financial Services Committee, in announcing the introduction of the Payment Modernization Act of 2019 (S.2243, H.R. 3951). The lawmakers said in a July 24 press release that American taxpayers and small businesses are currently losing billions in overdraft fees and are being forced to "turn more to costly financial products because of our inefficient payments system." They said the "Fed's failure to act is creating a vacuum that could result in a de facto monopoly of our payments system by the big banks that fails to include necessary safeguards for working Americans." The bill would update the 1987 Expedited Funds Availability Act to require financial institutions to recognize funds in real time, according to a one-page fact sheet issued by the bill's sponsors
    • On the same day, two Republican members of the House Financial Services Committee introduced separate bills that would require the Fed to satisfy certain conditions before providing a new payment service or making changes to existing services. Representative Denver Riggleman (R-VA) is sponsoring the Federal Reserve Accountability and Justification Act (H.R. 3928), which requires the Fed to meet transparency requirements. "American consumers need a robust faster payments system and the private sector has delivered that through RTP [real time payments], a system that meets the Federal Reserve's own standards, from their own asking," Riggleman said in his press release announcing the legislation. Meanwhile, Representative Ted Budd (R-NC) introduced legislation (H.R.3939) requiring the Fed "to carry out a quantitative impact study of any proposed real-time payment system under the Faster Payments Initiative before implementing such system." Budd was quoted in a published report saying that the Fed's "intrusion into this industry would disrupt already successful RTP systems and harm consumers," and added that, "It's not asking too much to require the Fed to study the destructive impact such a plan would have on private sector consumers."
    • Introduction of those legislative initiatives came two days after a bipartisan group of senators sent a letter to Fed Chairman Jerome Powell "seeking additional information regarding how a potential Fed-operated RTGS [real-time gross settlements] system would impact the adoption, quality and eventual ubiquity of real-time payments in the US" Pronouncing themselves "open minded" about the prospect of a "government-run" competitor to the current private-sector-run system, the senators questioned how long it would take to set up the program, how it would interact with the current system and whether it would help foster innovation. The July 22 letter – signed by five Banking Committee members led by Senators Mark Warner (D-VA) and Thom Tillis (R-NC) – was in response to the Fed's October 2018 request for public comment "on potential actions to facilitate real-time interbank settlement of faster payments."
    • The Clearing House, a private organization including 24 of the largest banks operating in the US, launched the RTP network in November 2017 and since then has invested more than $1 billion in it. Representatives of the major banks have argued that a public-sector alternative is not necessary. "In 2015, the Federal Reserve called on the private sector to build a real-time payments system," Greg Baer, president and CEO of the Bank Policy Institute, was quoted as saying in a recent published report. "The Clearing House, and only The Clearing House, responded by building the most advanced payments system in the world." He expressed concern that the Fed "may pull a bait and switch and build its own system certainly delaying and perhaps completely undermining the goal of a ubiquitous system where any US consumer or business can pay any other." But smaller community banks, as well as some major retailers and tech companies, have expressed support for the idea of a Fed-built system.
    • The Fed has not announced when, or whether, it will move on its own to design a faster payments system following last year's request for comment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions