Regulatory Update - December 2015

Grant Thornton’s monthly Regulatory Update tracks key regulatory news and enforcement activity within the financial services industry so you can stay informed about the impact of current events on your business.

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December 22, 2015 - CFPB Monthly Complaint Snapshot Examines Money Transfer Complaints
The CFPB released its latest monthly consumer complaint snapshot, highlighting consumer complaints about money transfers. The November 2015 report shows that consumers’ complaints about money transfers center around trouble safely and efficiently sending money, and complaints about being victims of fraud. This month’s snapshot also highlights trends seen in complaints coming from Georgia. As of December 1, 2015, the CFPB has handled over 770,100 consumer complaints across all products.
Read the full CFPB report here>>
December 21, 2015 - OCC Report Shows Third Quarter Trading Revenue of $5.3 Billion
Insured U.S. commercial banks and savings associations reported trading revenue of $5.3 billion in the third quarter of 2015, a drop of four percent or $200 million from the previous second quarter, the Office of the Comptroller of the Currency (OCC) reported in the OCC's Quarterly Report on Bank Trading and Derivatives Activities. Trading revenue in the third quarter was $300 million or five percent lower than in the year earlier period.
Read the full OCC press release here>>

December 21, 2015 - FRB Seeks Public Comment on Proposed Countercyclical Capital Buffer Policy
The FRB is seeking public comment on a proposed policy statement detailing the framework the Board would follow in setting the Countercyclical Capital Buffer (CCyB).The buffer is a macroprudential tool that can be used to increase the resilience of the financial system by raising capital requirements on internationally active banking organizations when there is an elevated risk of above-normal losses in the future. The CCyB would then be available to help banking organizations absorb shocks associated with declining credit conditions. The proposed policy statement provides background on the range of financial-system vulnerabilities and other factors the FRB could take into account as it evaluates settings for the buffer. Comments on the proposed policy statement are invited until February 19, 2016.
Read the full FRB press release here>>

December 17, 2015 - Federal Banking Agencies Seek Comment on Interagency Effort to Reduce Regulatory Burden
The federal banking agencies approved a notice requesting comment on the fourth and final set of regulatory categories as part of their review to identify outdated or unnecessary regulations applied to insured depository institutions. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires the FFIEC, OCC, FDIC and FRB to review their regulations at least every 10 years. The fourth and final notice seeks comment on regulations in three additional categories: rules of procedure; safety and soundness; and securities. Comments will be accepted within 90 days after publication of the notice in the Federal Register.
Read the full FRB press release here>>

December 16, 2015 - OCC Report Highlights Top Risks Facing National Banks and Federal Savings Associations
The OCC’s Semiannual Risk Perspective for Fall 2015 report highlights risks facing national banks and federal savings associations based on data through June 30, 2015.  The report notes that the risks associated with underwriting and cybersecurity are increasing, while strategic, compliance, and interest rate risks remain stable.  It presents data in four main areas: the operating environment, bank condition, key risk issues, and regulatory actions.
Read the full OCC report here>>

December 16, 2015 – CFPB Warns Colleges About Secret Campus Credit Card Contracts
The CFPB sent warning letters to 17 colleges directing them to improve disclosure of school-sponsored credit card agreements. A CFPB investigation found that these schools failed to make marketing agreements available to the public, as required by law. The CFPB also released its annual report on college credit card agreements, which highlights trends in the marketing partnerships between colleges and financial institutions and concerns about transparency with college-sponsored financial accounts. To promote increased protections for students in the expanding school-sponsored debit and prepaid market, the CFPB released a “Safe Student Account Toolkit” to help colleges and universities avoid promoting financial accounts with surprise fees.
Read the full CFPB press release here>>

December 16, 2015 - FRB Issues Federal Open Market Committee Statement
Consistent with its statutory mandate, the Federal Open Market Committee (FOMC) of the FRB seeks to foster maximum employment and price stability. With gradual adjustments in the stance of monetary policy, the FOMC believes economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. Overall, taking into account domestic and international developments, the FOMC sees the risks to the outlook for both economic activity and the labor market as balanced.
Read the full FRB press release here>>

December 15. 2015 - Office of Financial Research Report Reveals Risks Have Edged Higher Over the Past Year
The Office of Financial Research (OFR) unveiled its first annual Financial Stability Report, saying threats to the stability of the U.S. financial system have edged higher over the past year. Though overall threats remain moderate, OFR Director Richard Berner notes "We see elevated and rising credit risks in U.S. nonfinancial business and in emerging-market economies, the continued reach for yield in a climate of persistently low interest rates, and the uneven resilience of the financial system.” The report, supplements and precedes the 2015 Annual Report to Congress, which the OFR will publish in January.
Read the full OFR press release here>>

December 4, 2015 - FRB Appoints Chairs of Federal Reserve Banks for 2016
The FRB announced the designation of the chairs and deputy chairs of the 12 Federal Reserve Banks for 2016. Each Reserve Bank has a nine-member board of directors. The Board of Governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair.
Read the full FRB press release here>>

December 3, 2015 - Testimony by FRB Chair
FRB Chair, Janet Yellen, spoke before the Joint Economic Committee at the U.S. Congress regarding the agency's outlook on the current state of the economy. Chair Yellen discussed how the U.S. economy has recovered substantially since the Great Recession and expressed expectations of continued economic growth at a moderate pace sufficient enough to generate additional increases in employment and a rise in inflation to the 2 percent objective of the FRB.
Read the full testimony here>>

December 3, 2015 - CFPB Finds CARD Act Helped Consumers Avoid More Than $16 Billion in “Gotcha” Credit Card Fees
The CFPB released a report detailing how the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) has helped reduce the cost of “gotcha” credit card fees by more than $16 billion. Since the reform law, total costs to consumers have fallen with the elimination of certain back-end pricing practices such as over-limit fees. Over the same period, credit has generally become more available to consumers and the number of new accounts has grown faster than in almost every other major consumer credit market. Concerns remain, however, about other back-end practices such as deferred-interest promotions that can hit consumers with unexpected costs.
Read the full CFPB press release here>>

December 23, 2015 - Review of Regulations Related to Procedure; Safety and Soundness; and Securities and Recently Issued Regulations
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires the OCC, FRB, and  FDIC (collectively, the agencies) to review their regulations every 10 years in an effort to identify outdated, unnecessary, or unduly burdensome regulations applicable to insured depository institutions. To facilitate this review, the agencies divided their regulations into 12 subject matter categories and identified the regulations in each category. The agencies have published in the Federal Register their fourth and final notice, seeking comment on rules in the categories of Procedure, Safety and Soundness, and Securities. In addition, in this notice, the agencies are seeking comment on newly issued rules, including those issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the recently finalized domestic capital and liquidity rules, and any other final rules issued on or before December 31, 2015.
Read the full OCC bulletin here>>

December 22. 2015 - Agencies Release Annual CRA Asset-Size Threshold Adjustments
The federal bank regulatory agencies announced the annual adjustment to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association under the Community Reinvestment Act (CRA) regulations.  The definitions for “small” and “intermediate small institution” for CRA examinations will change as follows:
  • “Small bank" or "small savings association" means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.216 billion.
  • "Intermediate small bank" or "intermediate small savings association" means a small institution with assets of at least $304 million as of December 31 of both of the prior two calendar years, and less than $1.216 billion as of December 31 of either of the prior two calendar years.
Read the full FRB press release here>>

December 21, 2015 - Guidance Consolidates Capital Planning Expectations for Large Financial Institutions
The FRB has released guidance that consolidates the capital planning expectations for all large financial institutions and clarifies differences in those expectations based on firm size and complexity. For the largest and most complex firms, the guidance clarifies expectations that have been previously communicated to firms, including through past Comprehensive Capital Analysis and Review (CCAR) exercises and related supervisory reviews. For firms with more than $50 billion, but less than $250 billion in total consolidated assets, as well as less than $10 billion in foreign exposures, the guidance clarifies the supervisory expectations to be applied for the firms' capital planning processes. The guidance is effective for the 2016 CCAR cycle.
Read the full FRB press release here>>

December 18, 2015 - Agencies Issue Statement on Prudent Risk Management for Commercial Real Estate Lending
The federal banking agencies have observed substantial growth in many Commercial Real Estate (CRE) asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards. The federal banking agencies are advising financial institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE lending. Financial institutions should have risk-management practices and maintain capital commensurate with the level and nature of their CRE concentration risk.
Read the full FDIC press release here>>
Read the full FRB press release here>>
Read the full OCC press release here>>

December 18, 2015 – CFPB Issues Final Rules Regarding Exemption Thresholds
The CFPB issued a final rule regarding the asset-size exemption threshold for banks, savings associations, and credit unions under Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The asset-size exemption for banks, savings associations, and credit unions will remain at $44 million. The CFPB also issued a final rule adjusting the asset-size threshold for certain creditors to qualify for an exemption from the requirement to establish an escrow account for a higher-priced mortgage loan under Regulation Z, which implements the Truth in Lending Act (TILA). The asset-size threshold exemption for certain creditors will decrease from $2.060 billion to $2.052 billion for 2016.
Read the full CFPB press release here>>

December 17, 2015 - Notice of Proposed Rulemaking Regarding the Establishment of Enforceable Guidelines for Recovery Planning
The OCC is requesting comment on a proposed rule to establish enforceable guidelines for recovery planning by insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $50 billion or more (covered banks). The guidelines are issued pursuant to a federal statute that authorizes the OCC to prescribe operational and managerial standards for national banks and federal savings associations.  The OCC guidelines would be enforceable under the terms of that statute.
Read the full OCC press release here>>

December 16, 2015 - Margin and Capital Requirements for Covered Swap Entities
The FDIC, FRB, OCC, Farm Credit Administration, and Federal Housing Finance Agency (the Agencies) have adopted a final rule to implement Sections 731 and 764 of the Dodd-Frank Act. These sections require the agencies to adopt rules jointly to establish capital requirements and initial and variation margin requirements for all non-cleared swaps and non-cleared security-based swaps of dealers and major participants. The capital requirements under these sections have been previously incorporated in the Agencies' capital rules.
Read the full FDIC press release here>>

December 16, 2015 - Final Rule Amending the Filing Requirements and Processing Procedures for Changes in Control
The final rule amending the FDIC's filing requirements and processing procedures for notices filed under the Change in Bank Control Act consolidates and conforms the regulations of state nonmember banks, state savings associations, and certain parent companies, and makes existing FDIC practices more transparent. The final rule adopts certain provisions intended to establish consistency with the regulations of the other federal banking agencies. The final rule takes effect January 1, 2016.
Read the full FDIC press release here>>

December 11, 2015 - SEC Proposes New Derivatives Rules for Registered Funds and Business Development Companies
The SEC voted to propose a new rule designed to enhance the regulation of the use of derivatives by registered investment companies, including mutual funds, exchange-traded funds (ETFs) and closed-end funds, as well as business development companies.  The proposed rule would limit funds’ use of derivatives and require them to put risk management measures in place which would result in better investor protections. The Investment Company Act limits the ability of funds to engage in transactions that involve potential future payment obligations, including derivatives such as forwards, futures, swaps and written options. The proposed rule would permit funds to enter into these derivatives transactions, provided that they comply with certain conditions.
Read the full SEC press release here>>

December 10, 2015 - Banking Agencies' Statement Regarding the Basel Committee's Second Consultative Paper
The Basel Committee on Banking Supervision (BCBS) published a consultative paper, "Revisions to the Standardized Approach for credit risk," which is the committee's second consultative paper on the topic.  These proposed revisions would apply primarily to large, internationally active banking organizations and not to community banking organizations. The FRB, FDIC, and OCC will consider the proposals identified in the consultative paper with the goal of developing a stronger and more transparent risk-based capital framework for the largest institutions.
Read the full FRB press release here>>
Read the BCBS consultative paper here>>

December 4, 2015 - Revised Capital Rules for Non-Traditional Stock Corporations Finalized by FRB
The FRB issued a final rule providing information about how to apply the Board's revised capital framework issued in June 2013 to depository institution holding companies that are not organized as traditional stock corporations. Institutional investors with controlling interests in depository institutions and depository institution holding companies may structure their investments through non-stock entities, such as limited liability corporations and partnerships. The final rule provides examples to clarify how instruments issued by non-traditionally structured firms may qualify as regulatory capital.
Read the full FRB press release here>>

December 4, 2015 - FDIC Releases Revised Compliance Examination Manual
The FDIC has revised its Compliance Examination Manual (Manual) to reflect recent supervisory guidance. The Manual provides guidance to FDIC examination staff for evaluating financial institutions for compliance with the federal consumer protection laws and regulations. The Manual, which is available on the FDIC's website, may help staff at institutions who are seeking to better understand the FDIC's consumer compliance examination process.
Read the full FDIC press release here>>

December 3, 2015 –Margin Requirements for Non-Cleared Swaps and Non-Cleared Security-Based Swaps Final Rule Released
The FRB, FDIC, OCC, Farm Credit Administration, and Federal Housing Finance Agency (collectively, agencies) published this final rule to establish minimum margin requirements for registered swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (swap entities) subject to agency supervision. The OCC’s final rule applies to national banks, federal savings associations, and subsidiaries thereof. The margin requirements mandated by the Dodd–Frank Act address a number of weaknesses in the regulation and structure of the swap markets that were revealed during the recent financial crisis.
Read the full OCC press release here>>

December 3, 2015 – OCC Updates Guidance Regarding Risk Assessment System
The OCC has updated its guidance regarding its risk assessment system (RAS). These updates are reflected in the “Bank Supervision Process,” “Community Bank Supervision,” “Federal Branches and Agencies Supervision,” and “Large Bank Supervision” booklets of the Comptroller’s Handbook and internal guidance for examiners. Other Comptroller’s Handbook booklets will be updated as they are revised. The OCC’s updated RAS guidance is one of the agency’s responses to the recommendations in “An International Review of OCC’s Supervision of Large and Midsize Institutions” (International Peer Review report) and supports the agency’s mission of ensuring a safe and sound federal banking system.
Read the full OCC bulletin here>>

December 1, 2015 – OCC Releases Calendar Year 2016 Fees and Assessments Structure
The OCC released its 2016 Fees and Assessment Structure bulletin, informing all national banks, federal savings associations, and federal branches and agencies of foreign banks of fees and assessments charged by the OCC for calendar year 2016. The bulletin becomes effective January 1, 2016.
Read the full OCC bulletin here>>

December 1, 2015 – Smaller Loan Exemption Threshold
On November 27, 2015, the OCC published in the Federal Register a revision to its higher-priced mortgage loan (HPML) appraisal rule. The revision provides the HPML exemption threshold for smaller loan transactions effective for 2016 based on the annual percentage change in the consumer price index. The rule becomes effective January 1, 2016
Read the full OCC press release here>>

November 30, 2015 – FRB Approves Final Rule for Emergency Lending
The FRB approved a final rule specifying its procedures for emergency lending under Section 13(3) of the Federal Reserve Act. The final rule incorporates a number of changes from the original proposal made in response to comments received, including broadening the definition of insolvency to cover borrowers who fail to pay undisputed debts as they become due during the 90 days prior to borrowing or who are determined by the Board or lending Reserve Bank to be insolvent.
Read the full FRB press release here>>

December 23, 2015 - FDIC Announces Settlement with Delaware Bank
The FDIC announced a settlement with The Bancorp Bank for unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act (Section 5). The FDIC determined that the bank violated Section 5 in various ways with respect to the issuance of prepaid cards, such as failing to provide promised protections to consumers in the resolution of account errors, failing to provide promised benefits for a debit card rewards program that the bank offered with a third-party services provider, and charging deceptive debit decline fees on a general purpose reloadable prepaid card. As part of the settlement, the bank stipulated to the issuance of an Amended Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty. Under the FDIC Orders, bank will pay a civil money penalty of $3 million and an estimated $1.3 million in restitution to approximately 21,000 harmed customers.
Read the full FDIC press release here>>

December 23, 2015 – FRB Issues Civil Money Penalty and Cease and Desist Order Against Connecticut Corporation
The FRB assessed a civil money penalty and issued a cease and desist order against a Higher One, Inc. which provides students financial aid disbursements from institutions of higher education. The order addresses deceptive practices by the company considered misleading under Section 5 of the Federal Trade Commission Act including the omission of material information about how students could get their financial aid disbursement without having to open a OneAccount with Higher One, the omission of material information about the fees, features, and limitations of Higher One's OneAccount product prior to requiring students to make a selection regarding the method for financial aid disbursement and the omission of material information about the locations of automated teller machine (ATMs) where students could access their financial aid disbursements without cost and the hours of availability of those ATMs.  Further, the FRB found that the prominent display of the school logo was misleading as it suggested that the school endorsed the OneAccount product.
Read the full FRB press release here>>

December 16, 2015 – CFPB Orders Corporation to Pay $10 Million for Illegal Debt Collection Tactics
The CFPB took action against EZCORP, a small-dollar lender, and its wholly-owned subsidiaries for illegal debt collection practices. These tactics included illegal visits to consumers at their homes and workplaces, empty threats of legal action, lying about consumers’ rights, and exposing consumers to bank fees through unlawful electronic withdrawals. The CFPB ordered the corporation to refund $7.5 million to 93,000 consumers, pay $3 million in penalties, and stop collection of remaining payday and installment loan debts owed by roughly 130,000 consumers. It also bars the corporation from future in-person debt collection. In addition, the CFPB issued an industry-wide warning about collecting debt at homes or workplaces.
Read the full CFPB consent order here>>

December 10, 2015 - FRB Has Not Objected to the Resubmitted Capital Plan of a Large Financial Institution
The FRB announced it has not objected to the resubmitted capital plan of Bank of America Corporation. The FRB indicated that the institution must continue to make steady, demonstrable progress prior to the 2016 Comprehensive Capital Analysis and Review (CCAR) cycle toward establishing and maintaining sound risk-management and capital-planning processes that are commensurate with the size and complexity of its operations and systemic importance.
Read the full FRB press release here>>

December 7, 2015 - CFPB Takes Action Against Massachusetts Debt Collection Firm for Pursuing Disputed and Unverified Cellphone Debts
The CFPB has filed a federal complaint against EOS CCA, a Massachusetts debt collection firm, for reporting and collecting on old cell phone debt that consumers disputed and firm did not verify. The company also provided inaccurate information to credit reporting companies about the debt and failed to correct reported information that it had determined was inaccurate. The CFPB filed a proposed consent order that, if entered by the court, would require the firm to overhaul its debt collection practices, refund at least $743,000 to consumers, and pay a $1.85 million civil money penalty.
Read the full CFPB press release here>>

December 3, 2015 - CFPB Orders Subprime Credit Reporting Company to Pay $8 Million Penalty for Illegal Practices
The CFPB took action against Clarity Services, Inc., a nationwide credit reporting company, and its owner for illegally obtaining consumer credit reports. The company also violated the law by failing to appropriately investigate consumer disputes. The CFPB is ordering the company and its owner to halt their illegal practices and improve the way they investigate consumer disputes and obtain, sell, and resell consumer credit reports. The company and its owner must also pay an $8 million penalty to the CFPB.
Read the full CFPB press release here>>

Volcker Rule Independent Testing Services
Title VI of the Dodd-Frank Act, which amends the Bank Holding Company Act, contains Section 619 which is commonly known as the “Volcker Rule.” The Volcker Rule places significant restrictions on proprietary trading activities and certain investment activities for banks and bank holding companies, including state member banks, savings and loan holding companies, companies that control an insured depository institution, and foreign banking organizations with a branch, agency, or subsidiary bank in the United States, as well as to affiliates of these entities, such as broker dealers and commodity pool operators.

Grant Thornton’s Regulatory Center of Excellence offers advisory services to help institutions develop and implement sound compliance programs in accordance with the Volcker Rule. Following the six pillars of the compliance program as set forth by the Volcker Rule, we can help your institution realize efficiencies in your independent testing process.  Whether an institution is in the process of developing its independent testing program, enhancing their Volcker Rule map, developing test scripts or reporting results, Grant Thornton is here to assist at all stages. Please do not hesitate to contact Grant Thornton for an exploratory conversation to discuss how we may be able to help you enhance your current independent testing process.

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