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Regulatory Update - January 2016

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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.

We thank you for your interest in Grant Thornton.

INDUSTRY NEWS
January 28, 2016 - CFPB Monthly Complaint Snapshot Examines Debt Settlement, Check Cashing, and Other Financial Service Complaints
The latest monthly consumer complaint snapshot released by the Consumer Financial Protection Bureau (CFPB) highlights consumer complaints about financial services such as debt settlement, check cashing, money orders, and credit repair. The report shows that consumer complaints about these types of financial services generally revolve around issues of fraud or problems with reliable customer service. This month’s snapshot also highlights trends seen in complaints coming from New York State and the New York metro area.
Read the full CFPB press release here>>

January 27, 2016 - OCC Designates Senior National Bank Examiner
The Office of the Comptroller of the Currency (OCC) today announced that it had designated Brad Linskens a Senior National Bank Examiner. The Senior National Bank Examiner designation recognizes examiners who have distinguished themselves through high-quality performance and service as field examiners, subject matter experts, and advisers on highly complex and technical bank supervision issues. Being designated a Senior National Bank Examiner is the highest honor for national bank examiners.
Read the full OCC press release here>>

January 27, 2016 - OFR Issues 2015 Annual Report to Congress
The Office of Financial Research (OFR) has issued its fourth Annual Report to Congress. The report   analyzes potential threats to U.S. financial stability, key research findings, and progress in meeting its mission. The report indicates that threats to the U.S. financial stability have edged higher since the 2014 report, but remain in the medium or moderate range. The report also describes the 2016 agenda of the OFR, including an implementation of a programmatic approach to its work which will focus on eight programs in core areas: monitors; central counterparties; data quality, scope, and accessibility; stress tests; risks in changing market structure; and risks in financial institutions. The 2015 report highlights four key findings:  i) policymakers have taken important steps to eliminate the implied taxpayer support for large, complex financial institutions whose serious distress could threaten financial stability; ii) U.S. banking activity remains highly concentrated in eight global systemically important banks; iii) clearing derivatives through central clearing counterparties has significant benefits to reducing the risks to counterparties of default; and, iv) stress testing is an effective tool for testing the safety and soundness of individual financial institutions.

Read the full OFR press release here>>

January 27, 2016 - Statement on Longer-Run Goals and Monetary Policy Strategy Reaffirmed
The Federal Open Market Committee reaffirmed its "Statement on Longer-Run Goals and Monetary Policy Strategy," with a revision to clarify that it views its inflation objective as symmetric, and with an updated reference to participants' estimates of the longer-run normal unemployment rate in the most recent Summary of Economic Projections. The Committee first adopted the statement at its January 2012 meeting and has reaffirmed it, with appropriate revisions, at its annual organizational meetings each January.
Read the full FRB press release here>>

January 21, 2016 - FDIC Proposal to Amend How Small Banks are Assessed for Deposit Insurance

The FDIC is seeking comment on a revised proposed rule that would amend the way small banks are assessed for deposit insurance. The proposed rule would affect banks with less than $10 billion in assets that have been insured by the FDIC for at least five years. It would update the data and revise the methodology that the FDIC uses to determine risk-based assessments for these institutions to better reflect risks and to help ensure that banks that take on greater risks pay more for deposit insurance than their less risky counterparts.  The comment period expires in 30 days.
Read the full FDIC press release here>>

January 21, 2016 – OCC Proposes Expanding 18-Month Examination Cycle
The OCC is considering increasing the number of small community banks and savings associations eligible for an 18-month examination cycle. Comptroller of the Currency Thomas Curry remarked during the Federal Deposit Insurance Corporation’s meeting of its board of directors, which approved an interim final rule to allow well-managed community banks and thrifts with less than $1 billion in assets to qualify for the 18-month exam cycle. The previous threshold was $500 million.
Read the full OCC press release here>>

January 13, 2016 - Bilateral Repurchase Agreements Data Collection Pilot Results Released by OFR
A brief released by the OFR provides the first statistics on the U.S. market for bilateral repurchase agreements (repos). The repo market provides short-term funding for financial companies and facilitates market liquidity. Data was gathered from U.S. dealers affiliated with nine bank holdings companies and was shared through a voluntary pilot program run by the OFR, Federal Reserve and the SEC.  The brief concludes that a permanent data collection would encourage firms to improve data quality and provide a fuller picture of the market.
Read the full OFR press release here>>

January 11, 2016 - FRB Releases Reserve Bank Income and Expense Preliminary Data
The FRB has announced preliminary results indicating that the Reserve Banks provided for payments of approximately $98 billion of its estimated 2015 net income to the U.S. Treasury.  In addition, the FRB transferred to the Treasury $19.3 billion from Reserve Bank capital surplus on December 28, 2015, which was the amount necessary to reduce aggregate Reserve Bank surplus to the $10 billion surplus limitation in the Fixing America's Surface Transportation Act (FAST Act).  The FAST Act, which was enacted on December 4, 2015, requires that aggregate FRB capital surplus not exceed $10 billion.  The 2015 audited Reserve Bank financial statements are expected to be published in March.
Read the full FRB press release here>>

January 7, 2016 - CFPB Seeks Public Input on Mortgage Lending Information Resubmission Guidelines
The CFPB is seeking public feedback on the resubmission of mortgage lending data reported under the Home Mortgage Disclosure Act (HMDA). In October 2015, the CFPB finalized a rule updating the reporting requirements of the HMDA regulation, to improve information reported about the residential mortgage market. Given these changes, the current resubmission guidelines may need to be updated, and the CFPB is seeking feedback on what modifications may be appropriate.
Read the full CFPB press release here>>

January 4, 2016 - SEC Announces 2016 Examination Priorities
The SEC has announced its Office of Compliance Inspections and Examinations’ (OCIE) 2016 priorities.  New areas of focus include liquidity controls, public pension advisers, product promotion, and two popular investment products – exchange-traded funds and variable annuities.  The priorities also reflect a continuing focus on protecting investors in ongoing risk areas such as cybersecurity, microcap fraud, fee selection, and reverse churning.
Read the full SEC press release here>>

REGULATORY GUIDANCE
January 28, 2016 – OCC Releases Dodd-Frank Stress Test Scenarios for 2016
The OCC released economic and financial market scenarios that will be used in the upcoming stress tests for covered institutions with more than $10 billion in assets. The supervisory scenarios include baseline, adverse, and severely adverse scenarios, as described in the OCC’s final rules that implement stress test requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The 2016 scenario information can be found on the OCC DFAST website.
Read the full OCC press release here>>

January 28, 2016 - FRB Releases Supervisory Scenarios for 2016 CCAR and Stress Test Exercises
The FRB has released its supervisory scenarios for the 2016 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress test exercises.  In addition, the FRB has issued instructions to firms participating in CCAR. This year, CCAR will include 33 bank holding companies with $50 billion or more in total consolidated assets. Bank holding companies participating in CCAR are required to submit their capital plans and stress testing results on or before April 5, 2016. The FRB will announce the results of its supervisory stress tests by June 30, 2016, with the exact date to be announced later.
Read the full FRB press release here>>

January 15, 2016 - FRB Releases Interagency Advisory on External Audits of Internationally Active U.S. Financial Institutions
The Board of Governors of the FRB, FDIC and OCC have released the Basel Committee on Banking Supervision (BCBS) external audit guidance, setting forth the principles of the roles and responsibilities of audit committees and the expectations for applying auditing standards. The BCBS external audit guidance is intended for “internationally active banks” and is relevant for the management, audit committees, external auditors, and prudential supervisors of such financial institutions.
Read the full FDIC press release here>>
Read the full FRB press release here>>
Read the full OCC press release here>>

RECENT ENFORCEMENT ACTION ACTIVITY
January 21, 2016 - CFPB Takes Action Against Auto Sales Company for Unlawful Lending Practices
The CFPB is taking action against Herbies Auto Sales, a buy-here pay-here used car dealer, for abusive financing schemes, hiding auto finance charges and misleading consumers. The CFPB found that Herbies violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. Specifically, the company:
  • Hid finance charges and advertised a far lower APR than consumers received
  • Hid finance charges that stemmed from a refusal to negotiate car prices
  • Used abusive practices to mislead customers

Herbies will pay $700,000 in restitution to harmed consumers, with a suspended civil penalty of $100,000.
Read the full CFPB press release here>>

January 13, 2016 – SEC Fines Mortgage Servicer for Misstated Financial Results
Ocwen Financial Corp. has agreed to settle charges brought by the SEC alleging that the company misstated financial results by using a flawed, undisclosed methodology to value complex mortgage assets. Ocwen agreed to pay a $2 million penalty after an SEC investigation found that the company inaccurately disclosed to investors that it independently valued these assets at fair value under U.S. Generally Accepted Accounting Principles (GAAP). The SEC’s order finds that Ocwen violated various sections of the Securities Exchange Act. Ocwen consented to the SEC’s order without admitting or denying the findings.
Read the full SEC press release here>>

January 7, 2016 - SEC Charges 11 Bank Officers and Directors With Fraud
The SEC as charged 11 former executives and board members at Superior Bank and its holding company for fraud, accused of involvement in various schemes to conceal the extent of loan losses as the bank was faltering in the wake of the financial crisis. The SEC alleges the high-ranking officers and directors schemed to mislead investors and bank regulators by propping up Superior Bank’s financial condition through straw borrowers, bogus appraisals, and insider deals. Nine of the eleven bank officers and directors have agreed to settle the SEC’s charges.
Read the full SEC press release here>>

January 5, 2016 - OCC Terminates Mortgage Servicing-Related Consent Orders
The OCC has terminated mortgage servicing-related consent orders against two large banks, JP Morgan Chase and EverBank. The OCC has assessed civil money penalties against the banks for previous violations of the Consent Orders. The consent orders have been terminated as the OCC has determined both the institutions now comply with the Consent Orders.
Read the full OCC press release here>>

Thank you again for your continued interest in Grant Thornton’s monthly Regulatory Update. To discuss challenges impacting your business – or industry developments in general – please contact us to schedule a conversation.