Yesterday marked the fourth anniversary of the Dodd-Frank Act, a moment that passed with almost no fanfare. The most public event was the release of staff report by the House Financial Services that is critical of the provisions in Titles I and II that purport to end the too-big-to-fail phenomenon.The Committee will hold a hearing on the report tomorrow, July 23.
For community banks, there were somewhat more mundane, but nevertheless important developments from the FDIC: proposed changes to the deposit insurance risk-based assessment process, and guidance for state nonmember banks on agricultural lending, the reporting of international remittances, and dividend payments by S-corporations. The FDIC also published a report on minority-owned depository institutions, which will be a subject of the meeting tomorrow of the FDIC Advisory Committee on Community Banking.
The full set of developments over the past week was as follows:
The Economy
- Semiannual Monetary Policy Report to Congress (July 15, 16).
- Remarks of Chair Yellen to Congressional committees available at http://www.federalreserve.gov/newsevents/testimony/yellen20140715a.htm.
- Federal Reserve Beige Book released (July 16).
- "All twelve Federal Reserve Districts indicated that economic activity continued to expand since the previous report. The pace of economic growth was characterized as moderate in New York, Chicago, Minneapolis, Dallas, and San Francisco, while the remaining Districts reported modest expansion. Compared to the previous reporting period, Boston and Richmond noted a slightly slower pace of growth. Most Districts were optimistic about the outlook for growth."
- "Overall consumer spending increased in every District. Retail sales grew modestly in most Districts, with increases that were generally similar to the previous reporting period."
- "Activity in the nonfinancial services sector continued to grow across all Districts at a modest to moderate pace."
- "Reports on real estate activity varied across the Districts. Many Districts reported low inventories and increasing home prices, but demand was mixed."
- "Loan volumes rose across the nation, with slight to moderate increases reported in most Districts. Credit quality remained stable or improved slightly in most Districts, while San Francisco noted a slight decline."
- "Labor market conditions improved, as all twelve Districts reported slight to moderate employment growth."
- Available at http://www.federalreserve.gov/monetarypolicy/beigebook/default.htm.
Agricultural Loans
- FDIC releases Prudent Management of Agricultural Credits Through Economic Cycles, FIL-39-2014(July 16).
- "Agricultural lenders are reminded to maintain practices that focus on a borrower's cash flow across a range of future conditions."
- "Management should consider, but not rely unduly on, secondary repayment sources and collateral positions."
- "Lenders should carefully consider and closely monitor cyclical factors, such as land values, before and after making credit decisions."
- "Management should be cognizant of speculation in agricultural land or commodities."
- "Management should identify and effectively manage credit concentrations."
- "Lenders should work constructively with borrowers experiencing financial difficulties."
- FIL-39-2014 available at http://www.fdic.gov/news/news/financial/2014/fil14039.html.
- Replaces FIL-85-2010.
Call Reports
- International remittances – guidance from FDIC on reporting transfers in call report for second quarter 2014.
- FIL-38-2014 (July 16), available at http://www.fdic.gov/news/news/financial/2014/fil14038.html.
Capital
- S-corporations: FDIC issues guidance on consideration of requests of S-corporation banks and thrifts to pay dividends to shareholders to cover tax payments when dividends not otherwise permitted by capital conservation buffer requirements. (July 21.)
- Requests to be handled case by case.
- Prerequisites:
- Dividend no more than 40% of net income.
- CAMELS rating of 1 or 2, and no written supervisory directive.
- Bank must remain adequately capitalized (required by statute).
- FIL-40-2014 available at http://www.fdic.gov/news/news/financial/2014/fil14040.html?source=govdelivery&utm_medium=email&utm_source=govdelivery.
- Interagency technical correction of definition of "eligible guarantee" primarily for the purpose of the advanced approaches framework.
- Rule available at http://www.fdic.gov/news/news/press/2014/pr14057.html.
CFPB
- CFPB begins taking consumer complaints on prepaid cards, debt settlement and credit repair services, and pawn and title loans.
- CFPB proposes to expand consumer complaint database to include consumers' own narratives (July 16).
- Proposed policy available at http://www.consumerfinance.gov/newsroom/cfpb-proposal-would-give-consumers-the-opportunity-to-publicly-voice-complaints-about-financial-companies/.
- Comment deadline: 30 days after publication in Federal Register.
- Prepared remarks of Director Corday at Consumer Response Field Hearing, available at http://www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-director-richard-cordray-at-the-consumer-response-field-hearing/.
- Proposed policy available at http://www.consumerfinance.gov/newsroom/cfpb-proposal-would-give-consumers-the-opportunity-to-publicly-voice-complaints-about-financial-companies/.
Dodd-Frank Anniversary
- House Financial Services Committee Staff Report, Failing to End "Too Big to Fail:" An Assessment of the Dodd-Frank Act Four Years Later (July 21).
- Analysis of Titles I and II.
- Report available at http://financialservices.house.gov/news/documentsingle.aspx?DocumentID=388511.
- Companion hearing scheduled for July 23.
- Regulators Must First Do No Harm, Keynote Address of CFTC Commissioner O'Malia at the Quadrilateral Meeting (July 15).
- Text available at http://www.cftc.gov/PressRoom/SpeechesTestimony/opaomalia-40.
- Remarks at AEI Conference on Financial Stability by SEC Commissioner Piwowar (July 15).
- Text available at http://www.sec.gov/News/Speech/Detail/Speech/1370542309109.
Fannie Mae/Freddie Mac
- FHFA Inspector General releases Recent Trends in the Enterprises' Purchases of Mortgages from Smaller Lenders and Nonbank Mortgage Companies (July 17).
- Reduced concentration risk; increased counterparty credit risk.
- Evaluation Report, EVL-2014-010, available at http://fhfaoig.gov/.
Fees and Assessments
- FDIC issues proposal to revise risk-based assessment system for deposit insurance to reflect new regulatory capital rules.
- Conforms capital ratios and ratio thresholds in assessment system to new prompt corrective action capital ratios and ratio thresholds.
- Conforms assessment base calculation for custodial banks to new asset risk weights using standardized approach.
- Requires that all highly complex institutions measure counterparty exposure for assessment purposes using standardized approach.
- FIL-37-2014 (July 15), available at http://www.fdic.gov/news/news/financial/2014/fil14037.html.
- Comment deadline: 60 days from publication in Federal Register.
- OCC releases interim calendar year 2014 fees and expenses structure (July 14).
- Bulletin 2014-32 available at http://www.occ.gov/news-issuances/bulletins/2014/bulletin-2014-32.html.
Minority-Owned Banks
- Minority Depository Institutions: Structure, Performance, and Social Impact, FDIC Report (July 21).
- "While the report notes that MDIs underperform non-MDI institutions in terms of standard industry measures of financial performance, it concludes that these organizations often promote the economic viability of minority and underserved communities, that is, populations that are underserved by mainstream financial institutions." (FDIC press release.)
- Part of FDIC Community Banking Initiative.
- To be included in FDIC Quarterly 2014, vol. 8, no. 3; available now at http://www.fdic.gov/news/news/press/2014/pr14059.html.
Mortgage Servicing
- Settlement of claims for $7 billion against Citigroup involving packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities (July 14).
- $4.5 billion to government departments and agencies:
- $4 billion civil money penalty to DoJ. Settlement announcement and documents available at http://www.justice.gov/opa/pr/2014/July/14-ag-733.html.
- Approximately $208 million to FDIC. Announcement available at http://www.fdic.gov/news/news/press/2014/pr14056.html.
- Approximately $103 million to California (reimbursement of state pension funds). Announcement available at http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-announces-nearly-200-million-settlement.
- $92 million to New York State. Announcement available at http://www.ag.ny.gov/press-release/ag-schneiderman-announces-182-million-new-yorkers-part-7-billion-citigroup-settlement.
- $44 million to Illinois. Announcement available at http://www.illinoisattorneygeneral.gov/pressroom/2014_07/20140714.html.
- $45.7 million to Massachusetts. Announcement available athttp://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-07-14-citigroup-settlement.html.
- $7.35 million to Delaware. Announcement available at http://news.delaware.gov/2014/07/14/biden-secures-millions-more-for-delaware/.
- $2.5 billion in the form of relief to consumers.
- $4.5 billion to government departments and agencies:
Prepaid Cards
- CFPB begins accepting consumer complaints (July 21).
S-corporations
- FDIC issues guidance (FIL-40-2014) on dividends to cover tax payments where dividends not otherwise permitted. See Capital above. Prerequisites: dividend may not exceed 40% of net income; bank must be rated CAMELS 1 or 2, with no written supervisory directive; and bank must remain at least adequately capitalized after dividend.
Swaps and Derivatives
- Keynote address by CFTC Commissioner O'Malia, see Dodd-Frank Anniversary above.
Bank Closings
- Eastside Commercial Bank (Conyers GA) (July 18).
- All deposits assumed by Community & Southern Bank (Atlanta GA).
Congressional Hearings
- House Financial Services Committee
- "The Department of Justice's 'Operation Choke Point'" (July 15).
- Archived webcast, Committee Memorandum, and written testimony available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=387064.
- "Examining Regulatory Relief Proposals for Community Financial Institutions, Part II" (July 15).
- Archived webcast, Committee Memorandum, and written testimony available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=387065.
- "Monetary Policy and the State of the Economy" (July 16).
- Archived webcast, Committee Memorandum, and written testimony available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=387226.
- "A Legislative Proposal Entitled the 'Bank Account Seizure of Terrorist Assets (BASTA) Act'" (July 17).
- Archived webcast, Committee Memorandum, and written testimony available at http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=387459.
- "The Department of Justice's 'Operation Choke Point'" (July 15).
- Senate Banking Committee
- "The Semiannual Monetary Policy Report to the Congress" (July 15).
- Archived webcast and written testimony available at http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1e89f2ca-93bd-4778-89df-552961c2b4be.
- "What Makes a Bank Systemically Important?" (July 16).
- Archived webcast and written testimony available at http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=7d743184-d3e5-4ee7-8d41-ab4d846f7457.
- "The Semiannual Monetary Policy Report to the Congress" (July 15).
Upcoming Events
- July 22
- Senate Banking Committee hearing.
- "Building Economically Resilient Communities: Local and Regional Approaches."
- Senate Banking Committee hearing.
- July 22-23
- OCC bank director workshops, "Compliance Risk" and "Risk Assessment" (Minneapolis MN).
- July 23
- SEC full Commission open meeting.
- House Financial Services Committee hearing.
- "Assessing the Impact of the Dodd-Frank Act Four Years Later."
- FDIC Advisory Committee on Community Banking open meeting.
- OCC Mutual Savings Association Advisory Committee public meeting.
- July 23-24
- Joint Mutual Forum hosted by FDIC and OCC.
- July 24
- House Financial Services Committee hearing.
- "Oversight of the SEC's Division of Corporation Finance."
- House Financial Services Committee hearing.
- July 25
- SEC full Commission open meeting.
- July 28-30
- OCC bank director workshop, "Mastering the Basics: A Director's Challenge" (Columbus OH).
- July 29-30
- FOMC meeting.
- July 29
- Don't Forget About Deposit Regulations, FDIC Chicago Region regulatory conference call.
- July 31
- Model Approaches to Community Bank/CDFI Partnerships, FDIC webinar.
- Aug. 5-6
- OCC workshops, Compliance Risk and Risk Assessment, for directors of national community banks and federal savings associations, Syracuse NY.
- Aug. 21
- Risk Management – Corporate Governance, teleconference by FDIC San Francisco Regional Office.
- Sept. 23-24
- Community Banking in the 21st Century, Federal Reserve System/CSBS Second Annual Community Banking Research Conference.
- Oct. 16-17
- FDIC annual Consumer Research Symposium.
Regulatory Comment Deadlines
- Aug. 4 – FHFA: Fannie and Freddie guarantee fees.
- Aug. 4 – CFTC: position limits on physical commodity derivatives and aggregation.
- Aug. 11 – OCC: integration of national bank and federal savings association rules on corporate activities and transactions.
- Aug. 11 – Federal Reserve: shift in 12-month cycle for capital planning and stress testing.
- Aug. 22 – Federal Reserve/FDIC/OCC: changes to Schedules RC-R and RC-L of call report.
- 30 days from publication in Federal Register – CFPB: expansion of consumer complaint database to include personal narratives.
- Sept. 2 – Federal Reserve/FDIC/OCC: regulatory burden with respect to applications and reporting, powers and activities, and international operations.
- Sept. 2 – OCC/FDIC: shift in 12-month cycle for capital planning and stress testing.
- Sept. 10 – CFPB: request for information on mobile financial services.
- 60 days from publication in Federal Register – FDIC: changes to risk-based deposit insurance assessment system.