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Tuesday, August 15, 2017

SBA Seeks Feedback on Burdensome, Excessive Regulations

In response to President Trump’s executive order requiring all federal agencies to reduce regulatory burden, the U.S. Small Business Administration issued a request for input on which regulations could be repealed, replaced or modified.

The executive order directs agencies to focus specifically on regulations that inhibit job creation, are outdated, unnecessary or ineffective, impose costs that exceed benefits, are inconsistent with regulatory reform initiatives and policies or are associated with other executive orders or presidential directives that have been rescinded or substantially modified. Comments will be due 60 days after the notice is published in the Federal Register.

Read more.

Agencies Clarify Capital Treatment of Centrally Cleared Derivatives Contracts

The federal regulatory agencies issued joint guidance on the regulatory capital treatment of certain centrally cleared derivative contracts in light of recent changes to the rulebooks of certain central counterparties. The guidance specifically addresses the regulatory capital treatment of variation margin requirements for such centrally cleared derivative contracts and will result in more beneficial regulatory capital treatment for centrally cleared derivative contracts.

Previously, variation margin transferred to cover the exposure that arises from marking such centrally cleared derivatives contracts to market price was considered collateral pledged by one party to the other, with title to the collateral remaining with the posting party. However, under the central counterparties’ revised rulebooks, such variation margin for centrally cleared derivative contracts is considered a settlement payment for the exposure, with title to the payment transferring to the receiving party.

Under the guidance, if banks, after conducting accounting and legal analysis, determine that variation margin payments may be considered settlement of outstanding exposure under the regulatory capital rules, and that the payer of the variation margin has relinquished all legal claims to the variation margin, then variation margin would no longer be considered collateral pledged by one party to the other. ABA has long advocated for more risk-based bank regulatory capital treatment for centrally cleared derivative contracts. 

Read the guidance.

Friday, August 11, 2017

This Week Ahead: August 14-18

  • Comments Due CFPB: Amendments to Rules Concerning Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z)
    Read more.
  • Comments Due CFTC: Real-Time Public Reporting and Block Trade
    Read more.
  • Comments Due DOE: Request for Title IV Reimbursement or Heightened Cash Monitoring 2 (HCM2) (PRA)
    Read more.
  • Comments Due FEMA: Evaluation of Existing Regulations, Policies, and Information Collections
    Read more.
  • Comments Due IRS: Centralized Partnership Audit Regime 
    Read more.
  • Comments Due TREAS: Financial Crimes Enforcement Network Proposed Collection; Update and Renewal of the Bank Secrecy Act Designation of Exempt Person Report (PRA)
    Read more.
  • Comments Due FCA: Statement on Regulatory Burden 
    Read more.
  • Effective Date SBA: Small Business Investment Companies: Passive Business Expansion and Technical Clarifications
    Read more.
All times in Eastern Standard Time. See future events on the Dodd-Frank Calendar.

Watt: FHFA Will Not Build Short-Term Capital Buffer for GSEs

In a letter to the National Association of Realtors, FHFA Director Mel Watt signaled that the agency would not move to establish a short-term capital buffer for Fannie Mae and Freddie Mac when the current capital buffer put in place under the terms of the Senior Preferred Stock Purchase Agreements with the Treasury Department expires on Jan. 1, 2018.

Watt’s letter came in response to calls from NAR to establish a short-term “mortgage market liquidity fund,” where the GSEs could deposit a portion of their profits to cover future losses and reduce risk to taxpayers. Watt responded that while FHFA remains concerned about the expiration of the capital buffer, any changes to housing reform should come through Congress.

“I am sensitive to the prospect that whatever steps FHFA could take might be misperceived as either an effort to promote recapitalization and release of the Enterprises or as interference with Congress’ important work to advance housing finance reform,” Watt wrote, calling on lawmakers to continue the work it began on reform before the August recess.

ABA has long held that reform of the housing finance system must be directed by Congress. The association previously outlined specific recommendations for reforming Fannie and Freddie, with the goal of reducing the direct role of the federal government in mortgage finance, restoring private participation in housing markets and ensuring equitable access. 

Read Watt’s letter.
Read ABA’s principles for housing reform

Thursday, August 10, 2017

DOL Signals Intention to Delay Fiduciary Rule’s Exemptions

In a notice of administrative action filed in an ongoing lawsuit with the wealth management firm Thrivent Financial, the Department of Labor said that it has submitted a proposal to the Office of Management and Budget to extend to July 1, 2019, the applicability date for certain exemptions to the fiduciary rule. The extension would apply to the best interest contract exemption, principal transactions exemption, and prohibited transaction exemption 84-24.

The rule 
 which greatly expands the definition of who counts as a fiduciary under the Employee Retirement Income Security act and the Internal Revenue Code  took effect on June 9, 2017, though most provisions of the exemptions had a compliance date of Jan. 1, 2018.

The delay marks a significant victory for ABA, which has long called on DOL to extend the effective date for the exemptions to allow bankers more time to comply. The announcement came just two days after ABA wrote to DOL expressing concern that the rule remains “deeply flawed in several critical areas.” The association had also submitted comments in late July reiterating its call for an extension to the Jan. 1, 2018 compliance date and requesting that DOL act expeditiously so that banks could optimize the implementation of their compliance strategies and resources.

Fed Issues Final Guidelines for Evaluating Joint Federal Reserve Account Requests

The Federal Reserve issued its framework for how it will evaluate applications for joint accounts at Federal Reserve banks. Joint accounts can be used to facilitate faster settlement for payment transactions among the joint account holders.

Under the guidelines, joint account applicants must be depository institutions eligible to open individual accounts at Federal Reserve banks. Applicants must designate one “agent” for the account, indemnify the Fed for losses related to operating the account and rely on the payment system operator or agent to provide clearing services and manage positions within the joint account. The Fed will evaluate all applications it receives based on six specific criteria.

ABA generally supports the Fed’s guidelines as the industry continues to work toward the goal of a faster, more efficient payments system. In previous comments, ABA emphasized the need to maintain the safety and integrity of the payments system by limiting access to joint accounts to those that are already eligible to open individual accounts with the Fed. “Put simply, banks are held to higher standards in order to protect the interests of their customers,” ABA said. “Any entity that is not subject to the same standards and oversight would present unacceptable risk as a payments system participant.” 

Read the final guidelines.   
Read ABA's comment letter.