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Friday, December 19, 2014

FSOC Designates Nonbank Financial Company for Enhanced Supervision

The FSOC announced that it voted to designate a nonbank financial company to consolidated supervision by the Board of Governors of the Federal Reserve System and enhanced prudential standards. Treasury Secretary Jacob J. Lew, Chairperson of the Council said:

After a year and a half of extensive and in-depth analysis — including significant engagement with the company — the Council has determined that material financial distress at MetLife could pose a threat to U.S. financial stability. Designation of a nonbank financial company is a critical tool for the Council to address potential threats to U.S. financial stability. Consistent with its mandate, the Council remains focused on protecting the broader economy from the types of risk that contributed to the financial crisis.

The Council’s designation is the product of a three-stage process, during which the Council (1) applies uniform quantitative thresholds to identify nonbank financial companies for further evaluation, (2) analyzes the companies using a broad range of information available to the Council primarily through existing public and regulatory sources and (3) contacts each company that the Council believes merits further review to collect information directly from the company that was not otherwise available in the prior stages. Each nonbank financial company that is reviewed in Stage 3 is immediately notified that it is under consideration and is provided an opportunity to submit written materials related to the Council’s consideration of the company for a proposed designation.

Read the FSOC press release.

The Week Ahead: December 22-26

  • Comments Due FDIC: Proposed rule establishing FDIC record retention requirements for covered financial companies Read more.
  • Comments Due FDIC: Proposed rule restricting FDIC sales of assets of a covered financial company: Read more.

All times in Eastern Standard Time. See future events on the
Dodd-Frank Calendar.

The ABA Government Relations Summit is your opportunity to meet with Congress and the regulatory agencies to ensure they understand the principles that guide our industry, and incorporate them into policy. *Open to Bankers, Bank Directors & Trustees and State Association Executives only. Register now

ABA, Groups: Pentagon Proposal Would Constrict Credit

The Defense Department’s proposed restrictions on credit for service members goes too far, ABA said. Not only would the proposed rule constrict mainstream credit options for members of the military and their families, it would create technological and compliance hurdles that would impede lending across the country, regardless of the borrower’s military status.

In a comment letter signed by a coalition of groups representing banks and credit unions, ABA noted that DoD offered no evidence for covering mainstream products such as credit cards, student loans and installment loans under the Military Lending Act, which was intended to target tax refund anticipation loans, payday loans, car title loans and other predatory products not generally offered by depository institutions.

The groups urged DoD to exempt depository institutions from the rule, warning that its idiosyncratic Military APR cap (encompassing even low-rate credit cards) and “vague and uncertain prohibitions” could force banks and credit unions out of the military market — thus reducing access to mainstream credit for service members.

The proposal would also impose massive compliance burdens on all banks, whether they serve military customers or not. While today service members and their families must proactively identify themselves as such, DoD would require lenders to screen all applicants for military status. This requires checking each applicant at least twice in a Pentagon-run database — but the database is frequently unavailable, which would mean “virtually all new consumer lending comes to a standstill.”

Read the letter.

CFPB eRegulations Platform Allows Compare-and-Contrast

The CFPB’s eRegulations platform now allows bankers to compare existing regulations with regulatory text taking effect in the future.

This function is available for the TILA-RESPA mortgage disclosure integration rule, which takes effect in August 2015. When viewing a regulation, users can click on the “Regulation Timeline” icon in the upper left side of the screen, then select the versions they would like to compare.

View eRegulations.

ABA Wins Extension of Volcker Rule Covered Funds Deadline

The Federal Reserve extended the date by which banks must comply with the Volcker Rule’s prohibition on owning interests in covered funds. Banks will now have until July 21, 2017, to comply. The extension will allow thousands of banks sufficient time to deal with these funds in an orderly way. ABA President and CEO Frank Keating said:

We are grateful that the Federal Reserve will give banks of all sizes the time they need to comply with the rule, thus minimizing potential disruption from hastily unwinding these funds. We especially appreciate that it applies to all legacy funds, as many banks are still determining exactly what is covered as they seek to comply.

Through letters and in-person meetings, ABA has strongly advocated for more time for bankers to address the complex Volcker Rule treatment of covered funds. Intended by Congress to limit investments in hedge funds, the final rule can be read to cover a much wider range of bank fund investments that help banks serve customers and promote economic growth.

The extension will allow banks to unwind their investments with less harm to customers and communities and to seek further clarification in cases where the rule’s application is unclear. The Fed used its authority under the Dodd-Frank Act to grant a one-year extension now and said it will grant another next year.

Read more.

Thursday, December 18, 2014

GAO Releases Report on Dodd-Frank Efforts

The GAO report, Dodd-Frank Regulations: Regulators’ Analytical and Coordination Efforts, examines the regulatory analyses conducted by federal financial regulators, in their Dodd-Frank Act rulemakings, including their assessments of which rules they considered to be major rules and the possible impact of selected Dodd-Frank Act provisions and their implementing regulations on the financial marketplace.

GAO focused on the 54 rules that became effective from July 23, 2013, through July 22, 2014. Thirty-eight rules were substantive, meaning they were generally subject to public notice and comment under APA and therefore required some form of regulatory analysis. OMB identified 15 rules as major rules.

Also, GAO updated indicators from its prior reports that monitor certain risk characteristics of large U.S. bank holding companies. Although changes in the indicators are not evidence of causal links to the act’s provisions, some indicators suggest these companies’ leverage generally decreased and their liquidity generally improved since the act’s passage.

Read the GAO report.