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Friday, May 6, 2016

The Week Ahead: May 9 - 13

Monday
  • Comments Due CFPB: Equal Access to Justice Act (PRA) Read more.
  • Comments Due CFPB: Qualitative Consumer Education and Engagement Information Collections (PRA) Read more.
  • Comments Due CFPB: Policy to Encourage Trial Disclosure Programs (PRA) Read more.
  • Comments Due CFTC/SEC: Certain Natural Gas and Electric Power Contracts Read more.
  • Comments Due OCC: Disclosure and Reporting of CRA-Related Agreements (PRA) Read more.
Tuesday
  • Senate Hearing: Evaluating the Financial Risks of China Read more.
Thursday
  • House Hearing: The Future of Housing in America: A Comparison of the United Kingdom and United States Models for Affordable Housing Read more.
Friday
  • Comments Due FRB: Risk-Based Capital Guidelines: Implementation of Capital Requirements for Global Systemically Important Bank Holding Companies Read more.
  • Comments Due OCC: EGRPRA of 1996 Amendments Read more.

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

Climate-Related Financial Disclosures On Regulators’ Radar

Voluntary financial climate-related reporting was discussed at a recent Washington, D.C., meeting hosted by a task force of the Basel, Switzerland-based Financial Stability Board and attended by ABA staff. The task force’s reporting recommendations may affect banks both as reporters and as users of public disclosures. For example, such disclosure practices may affect reporting on climate-related risks associated with bank loans.

In addition, voluntary disclosures may expose banks to potential legal and regulatory risks based on subjective assessments of climate-related risks. Voluntary disclosures may also be converted into a mandatory reporting regime for banks.

The task force’s phase 1 report, released in March, focused on developing the scope and objectives for proposed work on a set of fundamental disclosure principles. The phase 2 report, which is anticipated in December, will likely make specific recommendations and guidelines for voluntary climate-related financial reporting. Through the International Banking Federation, ABA provided overall comments to the phase 1 report.

Read the phase 1 report.
Read the comment letter.

Thursday, May 5, 2016

OIG: CFPB Civil Penalty Fund Compliant with IPIA

The OIG has determined that the CFPB’s Civil Penalty Fund is in compliance with the Improper Payments Information Act of 2002 (IPIA), as amended.

The CFPB Civil Penalty Fund (CPF) contains money that the bureau collects from judicial and administrative actions against people or companies that violate federal consumer financial law. Funds may be used to pay victims or for consumer education, financial literacy programs and program administration costs. For fiscal year 2015, total disbursements from the CPF for program activities were approximately $24 million.

The OIG determined that the CFPB fully complied with the two applicable requirements of the IPIA for fiscal year 2015 regarding the CPF. First, the CFPB complied with the requirement of publishing an annual financial statement and posting that report on their website by publishing its Financial Report of the CFPB, Fiscal Year 2015. Second, the bureau complied with the requirement to complete a program-specific risk assessment every three fiscal years by conducting a risk assessment of the CPF in fiscal year 2014. The OIG determined that the remaining four IPIA requirements were not applicable to the CPF.

Read more.

OCC Hosts New York Workshop for Bank Directors

The OCC will host a workshop in Syracuse, N.Y., June 20-22, for directors of national community banks and federal savings associations supervised by the OCC.

The Building Blocks for Directors workshop combines lectures, discussion and exercises to provide practical information on the roles and responsibilities of board participation for both new and experienced directors. Taught by seasoned OCC supervision staff, the workshop focuses on directors’ duties and core responsibilities, discusses major laws and regulations and increases familiarity with the examination process.

The workshop fee is $99. Participants receive a pre-workshop reading package and course materials, assorted supervisory publications, and a Dictionary of Banking Terms. The workshop is limited to the first 35 registrants.
The workshop is one of 36 offered nationwide to enhance and expand the skills of national community bank and federal savings association directors.

Read more.

CFPB Proposal Would Undermine Benefits of Arbitration

The CFPB has released a proposal that would prohibit customers from waiving their ability to participate in class action suits and limit drastically the use of mandatory arbitration agreements for financial products and services. Many banks include mandatory arbitration clauses in their credit card and deposit account agreements in order to manage the unpredictable costs of class action lawsuits.

The proposal would also require institutions that continue to employ arbitration to submit certain claim records, agreements and arbitrator communications related to ongoing arbitrated disputes to the bureau. The CFPB said it would use the records to monitor arbitration and that it would publish redacted records on its website. The rule would take effect 30 days after the final version is published in the Federal Register, with the rule applying to agreements entered into starting 180 days after the effective date.

The proposal would apply to all extensions of credit under the Equal Credit Opportunity Act, automobile leases, depository services under the Truth in Savings Act, payments products and services subject to the Electronic Funds Transfer Act, debt settlements, credit reports and debt collection. The proposal would cover depository institutions, nonbank lenders and money transmitters.

ABA President and CEO Rob Nichols said
Consumers will get less and pay more if the CFPB’s proposal to sideline arbitration and promote class actions is ultimately adopted. Banks resolve the overwhelming majority of disputes quickly and amicably. When needed, arbitration is an efficient, fair and low-cost method of resolving disputes in a fraction of the time – and at a fraction of the cost – of expensive litigation. This helps keep costs down for all consumers.

The bureau also issued a report from its small business review panel, which raised several concerns about the cost of the proposal to small businesses. The CFPB dismissed most of those concerns in the text of its proposed rule. Comments are due on the proposal 90 days after it is published in the Federal Register.

Read the proposed rule.
Read the small business panel report.

Wednesday, May 4, 2016

Fed Proposes Limits on Qualified Financial Contracts

The Federal Reserve has proposed a rule that would establish restrictions on qualified financial contracts – such as derivative transactions, repurchase agreements, reverse repurchase agreements, and securities lending and borrowing agreements – of U.S. global systemically important banks and the U.S. operations of foreign G-SIBs. The objective of the proposal, the Fed said, is to facilitate the orderly resolution of a failed institution by limiting the ability of the firm’s QFC counterparties to terminate contracts immediately upon the entry of the covered entity or one of its affiliates into resolution.

The proposal would require G-SIBs’ QFCs to contain contractual provisions that recognize the automatic stay of termination provisions and transfer provisions applied in resolutions under the Dodd-Frank Act and the Federal Deposit Insurance Act. The proposal would also generally require QFCs to prohibit a counterparty to the QFC to exercise default rights based on the entry into resolution of an affiliate of the G-SIB.

The rule would require banks to conform QFCs from before the compliance date – the first day of the first quarter at least one year after the final rule takes effect – to the rule’s requirements if the bank or an affiliate enters into a new QFC with the same counterparty or an affiliate of the counterparty after the rule goes into effect.

The proposal would facilitate the implementation of the voluntary agreement organized by the International Swaps and Derivatives Association, which extends through contractual agreement the application of the resolution frameworks in the FDIA and Dodd-Frank to all QFCs entered into by a bank holding company and its subsidiaries, including QFCs entered into by banks outside the United States, and establishes restrictions on cross-default rights. The proposal would extend the ISDA stay protocol requirements beyond its current application to apply to QFCs of G-SIBs with all counterparties.

The OCC is expected to issue a proposed rule soon that would subject national banks and federal thrifts that are G-SIB subsidiaries to requirements substantively identical to those proposed by the Fed. Comments are due by Aug. 5.

Read the proposed rule.