On November 15, the Fed, the OCC and the FDIC released final revisions to “Interagency Questions and Answers Regarding Community Reinvestment,” which provide additional guidance to financial institutions and the public on the agencies’ Community Reinvestment Act regulations. Joint Release. Q&A.
On November 12, OCC published standards governing the use of independent consultants in enforcement actions involving significant violations of law. The standards describe the criteria the OCC will use in determining whether to require a national bank or federal savings association to retain a consultant, as well as the institution’s obligations to ensure the consultant has sufficient independence and qualifications. Among other issues, the standards describe the process for reviewing consultant qualifications and the contractual terms for the engagement, as well as the appropriate performance oversight. Press Release. Guidance.
On October 30, the OCC issued updated risk management guidance for national banks and federal savings associations related to third-party relationships. The banks should:
- Develop a plan that outlines the bank’s strategy, identifies the inherent risks of the activity and details how the bank will select, assess and oversee the third party;
- Perform proper due diligence to identify risks and select a third-party provider;
- Negotiate written contracts that clearly outline the rights and responsibilities of all parties;
- Conduct ongoing monitoring of the third party’s activities and performance;
- Execute a plan to terminate the relationship in a manner that allows the bank to transition the activities to another third party, bring the activities in-house or discontinue the activities;
- Provide for clear responsibilities for overseeing and managing third-party relationships and the risk management process;
- Maintain proper documentation and reporting to encourage oversight, accountability, monitoring and risk management; and
- Independently review the risk management process to enable management to assess that the bank’s process aligns with its strategy and effectively manages risks from third-party relationships.
On October 30, the OCC and FDIC proposed substantively the same liquidity rule as the proposal approved by the Fed on October 24. That proposal developed by the three agencies applies to: (i) banking organizations with $250 billion consolidated assets; (ii) banking organizations with $10 billion in on-balance sheet foreign exposure; (iii) systemically important, non-bank financial institutions that do not have substantial insurance subsidiaries or substantial insurance operations; and (iv) bank and savings association subsidiaries thereof that have total consolidated assets of $10 billion (covered institutions). The proposed rule does not apply to community banks.
Covered institutions would be required to maintain a specified level of high-quality liquid assets such as central bank reserves, government and Government Sponsored Enterprise securities and corporate debt securities that can be converted easily into cash. Under the proposal, a covered institution would be required to hold such high-quality liquid assets on each business day in an amount equal to or greater than its projected cash outflows less its projected cash inflows over a 30-day period. The proposed rule is consistent with the Basel Committee’s LCR standard, but is more stringent in terms of the range of assets that will qualify and the assumed rate of outflows of certain types of funding. Release. Proposed Rule.
On October 9, the Fed, CFPB, FDIC, NCUA and OCC issued a release encouraging financial institutions to work with borrowers affected by the government shutdown to provide workout arrangements. Joint Release.
On September 19, JPMorgan Chase entered into a consent Order of Assessment of a Civil Money Penalty with the Fed, the OCC, the SEC and the Financial Conduct Authority of the United Kingdom. The penalties issued by the agencies total approximately $920 million. The fine resulted from the deficiencies identified by the regulators in JPMorgan Chase’s risk management oversight, model validation, internal financial reporting and internal audit, and failure to elevate certain issues to the attention of the board of directors. In a separate action, the OCC and CFPB ordered JPMorgan Chase to refund $309 million for illegal credit card practices and to pay $80 million in civil penalties. Fed Release. CFPB Release. Fed Consent Order. OCC Consent Order.
On August 28, the FDIC, Fed, FHFA, OCC, SEC and HUD issued a notice of revised proposed rulemaking relating to required risk retention by sponsors in securitization transactions. The proposed rule would define “qualified residential mortgage” (QRM) in the same way that the CFPB has defined qualified mortgages (QMs) and would exempt securitizations of QRMs from the risk retention requirements. Comments on the revised proposed rule must be submitted by October 30. Joint Release. Proposed Rule.
On July 30, the FDIC, Fed and OCC released a request for comment on proposed guidance describing supervisory expectations for stress tests required by the Dodd-Frank Act to be conducted on medium-sized financial companies (with total consolidated assets between $10 billion and $50 billion). Comments on the proposed guidance must be submitted by September 25. Joint Release. Proposed Guidance.