On June 10, 2016, the Federal Reserve Board and Federal Deposit Insurance Corporation announced they are permitting 84 foreign banking organizations (not identified) with limited U.S. operations to file “reduced content” resolution plans for their next three resolution plans. As reported, the decision is intended “to increase clarity and reduce burden by creating more certainty around future filing requirements.” All of the 84 firms have less than $50 billion in total U.S. assets. The agencies said “the reduced content plans should focus on changes the firms have made to their prior resolution plans, actions taken to improve the effectiveness of, or that may alter, those plans, and, where applicable, actions to ensure any subsidiary insured depository institution is adequately protected from the risks arising from the activities of nonbank subsidiaries of the firm. The first of these reduced content plans must be submitted to the agencies by December 31, 2016. To file reduced content plans for the next three years, the firms must maintain less than $50 billion in U.S. assets and not experience any material events.
Federal Deposit Insurance Corporation
Agencies Extend Deadline for Certain Foreign Banking Organizations’ Resolution Plan Submissions
On June 8, 2016, the Federal Reserve Board and the Federal Deposit Insurance Corporation extended the deadline for Barclays PLC, Credit Suisse Group, Deutsche Bank AG, and UBS to present their upcoming resolution plans to July 1, 2017, as a result of these entities engaging in restructuring in order to be in “compliance with the Federal Reserve Board’s Intermediate Holding Company (IHC) requirement[.]” Press release. Press release.
FDIC Settles RMBS Litigation for $190 Million with U.S. Financial Institutions
On May 26, 2016, the FDIC reached a $190 million settlement of RMBS claims against eight financial institutions, including Barclays Capital Inc.; Deutsche Bank Securities Inc.; Goldman, Sachs & Co; RBS Securities Inc.; and UBS Securities LLC. The settlement resolves six separate suits brought in 2011 and 2012 in California and Alabama alleging misrepresentations within the defendant underwriters’ RMBS offering documents. The FDIC, as a receiver, will distribute the settlement funds among five failed bank receiverships. FDIC Settlement Agreement.
Agencies Invite Comment on Proposed Rule to Prohibit Incentive-Based Pay that Encourages Inappropriate Risk-Taking in Financial Institutions
On May 16, 2016, six federal agencies – the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Federal Reserve Board of Governors, the National Credit Union Administration, the Office of the Comptroller of the Currency and the Securities and Exchange Commission – requested public comments on proposed rule that would “prohibit incentive-based compensation arrangements that encourage inappropriate risks at covered financial institutions.” Comments must be submitted by July 22, 2016. Release.
U.S. Treasury Department Issues White Paper on Online Marketplace Lending Industry
On May 10, 2016, the Department of the Treasury issued a white paper on online marketplace lending that maps the current market landscape, reviews industry insights and offers policy proposals for the road ahead. Based on approximately 100 responses from online marketplace lenders, financial institutions, investors and other key industry figures, the Treasury, in consultation with the CFPB, FDIC, Federal Reserve Board, FTC, OCC, SBA and SEC, made several notable recommendations and observations.
The white paper explores policies that would expand regulatory oversight, including standardized representations and warranties in securitizations, pricing methodology standards, the implementation of a registry for tracking data on transactions and the reporting of loan-level performance, among others. In addition, the Treasury mentions potential cybersecurity threats, anti-money laundering, the uneven protections and regulations in place for small business borrowers and the growth of the mortgage and auto loan markets as some of the emerging trends to monitor. The Treasury is also considering the role of federal agencies in regulating these areas, including the formation of an interagency working group for online market place lending. Press Release. White Paper.
The SEC is Seeking Comment on a Joint Agency Proposed Rule Relating to Incentive-based Compensation Arrangements
On May 6, 2016, the Office of the Comptroller of the Currency, Treasury (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), and the U.S. Securities and Exchange Commission (SEC) issued and sought comment on a joint proposed rule to implement section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) relating to the prohibition on and the disclosure of information of incentive-based compensation arrangements. The deadline for comments is July 22, 2016. Notice of Proposed Rulemaking and Request for Comment.
Agencies Propose Net Stable Funding Ratio Rule
On May 3, 2016, the Federal Deposit Insurance Corporation, the Federal Reserve and the Office of the Comptroller of the Currency proposed a rule, the net stable funding ratio (the “NSFR”), to strengthen banks by requiring them to maintain a minimum level of stable funding relative to the liquidity of their assets, derivatives and commitments over a one-year period. The most stringent of the NSFR’s requirements would apply to, among others, banking organizations with $250 billion or more in total consolidated assets. The NSFR would become effective January 1, 2018. Release. Proposed Rule.
Joint Interim Final Rule Published Relating to Expanded Examination Cycle Eligibility
On March 24, 2016, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) issued and are requesting public comment on an interim final rule that will allow more community banks to be eligible for the 18-month on-site examination cycle. The rule expands eligibility to qualifying insured depository institutions with less than $1 billion in total assets. Press Release. Interim Final Bill.
FDIC Board Adopts Final Rule to Increase Deposit Insurance Fund to Statutorily Required Level
On March 15, the Federal Deposit Insurance Corporation approved a final rule that increased the minimum level of the Deposit Insurance Fund to the minimum level required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Release.
Covered Broker-Dealer Provisions Under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act
On February 17, the Securities and Exchange Commission and the Federal Deposit Insurance Corporation “jointly propos[ed] a rule to implement provisions applicable to the orderly liquidation of covered brokers and dealers under Title II of the Dodd-Frank Act[.]” The two government agencies issued the proposed rule pursuant to the Dodd-Frank Act, which specifically empowers them to regulate the liquidation of specific large financial entities. Release.