Federal savings associations

OCC Issues Final Rule Allowing Federal Savings Associations to Exercise National Bank Powers

 

On May 24, the Office of the Comptroller of the Currency (OCC) issued a final rule permitting federal savings associations with total consolidated assets of $20 billion or less to elect to operate as “covered savings associations” with the rights and privileges of national banks. A covered savings association will retain its federal savings association charter and existing governance framework, but will be subject to the same duties, restrictions, penalties, liabilities, conditions and limitations as a national bank. The final rule implements section 206 of the Economic Growth, Regulatory Relief and Consumer Protection Act. Release.

The OCC Publishes Final Rule Adjusting Civil Money Penalties for Inflation

 

On January 27, 2017, the Office of the Comptroller of the Currency (the “OCC“) published a final rule amending its rules of practice and procedure for national banks and in adjudicatory proceedings for federal savings associations. The final rule adjusts the maximum amount of each civil money penalty within the OCC’s jurisdiction to account for inflation. The effective date of the final rule is January 27, 2017, and the adjusted maximum amounts apply to penalties assessed after January 15, 2017 for violations occurring on or after November 2, 2015. Press Release. Final Rule.

Prohibition on Dealing or Investing in Industrial or Commercial Metals

 

On January 3, 2017, the Office of the Comptroller of the Currency (the “OCC“) finalized a rule that prohibits national banks and federal savings associations from dealing or investing in industrial or commercial metals. An “industrial or commercial metal” is “a metal (or alloy), including copper, in a form primarily suited to industrial or commercial use.” Examples of metals and alloys considered to be “industrial or commercial metals” include copper cathodes, aluminum T-bars and gold jewelry. The rule becomes effective on April 1, 2017, and includes a divestiture period requiring national banks and federal savings associations to dispose of industrial or commercial metals acquired through dealing or investing activities “as soon as practicable, but not later than one year from the effective date of the regulation.” However, the OCC may grant up to four separate one-year extensions of this period for national banks or federal savings associations making a good faith effort to divest of the industrial or commercial metals and where the banks’ or savings associations’ retention of these metals is not inconsistent with their safe and sound operation. Press Release. Rule.

OCC Releases Guidance on Third-Party Relationships

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.

The guidance rescinds OCC Bulletin 2001-47, “Third-Party Relationships: Risk Management Principles,” and OCC Advisory Letter 2000-9, “Third-Party Risk.”  ReleaseGuidance.

OCC Stress Testing Guidance and CRE Stress Test Tool

On October 18, the OCC provided guidance to national banks and federal savings associations with assets of $10 billion or less on using stress testing to assess risk in their loan portfolios.  The guidance indicates that stress tests do not need to involve sophisticated analysis or third-party consultative support.  The OCC is also making available a new portfolio level stress tool for income producing commercial real estate loans.  OCC Release.

OCC Interim Final Rule on Retail Forex Transactions

On September 12, the OCC adopted an interim final rule to expand its rule on retail foreign exchange transactions to also apply to Federal savings associations and to make conforming changes to required risk disclosure statements. The rule became effective on September 12. Any federal savings associations engaged in a retail foreign exchange business prior to July 12 must request a supervisory no-objection within 30 days of the effective date to continue this business. OCC Release. OCC Interim Final Rule.