OCC

Federal Banking Agencies Propose Extension of Certain Capital Rule Transitions

 

On August 22, 2017, in preparation for a forthcoming proposal that would simplify regulatory capital requirements, federal banking regulators proposed a rule that would extend the existing transitional capital treatment for certain regulatory capital deductions and risk weights. The extension would apply to banking organizations that are not subject to the agencies’ advanced approach to capital rules, which are generally those with less than $250 billion in total consolidated assets and less than $10 billion in total foreign exposure. Comments on this proposal will be accepted for 30 days after publication in the Federal Register. FDIC Press Release. Federal Reserve Press Release. OCC Press Release. Proposal.

OCC to Move Forward With Considering Fintech Charter Applications

 

On December 2, 2016, Comptroller of the Currency Thomas J. Curry announced that the Office of the Comptroller of the Currency (“OCC“) would move forward with considering applications from fintech companies that conduct at least one of three core banking activities (i.e., receiving deposits, paying checks or lending money) to become special purpose national banks. Fintech companies will have the option to seek a charter, and the OCC will evaluate applicants to ensure they have a reasonable chance of success, appropriate risk management, effective consumer protection and strong capital and liquidity.

The OCC simultaneously published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. Comments to the paper may be submitted through January 15, 2017. For further discussion relating to the announcement, please see “National Bank Charters for Fintech Companies.” Orrick Alert. Release. White Paper.

OCC Issues Responsible Innovation Framework

 

On October 26, the Office of the Comptroller of the Currency (“OCC“) announced that it will establish an office “dedicated to responsible innovation and implement a formal framework to improve the agency’s ability to identify, understand, and respond to financial innovation affecting the federal banking system [and stated that by] establishing an Office of Innovation, we are ensuring that institutions with federal charters have a regulatory framework that is receptive to responsible innovation and the supervision that supports it.”

The Office of Innovation will be headed by a Chief Innovation Officer assigned to OCC Headquarters. The office will be the central point of contact and clearinghouse for requests and information related to innovation and it will also implement other aspects of the OCC’s framework for responsible innovation, which include:

  • establishing an outreach and technical assistance program for banks and nonbanks,
  • conducting awareness and training activities for OCC staff,
  • encouraging coordination and facilitation,
  • establishing an innovation research function, and
  • promoting interagency collaboration.

The OCC expects the office to begin operations in first quarter 2017.

The OCC emphasized that its assessment of granting a special purpose national bank charter to nonbank financial technology companies, and under what conditions, continues.

See “Recommendations and Decisions for Implementing a Responsible Innovation Framework.”  Press Release.

Agencies Issue Advanced Notice of Proposed Rulemaking on Enhanced Cyber Risk Management Standards

 

On October 19, 2016, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency announced proposed rules relating to cybersecurity and risk management concerns that would apply to larger institutions under their purview. FDIC Press Release. Federal Reserve Press Release. OCC Press Release.

The OCC Publishes Guidance Concerning Foreign Correspondent Banking Accounts

 

On October 5, 2016, the Office of the Comptroller of the Currency (the “OCC”) issued risk management guidance that addresses periodic reevaluations of risks associated with foreign correspondent banking accounts. The guidance includes the OCC’s best practices for banks to consider when conducting reevaluations and making account termination and retention decisions. Press Release.

The OCC Proposes Rule to Address Concerns Relating to Exercise of Default Rights Under Qualified Financial Contracts

 

On October 3, 2016, the Office of the Comptroller of the Currency proposed a rule to enhance the resilience of federally chartered and licensed financial institutions. The proposed rule addresses concerns relating to the exercise of default rights under certain financial contracts that could interfere with the orderly resolution of systemically important financial firms. The rule requires, among other things, covered banks to ensure that covered qualified financial contracts (i) limit the exercise of default rights based on the insolvency of an affiliate of a covered bank and (ii) contain contractual stay-and-transfer provisions analogous to the statutory stay-and-transfer provision set forth under title II of the Dodd-Frank Act and the Federal Deposit Insurance Act. Comments on the proposed rule are due on October 18, 2016. Press Release.

The OCC Publishes Final Guidelines on Recovery Planning

 

On September 29, 2016, the Office of the Comptroller of the Currency (the “OCC”) published final guidelines establishing enforceable standards for recovery planning. The final guidelines generally apply to banks with average total consolidated assets of $50 billion or more (“covered banks”). If a covered bank fails to meet a guideline, the OCC may require such bank to submit a plan specifying steps the bank would take to comply with the guideline. If, after being notified that it is in violation of a guideline, a covered bank fails to submit an acceptable compliance plan or fails to materially comply with a plan approved by the OCC, the OCC may issue an order enforceable under section 8 of the Federal Deposit Insurance Act. Press Release. Final Guidelines.

Agencies Publish Study on Banking Activities and Investments under Dodd-Frank

 

On September 8, 2016, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) released a report detailing activities and investments that banking entities may engage in under state and federal law.

Pursuant to section 620 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which requires the trio of federal banking agencies to conduct the study and report their findings to Congress, the report considers financial, operational, managerial and reputational risks associated with the permissible activities or investments and how banking entities work to mitigate those risks.

Each agency also offers specific recommendations regarding whether an activity or investment could harm the overall safety and soundness of the banking entity or broader financial system and any additional restrictions necessary to curb any such potential risks. Press release. Report.