OCC

OCC Issues Responsible Innovation Framework

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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

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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

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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

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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

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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

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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.

Interim Final Rule Regarding Inflation-Adjusted Civil Money Penalties

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On July 1, 2016, the Office of the Comptroller of the Currency (OCC) published an interim final rule that amends its rules of practice for national banks and federal savings associations to adjust the maximum amount of each civil money penalty (“CMP”) within its jurisdiction.  The effective date of the rule is August 1, 2016, and the adjustments apply only to penalties assessed on or after such date.  The interim final rule includes revisions to charts that set forth the inflation-adjusted maximum CMPs and an addition of a new penalty that makes it unlawful for a creditor who extends credit or provides services for a consumer credit transaction secured by the consumer’s principal dwelling to engage in acts that violate the appraiser independence requirements, among other changes. Press Release. Interim Final Rule.

U.S. Treasury Department Issues White Paper on Online Marketplace Lending Industry

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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.