BPInsights: June 14, 2019

BPInsights: June 14, 2019


House Financial Services Committee Passes Bipartisan Bill to End Anonymous Shell Companies

The House Financial Services Committee passed H.R. 2513, known as the Corporate Transparency Act, legislation to end anonymous shell companies by a vote of 43-16. Ten Republicans joined Congresswoman Carolyn Maloney (D-NY), the sponsor of the measure, and Congressman Blaine Luetkemeyer (R-MO) to support the bill. The Act would require business owners to provide their name, address, date of birth and driver’s license or passport number when registering their company. The final version passed by the Committee included a manager’s amendment, which strengthened privacy safeguards based primarily on the existing rules that govern the SAR database.

“Today’s strong bipartisan vote to end anonymous shell companies used to mask criminal activity is a giant step forward,” said BPI President and CEO Greg Baer. “With today’s committee vote and Monday’s release of draft Senate legislation, it is clear that bipartisan momentum is building.  We look forward to continuing to engage members of Congress to ensure this simple, commonsense legislation becomes law.” BPI, along with other financial services trade groups, sent a letter in support of the legislation.

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5 Stories Driving the Week

1. Errors In Fed Analysis Aimed At Justifying CCyB Capital Increase

On June 7, Federal Reserve economists released a blog post measuring the severity of the Federal Reserve’s annual stress test over time.  The blog post leads to the conclusion that the CCyB should be increased, but this conclusion is based on errors in the analysis. By their own logic, based on the corrected analysis, the stress test design and severity make the CCyB unnecessary.


2. Senators Offer Draft AML Legislation

On June 10, a bipartisan group of Senators circulated draft legislation to end anonymous shell companies and modernize anti-money laundering laws: Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity Shell Holdings Act. BPI applauds the group’s work. The Senate Banking Committee will convene a hearing on beneficial ownership on June 20, where BPI President and CEO Greg Baer will testify.


3. CFPB to Host Symposium to Define ‘Abusive’ Practices

The Consumer Financial Protection Bureau announced it will host its first in a series of symposia on June 25 focused on defining what constitutes an “abusive” standard for financial services companies. One panel will discuss policy issues related to the abusive standard and another on how the abusive standard has been used in practice.


4. Risky Borrowing Is Making A Comeback, But Banks Are On The Sideline

The New York Times reports on how “risky borrowing” is growing in the shadow banking industry and this has created “new problems.” “In certain areas — including mortgages, auto lending and some business loans — shadow banks have eclipsed traditional banks, which have spent much of the last decade pulling back on lending in the face of stricter regulatory standards aimed at keeping them out of trouble,” the Times reports.


5. House Committee Approves Flood Insurance Reauthorization Legislation

On June 12, the House Financial Services Committee unanimously approved H.R. 3167, which would reauthorize the National Flood Insurance Program (NFIP) and its flood mapping program for five years, and address affordability of premiums. Lastly, the ANS would authorize funding for flood mapping, require up-to-date technology and more advanced and granular maps, improve the process for policyholders and communities to appeal FEMA’s mapping decisions, and create new flood map zones for levee-impacted and agricultural areas.


In Case You Missed It

BPI, Trades Offer Recommendations on TLAC Holdings Proposal

On June 7, the Bank Policy Institute, Financial Services Forum and the Securities Industry and Financial Markets submitted a comment letter to the federal banking agencies on their total loss-absorbing capacity (TLAC) holdings regulatory capital proposal, which would require advanced approaches firms to deduct from their regulatory capital, rather than risk-weight, certain investments in TLAC debt issued by both foreign and domestic GSIBs, as well as by the U.S. IHCs of foreign GSIBs. The letter offers several recommendations that would allow the final rule to address interconnectedness and other risks relating to a GSIB’s failure more appropriately. The letter’s recommendations would further the policy objectives of efficiency and simplicity in regulation and would also facilitate the ability of advanced approaches firms to engage in market-making activity, which supports the depth and liquidity of markets for TLAC-eligible debt.

Financial Stability Board Releases Evaluation of Regulatory Impact on Small Business Financing

On June 7, the Fianncial Stability Board (FSB) released and sought comment on a report “Evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME).” The report focused on the G20 reforms to capital and liquidity requirements and found no “material and persistent” negative impact. By contrast, a BPI post from December 2018, available here, and BPI’s March 2019 response to the FSB’s request for comment on SME financing, available here, document the extensive economic analysis that has found that stress tests other post-crisis regulatory changes have reduced the supply of credit to small businesses.

McWilliams: Bank Agencies Debating Approach to Encouraging Small-dollar Loans

Federal Deposit Insurance Corporation Chairman Jelena McWilliams said on June 12 that regulators are still debating whether to offer guidance or a formal regulation to encourage banks to offer small dollar loans. “If we do this by a rulemaking, it would have to be by its very nature more prescriptive,” McWilliams told reporters on the sidelines of a Cato Institute conference.

Lawmakers Offers CECL Accounting Delay Legislation

On June 11, Congressman Vicente Gonzalez (D-TX), joined by Blaine Luetkemeyer (R-MO), introduced legislation that would stop the implementation of Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss (CECL) accounting standard until a study of its potential economic effects could be completed. “With the potential to drastically impact consumers across the nation, it is simply unacceptable to continue the implementation of CECL without understanding the broad economic implications,” Congressman Luetkemeyer said in a press release.

FHFA Requests Congressional Authority to Charter New GSEs

In a 120-page report to Congress on June 12, the Federal Housing Finance Agency requested the authority to charter new government-sponsored enterprises to compete with Fannie Mae and Freddie Mac. In a letter accompanying the report, FHFA Director Mark Calabria also asked Congress to pursue housing finance legislation.

Social Security Administration Announces Enrollment Period for Social Security Verification System

On June 7, the Social Security Administration (SSA) announced the initial enrollment period of July 17 to 31 for access to the new electronic Consent Based Social Security Number Verification service to assist financial institutions in combating synthetic identity fraud. Companies will be able to verify social security numbers with other consumer information through an online government portal beginning in June 2020.


6/18/2019 —Senate Banking Holds TRIA Hearing

6/19/2019 —House Subcommittee Holds Hearing on Proposals to Strengthen Securities Enforcement

6/20/2019 —Senate Banking Holds Beneficial Ownership Hearing

6/20/2019 —House Financial Services Holds Board Diversity Hearing

6/20/2019 —House Subcommittee Holds Housing Appraisal Hearing

11/19/2019 – 11/21/2019 —The Clearing House + BPI 2019 Annual Conference

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