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BPI President & CEO Greg Baer Describes Opaque Subjective and Unreviewable Examination Process in Testimony Before Senate Banking Committee

BPI President & CEO Greg Baer Describes Opaque Subjective and Unreviewable Examination Process in Testimony Before Senate Banking Committee
Bank Policy Institute President & CEO Greg Baer testified on April 30 before the Senate Committee on Banking, Housing, and Urban Affairs on examination and enforcement actions taken by the banking agencies as part of their supervisory role. In his testimony, Baer argued that regulators have effectively turned examination reports into enforcement actions, often by issuing supervisory mandates in the form of Matters Requiring Attention (MRAs) and Matters Requiring Immediate Attention (MRIAs) that are treated as binding, are not subject to due process or congressional oversight and often relate to matters immaterial to safe and sound banking practices.

5 Stories Driving the Week

1. Bill Cracking Down on LLCs Used for Tax Evasion and Money Laundering Faces Obstacles

Following over a decade of legislative debate a bill to crack down on anonymous shell companies “may advance this year, having attracted support from some strange bedfellows, including banks, unions, the national security community, human rights advocates, environmentalists, multinational corporations, law enforcement and the Trump administration,” reports CQ Roll Call. The bipartisan bill has backing and support from 120 groups, including Bank Policy Institute (BPI), the National District Attorneys Association, Amnesty International and Global Witness. Read More >>

2. BPI Responds to CFPB’s Request for Information on Consumer Credit Card Market

On May 1, BPI submitted a comment letter in response to the Consumer Financial Protection Bureau’s (CFPB) request for information on the CARD Act’s requirement that it conduct biennial reviews of the consumer credit card market. The letter notes that the linear analysis required under the CARD Act and Regulation Z of a borrower’s ability-to-repay prevents issuers from accounting for other factors that may otherwise indicate creditworthiness, and thus limits the ability to increase comprehensive access to credit for non-prime and higher-risk borrowers. Further, the letter encourages modifications to Regulation Z to maximize the efficiencies of online servicing methods. Read More >>

3. OCC Issues Proposal on Fiduciary Activities

On April 26, the Office of the Comptroller of the Currency (OCC) issued an advance notice of public rulemaking (ANPR) on its fiduciary activities rule, proposing to update the definition of ‘fiduciary capacity’ include certain state-recognized trust-related activities. Further, the ANPR solicits comment on whether to establish a new regulation to govern and set basic standards for non-fiduciary custody activities of national banks and federal savings associations, noting that these activities have become more sophisticated since the OCC’s fiduciary regulation was last updated in 1996. Read More >>

4. NIST Releases Draft Privacy Framework

The National Institute of Standards and Technology (NIST) released a discussion draft of its Privacy Framework: An Enterprise Risk Management Tool on April 30. The Privacy Framework is structured similar to the Cybersecurity Framework to support compatibility. The draft is open for public comment and will be discussed at NIST’s upcoming workshop in Atlanta, Georgia, May 13-14. While the U.S. Congress continues to debate federal privacy legislation, the NIST effort is widely expected to produce a voluntary tool companies may use to guide their privacy programs. Read More >>

5. The Fed Wants Banks To [Be Willing To | Avoid] Borrowing And Hold [Fewer | More] Excess Reserves

The Fed is planning a new lending facility designed to convince banks to hold lower reserve balances, while simultaneously seeking comment on new liquidity requirements designed to reduce the likelihood of borrowing—a conflicted view going back at 50 years. BPI’s Executive Vice President and Chief Economist Bill Nelson posted a blog that explores this issue in more detail. Read More >>

Upcoming Events

5/3/2019 — Federal Reserve Vice Chairman Richard Clarida and Governor Michelle Bowman deliver remarks on May 3 at the Hoover Institution’s Strategies for Monetary Policy: A Policy Conference.

5/7/2019 — Federal Reserve Vice Chair for Supervision Randal Quarles delivers remarks on May 7 at 11:35 am on financial regulation at Yale School of Management’s Leader’s Forum Discussion with Professor Andrew Metrick.

5/7/2019 — The Senate Banking, Housing, and Urban Affairs Committee holds a hearing on May 7 at 10 am on “Privacy Rights and Data Collection in Digital Economy.”

5/8/2019 — Federal Reserve Governor Lael Brainard delivers remarks on May 8 at 8:30 am at the Fed Listens: A Community Listening Session.

5/8/2019 — House Financial Services Subcommittee on Housing, Community Development and Insurance will convene a hearing on minority homeownership on May 8 at 10 am.

5/8/2019 — The Consumer Financial Protection Bureau will host a town hall meeting on May 8 in Philadelphia on debt collection rules. CFPB Director Kathy Kraninger will deliver remarks.

5/9/2019 — The House Financial Services Committee will hold a markup on May 8 at 2 pm. The markup will continue May 9 at 10 am.

5/9/2019-5/10/2019 — Federal Reserve Hosts Community Development Research Conference

6/4/2019 — Speakers Added for SIFMA and BPI Prudential Regulation Conference

11/19/2019-11/21/2019 — November 19-21: The Clearing House + BPI 2019 Annual Conference
View Upcoming BPI Events /td>

In Case You Missed It

CFPB Issues Proposed Changes to HMDA Reporting Requirements

On May 2, the Consumer Financial Protection Bureau (CFPB) issued a proposal to the raise coverage threshold for the reporting requirements under the Home Mortgage Disclosure Act (HMDA), exempting smaller lenders from reporting requirements for closed-end mortgage loans and open-end credit lines. The proposal also would clarify certain partial HMDA exemptions introduced by the economic Growth, Regulatory Relief, and Consumer Protection Act. Notably, the CFPB also separately issued an Advance Notice of Proposed Rulemaking requesting feedback as to whether the CFPB should make changes to the data points currently collected under HMDA, as well as the costs and benefits of requiring reporting on certain commercial-purpose loans. Read More >>
APNR: Read More >>

OCC Proposes Updates to Real Estate Regulations

On April 24, the Office of the Comptroller of the Currency (OCC) issued a proposal to make the first updates in nearly twenty years to its so-called “other real estate owned” (commonly referred to as “OREO”) rules applicable to federally chartered banks. OREO includes foreclosed-upon properties and properties formerly held as bank premises. The OCC issued the proposal to clarify and streamline the regulation, remove outdated capital rules for national banks and federal savings associations, and solicit public comment on the acquisition, holding and disposition of OREO properties.Read More >>

OCC Proposes an Innovation Pilot Program

The OCC announced on April 30 that it is seeking public comment on a proposed Innovation Pilot Program. The Innovation Pilot Program is akin to a regulatory sandbox and is intended to further complement the OCC’s efforts to support responsible innovation. Under the proposal, OCC-regulated firms could apply for the program to test novel or complex new products and services and engage in an ongoing dialogue with OCC staff about appropriate controls and safeguards. The program is intended to not only help firms innovate but also better inform the OCC’s understanding of, and ability to supervise, risks. Read More >>

Regulators Plan Meeting With Law Enforcement On Banks’ AML Burden

The federal financial regulators will meet with law enforcement to discuss the effectiveness of the current anti-money laundering regime, said Federal Deposit Insurance Corporation Chairman Jelena McWilliams. She said the purpose of the meeting is to understand what law enforcement do with the “millions of suspicious activity reports banks submit every year without much feedback.” Read More >>

Otting Announces Plans to Review Executive Pay Rule

On April 29, Comptroller of the Currency Joseph Otting told reporters at a Milken Institute conference that his goal is to issue a proposal for a new principles-based version of a rule limiting executive incentive-based compensation this year. Otting indicated that the OCC expected to lead in the development of the interagency rulemaking, which was called for under the Dodd-Frank Act but has not yet been completed. “The Fed and the FDIC are aware of [the OCC’s efforts],” Otting said, “and they’ll join us as we get it to a point where we can share what a document would look like.” Read More >>

Why Aren’t White House Hopefuls Talking About Banking?

As the Democratic presidential filled emerges, surprisingly little has been said about banks and financial regulation has largely been out of the national spotlight, reports The American Banker. The reason could be because “the 2020 elections will be over a decade after the crisis, and other issues may resonate more soundly with voters, particularly younger voters who may not be familiar with the 2008 downturn.” Read More >>

BPInsights: May 3, 2019