On June 14, the Board of Governors of the Federal Reserve System (Federal Reserve) approved a final rule designed to reduce the risk of contagion to the financial system by limiting the amount of credit exposure large banking organizations can have with respect both to each other and to other counterparties. The rule, which implements part of the Dodd-Frank Act, covers loans, derivatives, securities lending transactions and certain other transactions. Under the rule, a global systemically important bank holding company (GSIB), any bank holding company with $250 billion or more in total consolidated assets, or any U.S. intermediate holding company with $50 billion or more in consolidated U.S. assets is limited to a net credit exposure of no more than 15 percent of its tier 1 capital to another systemically important financial firm, and to a net credit exposure of no more than 25 percent of tier 1 capital to any other counterparty. A foreign bank’s combined U.S. operations, outside of its U.S. intermediate holding company, will be considered in compliance if a comparable rule is in effect in the foreign bank’s home country. The Federal Reserve indicated in the rule’s release that it will consider whether a credit exposure limit should apply to holding companies between $100 billion and $250 billion in assets, though no such limits were imposed in this rule. The rule takes effect January 1, 2020, for GSIBs and July 1, 2020, for all other firms.
On June 15, the OCC issued a bulletin clarifying how examiners evaluate and communicate bank performance under the CRA. The bulletin is applicable to all national banks, federal savings associations, and federal branches and agencies subject to evaluation under the CRA. The bulletin includes clarifications to both supervisory policies and procedures. The policy clarifications address:
- implementation of full-scope and limited-scope reviews;
- consideration of activities that promote economic development;
- use of demographic, aggregate, and market share data;
- evaluation of the borrower distribution of loans outside bank assessment areas;
- evaluation of frequency and timing;
- the CRA performance evaluation period; and
- evaluation of home mortgage loans.
In addition, the process clarifications address:
- the type of information considered and presented in the written performance evaluation and the process for sharing CRA evaluation data and ratings;
- factors considered when evaluating bank performance under the small- and large-bank lending tests;
- branch distribution when concluding on the availability and effectiveness of bank systems for delivering retail banking services;
- internal and external performance context factors when concluding on performance; and
- consideration of CRA plans imposed as conditions of approval of corporate applications in the evaluation process.
These clarifications are effective immediately. The OCC has also rescinded its previous guidance from December 29, 2000 (“Large Bank CRA Examiner Guidance”). The rescission is effective June 1, 2018.
On June 18, President Trump announced his intent to nominate Kathy Kraninger as Director of the Consumer Financial Protection Bureau (CFPB), replacing Acting Director Mick Mulvaney. Ms. Kraninger currently serves as the Associate Director for General Government at the Office of Management and Budget. She previously served as Deputy Assistant Secretary for Policy at the Department of Homeland Security and as a congressional staff member for both the House Committee on Appropriations and the Senate Committee on Appropriations. Mr. Mulvaney will continue to serve as Acting Director until Ms. Kraninger is confirmed by the Senate.
The Securities and Exchange Commission (SEC) finally provided some good news, and guidance, regarding permissible token sales. On June 14, William Hinman, Director of the SEC Division of Corporation Finance, speaking at the Yahoo Finance All Markets Summit: Crypto, shared remarks that filled in some gaps surrounding the security status of tokens that have been issued in initial coin offerings (ICOs) and other token sales. Specifically, he told the audience that, in some circumstances, digital assets originally sold as securities may later be sold as non-securities, and that Bitcoin and Ether are not securities. For more information, read the client alert issued by Goodwin’s Digital Currency and Blockchain Technology practice.analysis of consumer debt collection complaints highlighting several issues that often arise in those complaints. In light of Acting Director Mulvaney’s comment in his January 2018 staff memo that debt collection complaints made up the majority of complaints received by the CFPB, the report potentially hints at future areas of focus for the CFPB. After providing complaint statistics by product and by state, the CFPB’s recent report turns its focus to debt collection complaints. View the LenderLaw Watch blog post.
Western Bankers Association, in partnership with FHLB-SF and The Silicon Valley Center for Innovation, will hold their 2018 Fintech Symposium on July 11, 2018. Goodwin will host this event. Mike Whalen, partner and Co-Chair of Goodwin’s Fintech practice, Mitzi Chang, partner in Goodwin’s Technology Companies, Life Sciences, and Digital Currency and Blockchain Technology practices, and Bill Growney, partner in Goodwin’s Technology and Life Sciences practice, will participate on the panel.
ACI’s 30th National Forum on Consumer Finance Class Actions and Government Enforcement gathers industry decision-makers, counsel and executives to discuss the latest developments and expert strategies for navigating class actions, litigation and government enforcement activity in the consumer financial services arena. Sabrina Rose-Smith, partner in Goodwin’s Financial Industry and Consumer Financial Services Litigation practices, will serve as co-chair of the forum. Brooks Brown, partner in Goodwin’s Financial Industry group and co-chair of its Banking and Consumer Financial Services practice, will be a speaker on the panel, “The Telephone Consumer Protection (TCPA) Litigation Bubble: Evolving Technology, Record-Breaking Settlements and Uncertain Legal Precedent.” For more information, please visit the event website.