Weekly RoundUp
July 25, 2018

Financial Services Weekly News

In This Issue.  Federal Reserve Vice Chairman for Supervision Randal K. Quarles delivered a speech detailing plans for more tailored supervision of large financial institutions; the Office of the Comptroller of the Currency (OCC) updated its Capital and Dividends Handbook; and the Securities and Exchange Commission (SEC) increased the sales threshold above which companies must provide additional disclosure to employees under Rule 701 of the Securities Act of 1933. These and other recent developments are covered below.


Regulatory Developments

Fed Vice Chair Details Plans for Tailored Supervision of Large Financial Institutions

On July 18, in a speech at the American Bankers Association Summer Leadership Meeting, Randal K. Quarles, Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System (Federal Reserve), detailed plans for the tailored supervision of large financial institutions. S. 2155, the financial regulatory reform law signed by President Trump in May, raised the threshold for enhanced prudential standards from $50 billion to $250 billion in assets, but left the Federal Reserve with a certain amount of discretion in deciding which enhanced prudential standards should apply to which firms with assets in the $100 billion to $250 billion range. In his remarks, Vice Chairman Quarles discussed possible changes in standards that the Federal Reserve might adopt with respect to such firms and to firms with more than $250 billion in assets that are not global systemically important banks (G-SIBs). Possible changes include the following:

  • Less frequent company-run stress tests;
  • Exemptions from requirements to calculate risk-weighted assets under the models-based advanced approaches to capital;
  • Modifications to standardized liquidity requirements and expectations around internal liquidity stress tests and liquidity risk management for firms under the $250 billion threshold, and a different calibration of liquidity requirements for non G-SIB firms relative to G-SIBs; and
  • Scaling back, or removing entirely, resolution planning requirements for most firms in the $100 billion to $250 billion asset range, and limiting the scope or reducing the frequency of resolution planning for other less complex and less interconnected institutions.

On a general level, Vice Chairman Quarles highlighted the importance of risk-based and leverage capital requirements, stress testing, and the Federal Reserve’s proposed stress capital buffer as key regulatory components for all institutions with more than $100 billion in assets. Vice Chairman Quarles also noted that, while S. 2155 set an 18-month deadline for the Federal Reserve to issue its final rule in this area, the Federal Reserve “can and will move much more rapidly than this.”

OCC Updates Capital and Dividends Handbook

On July 23, the OCC released a revised “Capital and Dividends” booklet of the Comptroller’s Handbook (Handbook), which supersedes the 1991 (narrative) and 1998 (procedures) “Capital Accounts and Dividends” booklet, as well as certain related guidance. Mindful of further pending regulatory changes following enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act in May 2018 and issuance of related interagency guidance, the revised booklet is intended to guide examiners assessing a national bank or federal savings association’s capital adequacy and compliance with capital and dividend requirements, and it also surveys the applicable regulatory capital framework for capital and minimum capital standards. Related revisions to the “Capital and Dividends” booklet of the Comptroller’s Licensing Manual were released in November 2017.

Client Alert: SEC Adopts Mandatory Inline XBRL

The SEC has amended its eXtensible Business Reporting Language (XBRL) rule to require operating companies to present XBRL financial statement information in “inline” format. Subject to a phase-in schedule, companies will be required to transition to Inline XBRL starting with fiscal periods ending on or after June 15, 2019. The Inline XBRL amendments will require companies to embed XBRL data directly into reports and registration statements filed with the SEC so that the document is both human-readable and machine-readable. This will eliminate the current need to file duplicative, separate copies of financial statement information in XBRL format. The amendments also eliminate the current website posting requirement and revise Form 10-Q and Form 10-K. For more information, read the client alert issued by Goodwin’s Public Companies practice.

Client Alert: Rule 701 Update – Increased Threshold for Heightened Disclosure Requirements

On July 24, the threshold for providing additional disclosure to employees under Rule 701 of the Securities Act of 1933, as amended (Rule 701) was increased from aggregate sales of $5 million in any 12-month period to $10 million. Unlike most rulemaking by the SEC, this amendment to Rule 701 was immediately effective upon publication and there is no comment period. For more information, read the client alert issued by Goodwin’s ERISA & Executive Compensation group.  

Goodwin News

Independent Director’s Council Roundtable – July 30

Mike Isenman, a partner in Goodwin’s Financial Industry, Securities Litigation and SEC Enforcement practices, will be speaking on the Litigation and Enforcement panel at the Independent Director’s Council Roundtable on July 30.

MBA Regulatory Compliance Conference 2018 – September 16-18

The Mortgage Bankers Association brings together inside and outside counsel, compliance officers, company executives, government relations professionals, policy directors, and quality assurance professionals to discuss current topics impacting the mortgage industry’s regulatory environment for this three-day conference. Goodwin is a sponsor and Tony Alexis, partner in Goodwin’s Financial Industry practice and head of the Consumer Financial Services Enforcement practice, will be speaking on the “Applied Compliance: Trends in RESPA Section 8 Compliance” track. Sabrina Rose-Smith, partner in Goodwin’s Financial Industry and Consumer Financial Services Litigation practices, will be speaking on the “Emerging Compliance Risk: Navigating State UDAP Laws” track. For more information, visit the event website.

Fiduciary Investment Advisors 2018 Annual Conference – September 20-21

Goodwin partner Michael Isenman will be a panelist at the Fiduciary Investment Advisors (FIA) 2018 Annual Conference. Mike will be a speaker on the panel, “401(k)/403(b) Mock Deposition: How to Protect Against & Prepare for Defined Contribution Litigation.” For more information, visit the event website.

This week’s Roundup contributors: Alex Callen