The U.S. Government Takes Action on the Silicon Valley Bank and Signature Bank Failures
On March 12, the FDIC, the Federal Reserve, and the U.S. Treasury Department announced that the U.S. government had invoked the systemic risk exception to permit the FDIC “to complete its resolution of Silicon Valley Bank...in a manner that fully protects all depositors.” The systemic risk exception permits the FDIC to take actions to avoid or mitigate serious adverse effects on economic conditions or financial stability. On that same day, Signature Bank was closed. All the deposits and substantially all the assets of Silicon Valley Bank and Signature Bank were transferred to two newly-created bridge banks: Silicon Valley Bank, N.A. and Signature Bridge Bank, N.A.
Goodwin is closely monitoring these developments. For the latest developments, FAQs, and resources related to these bank failures, visit our Bank Failure Knowledge Center.
Turbulent Banking Sector Renews Interest in Cash Management and Investment Policies
Companies do not always assess the long-term financial viability of the banks that hold their money or provide other critical financial services. Over the last week, countless companies had to grapple with these counterparty risks as they worried about how to make payroll. Companies, especially startups, often raise significant amounts of capital to fund future operations. Managing cash to ensure liquidity and capital preservation is critical not only to their success but also to their very survival.
In this client alert, the Goodwin team highlights a number of best practices companies should consider to ensure they manage their cash and investment risk effectively, particularly in this uncertain environment.
CFPB Seeks Public Comment on Data Brokers for FCRA Rulemaking
On March 15, the CFPB issued a Request for Information (RFI), seeking public comment on companies that track and collect information on people’s personal lives (i.e., data brokers), including the scope and breadth of data brokers and their business models and practices, the types of data that data brokers collect and sell, the sources upon which data brokers rely, consumers’ experience with data brokers, including when consumers attempt to remove, correct, or regain control of their data, data brokers’ impact on consumers’ daily lives, whether all data brokers are playing by the same rules, and the current state of business practices in exercising enforcement, supervision, regulatory, and other authorities. The CFPB intends to leverage responses to the RFI to determine, in advance of planned rulemaking, whether rules under the Fair Credit Reporting Act reflect market realities. Public comments are due by June 13, 2023.
CFPB Releases 2023 HMDA Transactional and Institutional Coverage Charts
On March 15, the CFPB released the 2023 HMDA Transactional and Institutional Coverage Charts, updating the closed-end threshold pursuant to the United States District Court for the District of Columbia September 23, 2022, order in NCRC et al. v. CFPB, which partially overturned a Trump-era CFPB rule that exempted many mortgage lenders from reporting key HMDA data.
Section 19 of the Federal Deposit Insurance Act Amendments
On December 23, the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 (NDAA), which included the Fair Hiring in Banking Act (Act), was signed into law and became immediately effective. The Act significantly amends Section 19 of the Federal Deposit Insurance Act (12 U.S.C. § 1829) (Section 19). (Fil 09-2023: Fair Hiring in Banking Act Amends Section 19 of the Federal Deposit Insurance Act.)
Section 19 prohibits a person from participating in the affairs of an FDIC-insured institution if he or she is a bad actor (convicted of an offense involving dishonesty, breach of trust, or money laundering, or has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense), without the prior written consent of the FDIC.
Several of the Act’s changes to Section 19 are highlighted below and in the attached Overview. The amended Section 19 statute can be found on the FDIC’s website.
Notable changes to Section 19 are: (1) offences committed by individuals 21 or younger are excluded; (2) certain “lesser offences are excluded”; (3) certain offences are excluded from the definition of “criminal offense involving dishonesty” and (4) certain offences that have been expunged, sealed or dismissed are excluded. See an overview of the changes at: Overview of Key Changes to Section 19.
CFPB Issues New Report On Buy Now, Pay Later Products
On March 2, the CFPB issued a report (Report) exploring the financial profiles of consumers of Buy Now, Pay Later (BNPL) products. The Report is based on the CFPB’s 2022 Making Ends Meet survey, which included data from 2,036 consumers and data from credit bureaus. Seventeen percent of survey respondents indicated that they had made at least one BNPL purchase in the 12 months prior to taking the survey.
The CFPB noted that BNPL borrowers were, “on average, much more likely to be highly indebted, revolve on their credit cards, have delinquencies in traditional credit products, and use high-interest financial services such as payday, pawn, and overdraft compared to non-BNPL borrowers.” The CFPB additionally noted that “BNPL borrowers had higher credit card utilization rates and lower credit scores.”
Read more about the CFPB’s key findings in the latest Goodwin Consumer Finance Insights blog post.
Goodwin To Sponsor 5K Run/1M Walk at Upcoming ICI Investment Management Conference
Goodwin is proud to once again sponsor the upcoming 5K run/1M walk on Monday, March 20, as part of the Investment Company Institute’s (ICI) Investment Management Conference hosted in Palm Desert, California. The run will take place at the JW Marriott Desert Springs Resort & Spa on the tennis lawn, with registration beginning at 6:15 AM. To secure your spot and receive more information, please sign up here. In connection with the 5K, Goodwin will make a donation to Expect Miracles, a leading advocate in the fight against cancer within the financial services industry.
The annual conference offers valuable content and networking opportunities for industry professionals, including asset managers, service providers, board members, and legal and compliance personnel. Goodwin partner Michael Isenman will be speaking on a panel, titled “Fund Industry Civil Litigation: Year in Review,” during the conference.
SIFMA C&L Annual Seminar
Goodwin was proud to return as sponsors to the SIFMA C&L Annual Seminar, which took place March 12-15 in San Diego, California. Part of the sponsorship included a hosted run, “Run for a Purpose”, which took place the morning of Monday, March 13th. Proceeds from the run were donated to the San Diego LGBT Community Center.
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Samantha M. Kirby
Samantha M. KirbyPartnerCo-Chair of Banking and Consumer Financial Services
William McCurdySenior Attorney