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 Dodd-Frank Reg Reform Center
The Arkansas Bankers Association has added this section to help our members better understand what is being called the biggest re-write of financial regulations in decades. Moreover, we hope to engage our membership in the regulatory implementation process.
This is where you will find news, proposed rules & regs, industry comments, effective dates and training related to the Dodd-Frank legislation.
Needed reform --- gone terribly wrong:
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* Please note that certain parts of this section may require your bank to be a member of the American Bankers Association. Join the AmBA.
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November 5, 2010
Fed Opens New Financial Stability Office
The Federal Reserve has established an Office of Financial Stability Policy and Research and named agency economist J. Nellie Liang as its director, the Fed said yesterday. The office, which will bring together economists, banking supervisors and markets experts, will coordinate Fed staff efforts to identify and analyze potential risks to the financial system and the overall economy.
It also will support the supervision of large financial institutions and the Fed’s participation on the Financial Stability Oversight Council. “The financial stability team will play an important role in implementing the [Dodd-Frank Act], in our oversight of systemically important financial institutions, and in our overall surveillance of the financial markets and the economy,” Fed Chairman Ben Bernanke said. Read more.
October 20, 2010
AmBA Meets With Treasury Officials on Dodd-Frank Implementation Issues
Wayne Abernathy, AmBA EVP for financial institutions policy, and other AmBA staff members met yesterday with Treasury officials to discuss three Dodd-Frank Act implementation issues: the new Office of Financial Research’s purpose and objectives; the Financial Stability Oversight Council’s advanced notice of proposed rulemaking on criteria to designate nonbank financial institutions for enhanced prudential regulation by the Federal Reserve; and the pending Volcker Rule study.
The OFR’s purpose and objectives should be established early, and the office also should maintain strong confidentiality standards and avoid duplication of information reporting,
AmBA
told Treasury. The association also urged that the OFR focus on its primary mission of collecting and analyzing data for the FSOC and its constituent members.
AmBA
is still considering positions on the FSOC’s ANPR, but it said there is a need to ensure that nonbanks do not engage in regulatory arbitrage.
AmBA
recommended that the criteria used in bringing nonbanks under the Fed’s jurisdiction be sufficiently inclusive to ensure that systemically significant nonbanks are subject to standards comparable to those that apply to banks.
During the Volcker Rule discussion,
AmBA
said the rule should be implemented in a way that will avoid disrupting transactions that do not pose the same risks as proprietary trading. Treasury officials welcomed AmBA’s offer to share its expertise as the agency and the FSOC work to implement the Dodd-Frank Act, and they will be meeting with the association staff and members on these and other issues.
October 15, 2010
FDIC Community Bank Panel Discusses Dodd-Frank Implementation
The FDIC Community Banking Advisory Committee discussed a wide range of topics affecting community banks and their customers yesterday at its fourth meeting. Agency officials provided the 14-member panel, which includes several
AmBA
member bankers, with an overview of the Dodd-Frank Act's implementation and related issues. They included how the act will impact the evolution of the deposit insurance assessment system, and FDIC's new authority to resolve at-risk financial companies that pose a significant threat to the
U.S.
financial system.
Among the other topics covered were the hike in deposit insurance coverage and advertising rules; capital adequacy requirements; current risk management issues; and consumer protection. Watch for a video of the meeting. For more information, contact
AmBA
's Denyette DePierro.
October 13, 2010
TCF Files Lawsuit Challenging Durbin Amendment
Wayzata, Minn.-based TCF Financial Corp. yesterday filed a lawsuit against the Federal Reserve, seeking to halt implementation of the Dodd-Frank Act's Durbin interchange fee amendment.
The ABA-opposed provision, which directly applies to banks with $10 billion or more in assets, directs the Fed to set prices on debit-card interchange fees. The Fed is required to consider only the cost of protecting against fraud when determining whether fees are “reasonable and proportional,” and merchants will be allowed to offer discounts for certain payment types.
TCF's lawsuit, filed in the U.S. District Court for
South Dakota
, contends that the Durbin amendment forces the bank to offer debit card interchange below cost without just compensation and due process. The suit also charges that the provision is unconstitutional because it unfairly targets large financial institutions.
"It is unprecedented for Congress, or any regulatory agency, to mandate a fee charged in the free market that not only denies a reasonable rate of return on investment, but actually requires the rate to be lower than the incremental cost of providing the service," TCF Chairman and CEO William Cooper said. Read TCF’s press release.
September 27, 2010
FDIC to Begin Implementing Resolution Authority at Today’s Board Meeting
The FDIC Board at its meeting today will begin the process of implementing the agency’s new resolution authority for systemically important firms. According to the meeting agenda, the board will consider an interim final rule implementing certain orderly liquidation authority provisions of the Dodd-Frank Act.
Other agenda items include a rule on the FDIC’s treatment -- as conservator or receiver -- of financial assets that an institution transfers in connection with a securitization after Sept. 30, and a notice of proposed rulemaking on the deposit insurance of noninterest-bearing transaction accounts. Read more.
September 22, 2010
AmBA Participates in Treasury Forum on Simplifying Mortgage Disclosures
AmBA
and more than 25 other groups representing banks, mortgage companies and consumers met with Treasury Secretary Timothy Geithner and special adviser Elizabeth Warren yesterday to discuss streamlining disclosures under the Real Estate Settlement Procedures Act and Truth in Lending Act.
Geithner said the improvement of the disclosures is a top priority of the new Consumer Financial Protection Bureau, which is required by the Dodd-Frank regulatory reform bill to combine and simplify the overlapping forms by July 2012. He said a proposed combined form is likely to be available well ahead of that deadline.
“I’m pleased that Secretary Geithner and Elizabeth Warren expressed genuine interest in pursuing simpler, targeted disclosures more likely to help consumers make good decisions,” said AmBA EVP Bob Davis, who attended the meeting. “The convoluted disclosures currently required impede effective consumer choice and increase vulnerability to fraud.”
Treasury plans to hold additional meetings, and
AmBA
, which has long advocated simplified mortgage disclosures, will remain actively engaged in the discussions. Read more. For more information, contact
AmBA
's Davis.
FDIC to Begin Implementing Resolution Authority at Board Meeting
The FDIC Board at its meeting next Monday will begin the process of implementing the agency’s new resolution authority for systemically important firms. The meeting agenda shows the board will consider an interim final rule implementing certain orderly liquidation authority provisions of the Dodd-Frank Act.
Other agenda items include a rule on the FDIC’s treatment -- as conservator or receiver -- of financial assets that an institution transfers in connection with a securitization after Sept. 30, and a notice of proposed rulemaking on the deposit insurance of noninterest-bearing transaction accounts. Read more.
September 20, 2010
Breaking News:
Designated Transfer Date is Announced: July 21, 2011In accordance with the Dodd-Frank Act, Treasury Secretary Tim Geithner has selected July 21, 2011 as the “designated transfer date.” This will be the date that all existing federal consumer protection laws as well as large bank supervisory authority being assumed by the new Bureau of Consumer Financial Protection will be transferred from the Federal Reserve Board and other banking agencies. This date also triggers other deadlines including the target date for publishing final rules implementing Title XIV mortgage reform which will be 18 months later, January 21, 2013. Read more.
President Appoints Warren as Special Consumer Bureau Adviser
As expected, President Obama on Friday appointed Elizabeth Warren, chair of the TARP Congressional Oversight Panel, as a special adviser to oversee the creation of the Bureau of Consumer Financial Protection.
The appointment enables
Warren
to set up the new agency without having to go through a potentially contentious confirmation battle in the Senate. She will not, however, be able to issue rules since only the bureau’s director has that authority.
Warren, a Harvard law professor who proposed the creation of a consumer agency in 2007, will report to both the Treasury Department and the White House in her advisory role. Read the White House press release.
September 16, 2010
President to Appoint
Warren
as Special Consumer Bureau Adviser
President Barack Obama will appoint Elizabeth Warren, chair of the TARP Congressional Oversight Panel, as a special adviser to oversee the creation of the Bureau of Consumer Financial Protection, according to press reports.
The decision, which Obama is expected to announce this week, would allow
Warren
to set up the new agency without having to go through a potentially contentious confirmation battle in the Senate. It would not allow her to issue rules, however, since only the bureau's director has that authority. Warren, a Harvard law professor who proposed the creation of a consumer agency in 2007, would report to both the Treasury Department and the White House in her advisory role.
August 30, 2010
AmBA Asks Fed to Put Dodd-Frank Borrowing Disclosures in Context
AmBA
on Friday asked the Federal Reserve to include a paragraph that would provide context to Dodd-Frank Act-mandated disclosures on certain loans or other financial assistance -- including Term Auction Facility borrowing -- the agency provided between Dec. 1, 2007, and July 21, 2010. The act requires the Fed to publish on its website by Dec. 1, 2010, the names of entities that received assistance; the type, amount, and date of assistance; the terms of repayment; and the rationale for each program offered.
AmBA President and CEO Ed Yingling pointed out in a letter to the Fed that during the period the disclosure-requirement covers, the regulators frequently urged all insured depository institutions to establish contingency funding plans and to test those plans -- including government funding sources.
“In response, healthy institutions participated in programs such as the Term Auction Facility in an abundance of caution to ensure that they could access the source of liquidity if they ever needed it,” Yingling said. “However, the disclosures mandated by the Dodd-Frank Act could lead to the erroneous impression that these institutions are in a troubled condition.”
There is nothing in Dodd-Frank that prevents the Fed from helping those who read the disclosures to understand their significance by placing the required information in context, he said. Yingling provided a sample paragraph the Fed could use to preface the disclosures which would explain that different institutions had different reasons for participating in the borrowing programs.
The sample paragraph would further say: “For instance, some institutions will have participated in an abundance of caution to test the bank’s ability to access back-up lines of liquidity in the event the liquidity ever was needed. Thus we urge caution about drawing inferences from the inclusion of a bank in the information provided below.” Read the letter. more information, contact
AmBA
's Mark Tenhundfeld.
August 24, 2010
Fed Starts Implementing Dodd-Frank TAF Disclosures
The Federal Reserve has started implementing a Dodd-Frank Act provision requiring the agency to disclose by Dec. 1, 2010, information on certain loans or other financial assistance -- including Term Auction Facility borrowing -- it provided between Dec. 1, 2007, and July 21, 2010.
According to a recent letter from the Boston Fed, the information the Fed will release on TAF assistance will include the identity of the entity receiving the assistance; the type of assistance; the value or amount; the date it was provided; repayment terms; and the rationale for the facility.
AmBA
, which did not support the required disclosures, has serious concerns about their retroactive imposition. The association will continue to monitor the Dodd-Frank Act implementation closely and will keep its members current on developments.
AmBA
also is encouraging members to report any Dodd-Frank Act implementation issues as they arise, and to provide any related information that can help
AmBA
better represent the industry. Read the letter. For more information, contact
AmBA
's Mark Tenhundfeld.
August 17, 2010
House Dems Push for
Warren
Nomination
House Financial Services Committee Chairman Barney Frank (D-Mass.) and 62 other House Democrats last month sent a letter to President Obama asking him to nominate
Harvard
University
law professor Elizabeth Warren to head up the Consumer Financial Protection Bureau.
“At a time when the nation is still coping with the aftermath of a decade of a hands-off regulatory approach that brought the nation the worst financial crisis in three generations, with mortgage foreclosures still occurring at a rate of one million a year..., we need a CFPB Director who truly understands the burden that American families are coping with today, and the mission of this new body,” the members wrote.
The letter was sent the same day that three Senate Republicans -- who voted for the Dodd-Frank bill -- cautioned the White House not to bypass the Senate confirmation process by nominating someone during the August recess.
Speculation about
Warren
’s nomination spiked last week after
Warren
met with senior White House officials. It’s unclear when the president will make known his choice, but spokesman Robert Gibbs warned not to expect an announcement this week. Read the letter.
August 13, 2010
FDIC Announces Open Door Policy for Dodd-Frank Rulemaking
The FDIC soon will post biweekly records of meetings its senior officials have with private-sector individuals that involve interpreting or implementing Dodd-Frank Act provisions, the agency said yesterday. The action is part of a new open door policy for regulatory reform rulemaking that “will make it easier for the public to give input and track the rulemaking process as the agency implements the new law,” the FDIC said.
Before formal rulemaking, the FDIC said it will hold a series of roundtable discussions with outside parties on implementation issues. “These will be designed to provide balanced public input throughout the rulemaking process and will be available for public viewing via webcast,” the agency said. “In addition, any interested party can request a meeting with FDIC officials or staff by submitting a form that will be provided on the FDIC's webpage.” Read more. Read details of the open door policy.
August 10, 2010
FDIC ADDS TWO NEW DIVISIONS
The FDIC Board yesterday approved the creation of the Office of Complex Financial Institutions and the Division of Depositor and Consumer Protection to carry out the agency’s responsibilities under the Dodd-Frank Act. The Office of Complex Financial Institutions will oversee bank holding companies with more than $100 billion in assets and non-bank financial companies that the new Financial Stability Oversight Council has designated “systemically important.” The office also will conduct orderly liquidations of bank holding companies and non-bank financial firms that fail.
The Division of Depositor and Consumer Protection is intended to increase the FDIC compliance examination and enforcement program’s visibility. Under the Dodd-Frank Act, the FDIC is responsible for enforcing Consumer Financial Protection Bureau rules at institutions with $10 billion or less in assets.
July 27, 2010
AmBA to Testify on Interchange Fee’s Impact on Small Businesses AmBA banker Robert Oeler will testify Thursday during the House Small Business Investigations and Oversight Subcommittee’s hearing on how the interchange fee will affect small businesses. Oeler is president and CEO of Dollar Bank in
Pittsburg
.
Fed Seeking Nominations for Consumer Advisory Council
The Federal Reserve is seeking nominations for up to 10 new members to serve on its Consumer Advisory Council, the Fed said yesterday. The council, which meets three times a year in
Washington
,
D.C.
, advises the Fed on its responsibilities under various consumer financial services laws and other matters. Read more.
SEN. DODD RAISES DOUBTS ON
WARREN
CFPB NOMINATION
Senate Banking Committee Chairman Chris Dodd (D-CT) suggested on a Washington-based public radio show yesterday that Elizabeth Warren may not be confirmable as the first Director of the new Consumer Financial Protection Bureau (CFPB). Warren, who currently heads the Congressional Oversight Panel for the Troubled Asset Relief Program, has been widely discussed as the frontrunner for the position.“No idea is terribly creative if it can’t sell,” Chairman Dodd said on the program, asking rhetorically, “Is she confirmable?”Other potential nominees under discussion include Treasury Assistant Secretary for Financial Institutions Michael Barr and Deputy Assistant Attorney General Eugene Kimmelman.
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November 10, 2010
Temporary Unlimited Coverage for Noninterest-Bearing Transaction Accounts Approved
In related news, the FDIC Board yesterday also approved a final rule that will implement unlimited deposit insurance coverage on noninterest-bearing transaction accounts beginning on Dec. 31, 2010, and ending Dec. 31, 2012, as mandated by the Dodd-Frank Act. This coverage replaces the unlimited coverage under the Transaction Account Guarantee Program.
Coverage under this program is confined to noninterest-bearing accounts and will not cover interest-bearing NOW accounts or Interest on Lawyers Trust Accounts -- IOLTAs. Banks that opted into the current TAG program are required to notify affected account-holders by year’s end that coverage on low-interest NOW accounts and Interest on Lawyers Trust Accounts will be limited to $250,000 (i.e., the general coverage for FDIC insurance) starting Jan. 1, 2011.
The FDIC followed
AmBA
’s recommendation to clarify what counts as a “noninterest-bearing transaction account,” and adopted the branch and website notification the association suggested: NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE COVERAGE FOR TRANSACTION ACCOUNTS
All funds in a “noninterest-bearing transaction account” are insured in full by the Federal Deposit Insurance Corporation from December 31, 2010, through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDIC's general deposit insurance rules.
The term “noninterest-bearing transaction account” includes a traditional checking account or demand deposit account on which the insured depository institution pays no interest. It does not include other accounts, such as traditional checking or demand deposit accounts that may earn interest, NOW accounts, money-market deposit accounts, and Interest on Lawyers Trust Accounts (“IOLTAs”).
For more information about temporary FDIC insurance coverage of transaction accounts, visit www.fdic.gov.Read more. Read the final rule. For more information, contact
AmBA
's Rob Strand.
November 9, 2010
FDIC Proposes New Assessment System To Take Effect in Q2
The FDIC Board this morning issued a proposed rule that would change the assessment base -- beginning with the second quarter and payable at the end of September -- from adjusted domestic deposits to a bank’s average consolidated total assets minus average tangible equity, as required by the Dodd-Frank Act. The proposal defines tangible equity as Tier 1 capital.
Since the new base is larger than the current base, the FDIC proposal also would lower assessment rates to between 2.5 and 9 basis points on the broader base for banks in the lowest risk category, and 30 to 45 basis points for banks in the highest risk category.
The proposal would eliminate the adjustment to the rate paid for secured liabilities, including Federal Home Loan Bank advances, since these will be part of the new assessment base. The proposal also would create a new depository institution debt adjustment (DIDA) that increases the assessment rate of an institution that holds long-term unsecured debt issued by another insured depository institution. The DIDA amounts to 50 basis points for every dollar of long-term unsecured debt held.
FDIC’s proposal also would change the amount of, and cap on, the unsecured debt adjustment to the assessment base; eliminate Tier 1 capital from the definition of unsecured debt; and tweak the formula for the current brokered deposits adjustment.
Separately, the board issued a revised proposal that would create a scorecard-based assessment rate for banks with more than $10 billion in assets and for large, highly complex institutions. The scorecards would include financial measures that are predictive of long-term performance.
The proposal replaces one issued by the Board in April and includes an adjustment to the treatment of brokered deposits and unsecured liabilities and eliminates higher rates associated with excessive reliance on secured funding. The new proposal follows
AmBA
’s suggestion that subjective adjustments on the final rate assessed be limited.
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Risk Category I
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Risk Category II
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Risk Category III
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Risk Category IV
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Large & Highly Complex Institutions
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Initial base assessment rate
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5-9
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14
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23
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35
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5-35
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Unsecured debt adjustment*
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(4.5)-0
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(5)-0
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(5)-0
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(5)-0
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(5)-0
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Brokered deposit adjustment
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0-10
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0-10
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0-10
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0-10
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Total base assessment rate**
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2.5-9
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9-24
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18-33
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30-45
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2.5-45
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Amounts for all risk categories are in basis points annually.
* The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an institution’s initial base assessment rate.
** Total base assessment rates do not include the proposed depository institution debt adjustment.
AmBA
has learned that FDIC will have a new assessment rate calculator available on its website later this week. Both proposals will have a 45-day comment period upon publication in the Federal Register. Read the new assessment base proposal. Read the large bank assessment system proposal. For more information, contact
AmBA
's Rob Strand.
November 5, 2010
AmBA
: ‘Volcker Rule’ Definitions Could Affect Traditional Banking
AmBA
is concerned that that a number of definitions in the Dodd-Frank Act’s “Volcker Rule” could be interpreted so broadly that they could affect traditional banking activities, and not address the rule’s intended focus to prevent significant conflicts of interest, the association said yesterday in a comment letter.
The letter was in response to the newly created Financial Stability Oversight Council’s request for comments to help it conduct a study and make recommendations on the Volcker Rule. The rule prohibits financial entities from engaging in proprietary trading activities, and from investing in and sponsoring hedge funds and private equity funds. The FSOC is required to make recommendations by Jan. 22, 2011, to guide coordinated agency rulemaking on the rule.
AmBA
’s comments focused on rule’s unintended consequences to the trust and asset management industry that could occur unless appropriate clarifications are made through the FSOC study and the regulatory process. For example, the Volcker Rule defines the term “sponsor” to mean acting as a general partner, managing member, or trustee of a fund. “If interpreted too broadly, this definition of ‘sponsor’ would capture situations where the banking entity acts as a directed trustee, among other situations,”
AmBA
explained.
AmBA
also noted that the rule’s definitions of “hedge fund” and “private equity fund” are overbroad and encompass investment vehicles that are beyond the intended scope of the Volcker Rule.
AmBA
requested clarification so that vehicles commonly used by banking entities to facilitate permissible activities -- such as acquisition vehicles or joint ventures relating to a single underlying investment, finance subsidiaries, credit funds, employee pension funds, and bank-owned life insurance policies -- are not swept into the rule.
Read the letter. For more information, contact
AmBA
's Lisa Bleier.
October 29, 2010
FED PUBLISHES INTERIM APPRAISAL RULE
As mandated by the Dodd-Frank Act, the Federal Reserve has published an interim final rule that is intended to ensure that real estate appraisers can use their independent judgment in assigning home values, and that they receive customary and reasonable payments for their services. The rule also includes several provisions that protect the integrity of the appraisal process when a consumer’s home is securing the loan. The comment deadline is Dec. 27. The rule’s mandatory compliance date is April 1, 2011. For more information, contact
AmBA
's Rod Alba.
October 21, 2010
Fed Report: Regulators Should Craft Rules Tailored to Securitized Asset Types
Regulators should craft new risk-retention rules that are tailored for each class of securitized assets to avoid reducing the credit supply, the Federal Reserve said in a study released late Tuesday. The report -- mandated by the Dodd-Frank Act -- stressed that market practices and performance are significantly different among the nine asset categories it examined.
“[S]imple credit risk-retention rules, applied uniformly across assets of all types, are unlikely to achieve the stated objective of the act -- namely to improve the asset-backed securitization process and protect investors from losses associated with poorly underwritten loans,” the study said.
The report also included several factors regulators should consider when crafting risk-retention rules, including their potential effect on the capacity of smaller market participants to remain active in the securitization market. Read more. Read the report.
October 18, 2010
AmBA Asks for Clarifications on Noninterest-Bearing Transaction Accounts Proposal
AmBA generally supports the FDIC’s proposed rule that would implement Dodd-Frank provisions to provide depositors at all agency-insured institutions with unlimited deposit insurance coverage on noninterest-bearing transaction accounts beginning Dec. 31, 2010 through Dec. 31, 2012, the association said Friday in a comment letter.
But
AmBA
asked that the agency make several clarifications, including one that would stipulate that noninterest-bearing checking accounts will be considered to the same extent as other deposit products in a bank’s rewards program -- even if the rewards program affords consumer benefits in addition to fee waivers.
The association also requested the agency to clarify that it will look only to the absence of a contract interest rate to determine whether a checking account qualifies for unlimited FDIC insurance, and not to any ancillary benefits. “Finally, we ask the FDIC to confirm that interest-bearing accounts may be converted to noninterest-bearing checking accounts after Dec. 30, 2010, and still obtain the benefits of unlimited FDIC insurance,” AmBA said.
In addition to the clarifications, the association suggested clearer, more concise language for the proposed notice that branches will post to inform customers about the rule change.
AmBA
also recommended that the FDIC weigh the value of a permanent, self-supporting and optional insurance program for interest-bearing deposit accounts, based on its experience with the Transaction Account Guarantee Program. Read AmBA’s letter. Read the proposed rule. For more information, contact
AmBA
's Rob Strand.
October 13, 2010
FDIC Issues Proposal on Dodd-Frank Resolution Authority
The FDIC Board yesterday issued a notice of proposed rulemaking that would clarify how the agency would treat certain creditor claims under its new orderly liquidation authority established by the Dodd-Frank Act. The act gives the FDIC the authority to act as receiver for financial companies when their failure would pose a significant risk to the financial stability of the
United States
.
The agency's proposal would, among other things, bar additional payments to company creditors; limit creditor protection to the fair value of collateral; and allow payments to creditors, subject to recoupment, when the recovery is insufficient to repay temporary government liquidity support paid as part of the orderly wind-down.
There will be a 30-day comment period on the proposal following its publication in the Federal Register. There also will be a 90-day comment period on a series of questions designed to help the FDIC develop a broader proposal to launch the resolution system.
Bankers who want to participate in the proposal’s comment process should contact
AmBA
’s Denyette DePierro. Read more. Read the proposal.
October 12, 2010
AmBA Outlines Priorities to CFPB Leader
Wayne Abernathy, AmBA EVP for financial institutions policy, met yesterday at the Treasury Department with agency counselor and presidential assistant Elizabeth Warren to discuss priorities and procedures for the new Consumer Financial Protection Bureau.
Warren
is overseeing the creation of the CFPB, and the meeting was billed as a listening session to let her hear the views of financial industry representatives.
Abernathy emphasized that the most significant thing the new bureau could do to benefit bank customers immediately would be to simplify the notices and disclosures banks are required to provide. “Nobody is happy with these disclosures, neither the banks nor our customers,” Abernathy told
Warren
. “
AmBA
has been working since the mid-1980s to get the regulators to simplify these disclosures. They just haven’t been able to get it done.”
Abernathy pledged
AmBA
’s eager participation in helping the CFPB to achieve success in notice-disclosure simplification, a task that so far has eluded the financial regulators’ best efforts. The meeting is the latest AmBA effort to engage with the new consumer bureau, and help it develop a program that focuses on standards that are workable, genuinely help consumers -- rather than limit their choices -- and apply to nonbanks as effectively as banks.
OCC, FRB, FDIC and OTS: Advance Notice of Proposed Rulemaking Regarding Alternatives to the Use of Credit Ratings in the Risk-Based Capital Guidelines of the Federal Banking Agencies
ABA Contact: Mary Frances Monroe
Published Proposal: 75 Federal Register 52283, August 25, 2010
Comments Due: October 25, 2010
Disposition: Pending
Summary of the Proposed Rule:
The regulations of the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS) include various references to and requirements based on the use of credit ratings issued by nationally recognized statistical rating organizations (NRSROs). Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010, requires the agencies to review their regulations that require the use of an assessment of creditworthiness of a security or money market instrument and make reference to, or have requirements regarding credit ratings. The agencies must then modify their regulations to remove any reference to, or requirements of reliance on, credit ratings in such regulations and substitute in their place other standards of creditworthiness that the agencies determine to be appropriate for such regulations.This advanced notice of proposed rulemaking describes the areas in the agencies' risk-based capital standards and Basel changes that could affect those standards that make reference to credit ratings and requests comment on potential alternatives to the use of credit ratings.
October 7, 2010
FSOC Publishes Proposal on Supervision for Nonbank Financial Firms
The Financial Stability Oversight Council yesterday published in the Federal Register an advance notice of proposed rulemaking on designating when nonbank financial companies would require heightened supervision. The Dodd-Frank Act requires nonbank financial firms to be put under the Federal Reserve’s supervision if the FSOC determines that their financial distress or other factors could pose a threat to the financial stability of the United States. The FSOC’s advance notice of proposed rulemaking consists of 15 questions, including what metrics the council should use in making its judgment. The comment deadline on the proposal is Nov. 5.
Bankers who want to participate in the proposal’s comment process should contact AmBA’s Cathy McTighe. Read the proposal.
October 4, 2010
Financial Stability Oversight Council Holds First Meeting
The Financial Stability Oversight Council at its first meeting Friday issued an advance notice of proposed rulemaking on designating when nonbank financial companies would require heightened supervision. The proposal, which will have a 30-day comment period, consists of 15 questions, including what metrics the council should use in its determinations.
The council also issued a notice and request for information -- with a 30-day comment period -- on the council’s study on the Volcker Rule, which prohibits financial institutions from engaging in proprietary trading activities and certain private fund investments. The council is required to make recommendations by Jan. 22, 2011, to guide coordinated agency rulemaking on the Volcker Rule.
The council, which was created by the Dodd-Frank Act, is charged with identifying threats to
U.S.
financial stability; responding to those threats; and promoting market discipline by eliminating expectations that the federal government will shield failing companies from losses. Treasury Secretary Timothy Geithner chairs the council, and its members are the heads of the federal banking and credit union agencies, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler and Federal Housing Finance Agency Acting Director Edward DeMarco. Read more.
Municipal Advisers Must Register With SEC
The Dodd-Frank Act makes it unlawful for municipal advisers to provide certain advice, or to solicit municipal entities or certain other individuals without registering with the Securities and Exchange Commission, the FDIC reminded banks Friday. The SEC on Sept. 8 issued an interim final temporary rule requiring municipal advisers to register with the agency by Oct. 1 by submitting Form MA-T through the SEC Web site. Financial institutions should review their dealings with municipal entities to determine if those dealings require registration as a municipal adviser, the FDIC said. Read more. For questions on activities the SEC registration requirement covers, contact
AmBA
's Carolyn Walsh.
Designated Transfer Date is Announced: July 21, 2011
In accordance with the Dodd-Frank Act, Treasury Secretary Tim Geithner has selected July 21, 2011 as the “designated transfer date.” This will be the date that all existing federal consumer protection laws as well as large bank supervisory authority being assumed by the new Bureau of Consumer Financial Protection will be transferred from the Federal Reserve Board and other banking agencies. This date also triggers other deadlines including the target date for publishing final rules implementing Title XIV mortgage reform which will be 18 months later, January 21, 2013.
Read more.
September 1, 2010
FDIC to Move Quickly on Resolution Rule
The FDIC will move quickly to issue an interim rule to guide resolutions of systemically important financial companies on the brink of failure, agency Chairman Sheila Bair said yesterday at a roundtable discussion on the Dodd-Frank Act’s resolution authority. The FDIC will release a rule “fairly quickly, and then we will use that as the vehicle to solicit more comments,” Bair said.
Bair, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler and Deputy Treasury Secretary Neal Wolin were among regulators who attended the roundtable. Executives from Citigroup Inc., Bank of New York Mellon Corp., Goldman Sachs Group Inc. and other large banks also participated.
Some of the issues that will have to be worked out before the new rules go into effect include the treatment of creditors and the new “living wills” that certain firms will provide regulators to serve as roadmaps if they become financially distressed.
Bair emphasized that taxpayer dollars will not be used. “There will be no more bailouts. There will be resolution or bankruptcy and that will be the option, and if an entity will show they can't be resolved in an orderly way they need to be downsized,” she said.
August 13, 2010
FDIC Announces Open Door Policy for Dodd-Frank Rulemaking
The FDIC soon will post biweekly records of meetings its senior officials have with private-sector individuals that involve interpreting or implementing Dodd-Frank Act provisions, the agency said yesterday. The action is part of a new open door policy for regulatory reform rulemaking that “will make it easier for the public to give input and track the rulemaking process as the agency implements the new law,” the FDIC said.
Before formal rulemaking, the FDIC said it will hold a series of roundtable discussions with outside parties on implementation issues. “These will be designed to provide balanced public input throughout the rulemaking process and will be available for public viewing via webcast,” the agency said. “In addition, any interested party can request a meeting with FDIC officials or staff by submitting a form that will be provided on the FDIC's webpage.” Read more. Read details of the open door policy.
FDIC Adopts Final Rule Permanently Raising Insurance Coverage to $250,000
The FDIC Board this week adopted a final rule that revises the agency’s deposit insurance and advertising regulations to conform with Dodd-Frank Act provisions that permanently increased the standard maximum deposit insurance amount from $100,000 to $250,000, the agency said yesterday in a financial institution letter. The permanent increase became effective July 22.
The final rule also changes the FDIC’s official sign for advertising deposit insurance coverage to reflect the increase. “To ensure depositors are accurately informed of the permanent [increase] insured depository institutions should promptly obtain the new official signs and, upon receipt, display them without delay -- in any event not later than Jan. 3, 2011, the date for mandatory compliance with the final rule,” the FDIC said.
Banks can order official signs from the FDIC at https://vcart.velocitypayment.com/fdic/. There is no charge for decals and counter signs. Read more.
August 10, 2010
FDIC Board to Meet Today
The FDIC Board at its meeting today will consider proposed templates for safe, low-cost transactional and basic savings accounts. The board also will consider an advanced notice of proposed rulemaking on alternatives to using credit ratings in the banking agencies’ regulatory capital guidelines. Read the meeting agenda.
Dodd-Frank Act Requires New Fed Discount Window Disclosures
The Dodd-Frank Act requires the Federal Reserve to disclose certain discount-window lending information for loans extended on or after July 21, 2010, a Fed official told
A
m
BA
yesterday. The Fed will publicly disclose -- generally about two years after a discount window loan is extended -- the depository institution’s name and identifying details; the amount borrowed; the interest rate paid; and the types and amounts of collateral pledged. The new disclosure requirement applies to primary, secondary and seasonal credit, the Fed said. Read more.
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November 8, 2010
AmBA Comments on FSOC's Heightened Supervision Authority
The Financial Stability Oversight Council should apply comparable prudential standards to systemically important financial companies with similar activities or functions as part of its criteria for determining when nonbank firms would require heightened supervision, AmBA said in a comment letter Friday.
AmBA
was commenting on the FSOC's advance notice of proposed rulemaking intended to help the new agency develop metrics for designating when nonbank financial firms would require heightened supervision under its Dodd-Frank Act authority.
"The designation criteria should be sufficiently inclusive to ensure that a ... company will be subject to enhanced prudential standards when [its] failure ... would create material risk that a meaningful number of other financial companies would fail, suffer material financial distress that could bring them -- or an important activity or function -- to the point of [failure], or be unable to meet their obligations," AmBA said.
The association recommended that the FSOC focus on activities/functions and not types of financial companies, and also interconnection and risk of contagion.
AmBA
also said, among other things, that size alone is an insufficient proxy for systemic significance; flexibility to act as needed should be preserved; there should be an appropriate focus on foreign firms; and the FSOC should create a banking industry advisory council. Read the letter. For more information, contact
AmBA
's Cathy McTighe.
October 28, 2010
FDIC: PROPOSED LONG-RANGE MANAGEMENT PLAN FOR DEPOSIT INSURANCE FUND
In order to implement a comprehensive, long-range management plan for the Deposit Insurance Fund, the FDIC has issued a notice of proposed rulemaking and request for comment on its proposal to amend its regulations to: implement the dividend provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act; set assessment rates; and set the designated reserve ratio at 2 percent. Comments are due by November 26, 2010.
October 26, 2010
AmBA
Weighs In on Credit Ratings Alternatives Proposal
While inadequacies in the issuance and use of credit ratings contributed to recent financial disruptions in
U.S.
markets, a complete abandonment of credit ratings is ill-advised and an over-reaction,
AmBA
said yesterday in a comment letter to the federal banking agencies. The letter was a response to an advance notice of proposed rulemaking regarding alternatives to the use of credit ratings in the risk-based capital guidelines of the agencies.
“Other provisions of the Dodd-Frank [Act] and changes in industry practice render unnecessary the abandonment of the use of credit ratings as an indicator of creditworthiness,”
AmBA
said, noting that Dodd-Frank requires new credit rating agency disclosures, enhanced SEC oversight and new liability standards on rating agencies.
Eliminating the use of credit ratings could complicate adoption of the internationally agreed-upon Basel III standards and pose problems for community and regional banks, since they generally do not have advanced analytical capabilities,
AmBA
said. The association instead recommended that the use of credit ratings be supplemented by banks’ own analytics, which should be appropriate to the size and complexity of the bank and its exposures. Read the letter. For more information, contact
AmBA
's Mary Frances Monroe.
AmBA
Comments on OCC, OTS Credit Ratings Proposals
In related news,
AmBA
and its AmBA Securities Association affiliate yesterday filed comments with the Office of the Comptroller of the Currency and the Office of Thrift Supervision on their separate proposals for using credit ratings alternatives in regulations unrelated to capital.
The inability to use credit ratings even as one factor in assessing the creditworthiness of an investment is unworkable, the trade groups said. “[Our members] believe that without a standard set of market-accepted parameters, such as is provided by the rating agencies, banks will be at risk of being criticized by examiners after the fact when their judgments about the same security differ,” they wrote.
The groups added that banks will be constrained by the number of securities they can review, which will likely lead to greater concentrations in a smaller range of investments. Read the OCC letter. Read the OTS letter. For more information, contact
AmBA
's Cris Naser.
October 18, 2010
AmBA
SEEKS CLARIFICATIONS ON FDIC PROPOSAL
AmBA said in a comment letter Friday that we generally support an FDIC proposal to implement Dodd-Frank provisions to provide depositors at all FDIC-insured institutions with unlimited deposit insurance coverage on non-interest-bearing transaction accounts beginning December 31, 2010, through December 31, 2012.
AmBA
asked, however, that the agency make several clarifications, including stipulating that non-interest-bearing checking accounts will be considered to the same extent as other deposit products in a bank’s rewards program.
AmBA
also asked the FDIC to clarify that it will look only to the absence of a contract interest rate to determine whether a checking account qualifies for unlimited FDIC insurance, and not to any ancillary benefits, and to confirm that interest-bearing accounts may be converted to non-interest-bearing checking accounts and still obtain the benefits of unlimited FDIC insurance.
See Comment Letter
October 13, 2010
AmBA Expands on Points Made During Meeting With CFPB Leader
Wayne Abernathy, AmBA EVP for financial institutions policy, yesterday sent a follow-up letter to Treasury Department counselor and presidential assistant Elizabeth Warren that expands on points made during last Thursday’s meeting for financial services industry representatives on the new Consumer Financial Protection Bureau.
“
AmBA
is eager to see the promise of the [CFPB] realized,” Abernathy told Warren, who is overseeing the consumer bureau’s creation. He said the association particularly supports a greater focus on enduring consumer benefits. “That is a key element that differentiates banks from firms whose business models rely on random point-of-sale encounters with customers rather than long-term relationships of trust,” Abernathy explained.
He added that
AmBA
also backs the full application of all consumer standards to all providers of comparable services, including nonbanks, and sustainable consumer standards that meet their genuine needs, interests and preferences. “Regulations that limit customer choices or make those choices unaffordable do not help consumers,” he said.
Realizing such important consumer-service goals requires frequent, in-depth research into consumer needs, interests and preferences, and also close consultation with businesses that provide those services, Abernathy said.
“Bankers dedicate enormous amounts of time and resources to asking these very questions, because banking success relies upon correctly knowing our customers and predicting what services they want and how they want them provided,” he said. “That is to say, no one knows banking customers better than bankers do.” Read the letter. For more information, contact
AmBA
's Abernathy.
August 11, 2010
REGULATORS SEEK CREDIT RATING ALTERNATIVES FOR CAPITAL GUIDELINES
The federal banking regulators has issued an advance notice of proposed rulemaking to seek comments on alternatives to using credit ratings in their risk-based capital rules for banking organizations. The proposal is in response to a Dodd-Frank Act provision that requires the regulators to develop, within one year, different methods for gauging credit strength wherever they now use external ratings.
The proposed alternatives to using credit ratings in banks’ capital guidelines include relying more on credit spreads, banks’ own internal risk models, and metrics developed by the regulators. The proposal also seeks comments on the feasibility of, and burden associated with, alternative methods of measuring creditworthiness for banks of different sizes and complexity. There will be a 60-day comment period after the proposal’s publication in the Federal Register. The OCC also issued a separate advance notice of proposed rulemaking seeking comments on national-bank alternatives to using credit ratings in areas other than regulatory capital guidelines, including national banks’ permissible investments, securities offerings, and the international activities of federal branches or agencies of foreign banks. The OCC proposal also was issued in response to the Dodd-Frank Act and is subject to a 60-day comment period.
As the various agencies taking comments under Dodd-Frank begin this process, we will note deadlines and offer sample letters. All bankers are strongly encouraged to submit comment letters; however, it is most important that bankers submit original letters with bank specific examples expressed.
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December 7, 2010
FDIC to Host Telephone Seminars on Insurance Coverage
FDIC next week will host two free identical telephone seminars -- Dec. 14 at 1 p.m. EST and Dec. 16 at 2 p.m. EST -- for bank officers and employees to explain the insurance coverage rules and disclosure requirements on the new temporary unlimited insurance coverage for noninterest-bearing transaction accounts at agency-insured institutions. The seminars, which require advance registration, will start with a 30-minute audio and slide presentation, followed by a one-hour question-and-answer period. Read more. Read the registration instructions.
December 1, 2010
AmBA Posts ‘Tips for Writing Effective Comment Letters’
Banker comment letters that articulate specific, real-world concerns with proposed Dodd-Frank Act rules are essential in promoting the sensible implementation of the new law. That’s why
AmBA
has developed “Tips for Writing Effective Comment Letters” to help bankers with the vital letter-writing process. The instructional piece describes the regulatory process, explains why banker involvement makes a difference, and provides a template for drafting individual comment letters. Read “Tips for Writing Effective Comment Letters.”. For more information, contact
AmBA
's Mark Tenhundfeld.
October 21, 2010
REGULATORS TO HOST MORTGAGE SYMPOSIUM
The FDIC and the Federal Reserve announced yesterday that next week they will host a two-day symposium on mortgages and the future of housing finance. Federal Reserve Board Chairman Ben Bernanke will deliver opening remarks, and FDIC Chairman Sheila Bair will be the keynote luncheon speaker, at the event, scheduled for October 25 and 26. Experts from the public, private, and academic sectors will participate in the symposium to discuss mortgage finance, foreclosures, loan modifications, and securitizations, the FDIC and Fed said. A webcast will be available on the FDIC web-site.
How Financial Regulatory Reform Legislation Will Impact Banks Series
Audio CDs are now available for purchase.
The set of audio recordings consist of five regulatory reform programs which examine issues in the legislation that will affect all banks. The second series focuses on more targeted areas and additional programs will be added as issues arise. The first two programs from the second series also are available on CD. Audio CDs available.
Questions about Telephone Briefings/Webcasts?
Please contact Linda Shepard
August 4, 2010
Recordings of Reg Reform Telephone Briefings Available
Bankers can order audio recordings of
AmBA
’s recent telephone briefings on the major changes in the Dodd-Frank regulatory reform bill. The briefings covered safety and soundness regulation, consumer requirements, thrift and mutual regulation, permissible bank activities, and changes affecting housing finance.
Programs in the series have been approved for various
Institute
of
Certified Bankers
certification credits and continuing professional education credits for certified public accountants. Read more and order the audio CDs.
AmBA Develops Calculator for Assessment-Base Change
With next year’s budgeting process beginning, bankers have asked AmBA for a way to estimate the likely impact of the Dodd-Frank Act provision that broadens the assessment base for FDIC premiums. In response,
AmBA
has developed a calculator that estimates a “static” savings using first quarter 2010 financials. While the starting quarter for which the assessment base change will apply isn’t yet known, the calculator allows inputs to be changed to reflect expected asset or equity growth that may occur between the first quarter of 2010 and the time of the base change.
The calculator provides a point-in-time estimate and does not include changes that may occur as a consequence of the assessment-base change. For example, bankers have asked
AmBA
for a way to calculate the potential impact of rising deposit interest rates that may result. Thus, the calculator provides an estimate for the increase in deposit rates that would eliminate all the static savings. An explanation of the calculator’s capabilities and other potential FDIC costs also are included with the calculator. Read the explanation. Access the calculator. For more information, contact
AmBA
’s Ryan Zagone.
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