Insured depository institutions with $50 billion to less than $100 billion in average total assets are subject to new resolution reporting standards, with enhanced reporting for those with average total assets of $100 billion or more.
By Arthur S. Long, Pia Naib, and Deric Behar
On June 20, 2024, the Federal Deposit Insurance Corporation (FDIC) issued a final rule (the Rule) updating the FDIC’s resolution plan regulations1 for covered insured depository institutions (CIDIs).2 The revisions are
The proposal seeks to make executive compensation arrangements more sensitive to risk and would require complex risk management programs to ensure compliance.
By Arthur S. Long, Pia Naib, and Deric Behar
On May 6, 2024, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Federal Housing Finance Agency (FHFA), and the National Credit Union Administration (NCUA) (collectively, the agencies) issued a joint Notice of Proposed Rulemaking (the Proposed Rule) to curb “excessive risk-taking” resulting from incentive-based compensation arrangements. The Board of Governors of the Federal Reserve System (FRB) and the Securities and Exchange Commission (SEC) did not join in the Proposed Rule.[1],[2] Critically, without the FRB’s participation, the Proposed Rule may not be finalized.
The Proposed Rule seeks to curtail incentives for certain financial services sector officers, employees, and directors to take inappropriate risks as a result of seeking excessive compensation, fees, or benefits. It uses a tiered approach based on asset size categories, where covered institutions (defined below) within the two largest asset size categories would be subject to prescriptive requirements related to the structure of their incentive-based compensation arrangements, including incentive award limits, deferral requirements, downward adjustments, forfeitures, and clawbacks.
The Proposed Rule re-proposes the regulatory text previously proposed in June 2016 (with a new preamble that acknowledges developments and supervisory learnings) and seeks additional feedback from commenters on potential alternatives to various provisions.
With regulators keeping close watch, the results underscore the need for ongoing climate risk management investment and adaptation within the financial sector.
By Betty M. Huber, Arthur S. Long, Pia Naib, and Deric Behar
On May 9, 2024, the Board of Governors of the Federal Reserve System (FRB) published summary results of a pilot climate scenario analysis (CSA) that explored how resilient six of the largest US bank holding companies (by total assets) are to climate-related financial risks. The analysis is intended to help the FRB “learn about large banking organizations’ climate risk-management practices and challenges and to enhance the ability of large banking organizations and supervisors to identify, estimate, monitor, and manage climate-related financial risks.”
The CSA was first announced in September 2022, and was intended as an exploratory exercise. It does not therefore result in any capital or supervisory consequences for the participating financial institutions.
The Proposal clarifies the FDIC’s bank merger approval process but may prove challenging for new large bank consolidations with the FDIC as the primary regulator.
By Arthur S. Long, Pia Naib, and Deric Behar
On March 21, 2024, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved Proposed Revisions to its Statement of Policy on Bank Merger Transactions (the Proposal). The Proposal adopts a principles-based approach and aims to update, strengthen, and clarify the FDIC’s
Banking agencies are alleged to have exceeded their congressional authorization, with potentially adverse consequences on banks and consumers.
By Arthur S. Long, Pia Naib, and Deric Behar
On February 5, 2024, several banking trade groups[1] (the Plaintiffs) sued the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) in the US District Court for the Northern District
As person-to-person payments become mainstream, the proposal would proactively outlaw fees that financial institutions could assess on instantaneously declined transactions.
By Arthur Long, Parag Patel, Barrie VanBrackle, and Deric Behar
On January 24, 2024, the Consumer Financial Protection Bureau (CFPB) proposed a rule, Fees for Instantaneously Declined Transactions (the Proposal), that would prevent banks and other financial institutions from charging non-sufficient funds (NSF) fees on transactions declined in real time.
When a consumer initiates a withdrawal, debit
Opposition and significant concerns dominate the record.
By Arthur S. Long, Roman Martinez, Pia Naib, and Jordan R. Goldberg
Key points:
A recent bipartisan bill, if enacted, would particularly benefit small lenders and bank-fintech partnerships by promoting transparency, appellate rights, and examiner accountability.
By Arthur S. Long, Parag Patel, Barrie VanBrackle, Pia Naib, and Deric Behar
On December 14, 2023, a bipartisan group of senators introduced the Fair Audits and Inspections for Regulators’ Exams Act (FAIR Exams Act), which seeks to increase transparency in the bank examination process. The proposed legislation would require examining agencies to act quickly and transparently, while creating an independent review and appeals process under the Federal Financial Institutions Examination Council (FFIEC),[1] which would allow banks to seek independent review of material examiner findings.
The OCC outlines safety and soundness principles and appropriate risk management processes for its regulated institutions that engage in venture lending.
By Arthur S. Long, Pia Naib, and Deric Behar
On November 1, 2023, the Office of the Comptroller of the Currency (OCC) issued Bulletin 2023-34 (the Guidance), which clarifies the OCC’s policy positions regarding the risk management of venture loans. These lending activities involve commercial loans made to companies that do not primarily rely on their own internally generated cash flow to maintain and grow operations, but rather on equity infusions.
As a general matter, the OCC states that a bank’s venture lending practices should be appropriate to the bank’s size and complexity, and consistent with the bank’s risk appetite and policies and procedures (as established and communicated by the bank’s board of directors and senior management). The OCC expects banks involved in this type of lending activity to identify, measure, monitor, and implement adequate controls over the bank’s risks, while maintaining sufficient capital buffers.
Government plans to add more flexibility to the regime, but its long-term future remains undecided.
By Rob Moulton and Charlotte Collins
On 28 September 2023, HM Treasury published further papers in relation to the planned reform of the UK bank ring-fencing regime, which was announced as part of the Edinburgh Reforms (see this Latham article). The ring-fencing regime requires banks over a certain size threshold to separate out their retail deposit-taking operations into a ring-fenced entity.
HM Treasury has published a consultation on short-term reforms to the regime, aiming to implement (and, in some cases, go beyond) recommendations made in 2022 by the independent review of ring-fencing. The proposed reforms include raising the ring-fencing threshold from £25 billion to £35 billion of core deposits, and expanding the activities that a ring-fenced bank may carry on. HM Treasury has also published a response to its Call for Evidence on aligning the ring-fencing and resolution regimes in the longer term.