Dodd-Frank News Center

Fed releases scenarios for 2016 CCAR and Dodd-Frank Act stress test exercises

This story appeared in Bank Digest.

The Federal Reserve Board has released the supervisory scenarios for the 2016 Comprehensive Capital Analysis and Review and Dodd-Frank Act stress test exercises and has also issued instructions to firms participating in CCAR. According to the agency's press release, CCAR evaluates the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies, while the Dodd-Frank Act stress tests help assess whether firms have sufficient capital. The release said that this year, CCAR will include 33 bank holding companies with $50 billion or more in total consolidated assets.

Financial institutions are required to use the supervisory scenarios in both the stress tests conducted as part of CCAR and those required by the Dodd-Frank Act, according to the Fed. The outcomes are measured under three scenarios: severely adverse, adverse, and baseline.

SIGTARP issues Quarterly Report to Congress

This story appeared in Bank Digest.

The Office of the Special Inspector General for the Troubled Asset Relief Program has issued its Quarterly Report to Congress for the first quarter of Fiscal Year 2016. The report discusses SIGTARP oversight activities and recommendations, and it contains sections on the Troubled Asset Relief Program and TARP operations and administration. It also contains a section entitled "Mortgage Servicers Have Wrongfully Terminated Homeowners Out of the HAMP Program."

According to the report, SIGTARP's investigations this quarter resulted in significant criminal prosecutions and civil fraud enforcement actions against bankers, including the first indictment of a TARP institution--Wilmington Trust, which was indicted for concealing past due loans.

OFR issues 2015 Annual Report to Congress

This story appeared in Bank Digest.

The Office of Financial Research has released its "2015 Annual Report to Congress," fulfilling its statutory responsibility to report on potential threats to U.S. financial stability, key research findings, and progress in meeting its mission. The report also describes the OFR's 2016 agenda. The report says threats to U.S. financial stability have edged higher since last year's report, they but remain in the medium, or moderate, range. That assessment has not changed since the Federal Reserve Board incrementally increased short-term interest rates last month.

OIG issues report on CFPB's Civil Penalty Fund victim identification process

This story appeared in Bank Digest.

The Office of Inspector General for the Consumer Financial Protection Bureau and the Federal Reserve Board has issued an audit report entitled "The CFPB's Civil Penalty Fund Victim Identification Process Is Generally Effective but Can Be Enhanced." The objective of the report was to assess the efficiency and effectiveness of the bureau's process for identifying victims eligible to receive compensation from the Consumer Financial Civil Penalty Fund.

The OIG said that overall, the CFPB's Civil Penalty Fund victim identification process is generally effective and efficient, but it saw an opportunity to enhance the victim identification process. The OIG recommended that the Chief Financial Officer, in coordination with the Office of Technology and Innovation (T&I), update the Office of the Chief Financial Officer's procedures to document the roles and responsibilities of T&I in the victim identification process.

Report claims CFPB removed safeguards in racial discrimination claims process

This story appeared in Bank Digest.

A report by Republican staff of the House Financial Services Committee alleges that the Consumer Financial Protection Bureau removed safeguards from the claims process regarding its enforcement action against Ally Financial Inc. and its subsidiary Ally Bank over alleged racial discrimination against African-Americans, Hispanics, and Asians. The report, entitled "Unsafe at Any Bureaucracy, Part II: How the Bureau of Consumer Financial Protection Removed Anti-Fraud Safeguards to Achieve Political Goals," claims that the CFPB removed safeguards, including confirming the race of claimants, to ensure that a sufficient number of consumers received checks to justify CFPB Director Richard Cordray's claim that 235,000 consumers had been harmed by Ally. This allegedly increased the likelihood that non-minority consumers would receive remuneration.

According to the report, "if fewer claimants received checks than Director Cordray initially announced, the validity of the Bureau's disparate impact methodology would be called into question." Committee chairman Jeb Hensarling (R-Texas) said the bureau's action "invites fraud on a massive scale." He asked Attorney General Loretta Lynch to immediately suspend distribution of the settlement proceeds until she has "certified that all claimants have verified their eligibility in writing under penalty of perjury."

In November, Republican staff of the committee released a report entitled "Unsafe at Any Bureaucracy: CFPB Junk Science and Indirect Auto Lending," which contended that the bureau pursued its enforcement action against Ally even though internal bureau documents revealed that the statistical method upon which its case rested is "prone to significant error."

CFPB solicits applications for membership in CAB, councils

The Consumer Financial Protection Bureau is accepting applications for membership in its Consumer Advisory Board, Community Bank Advisory Council, and Credit Union Advisory Council. A number of seats in these advisory groups will become vacant in the fall of 2016. The bureau is also accepting applications to fill three additional seats in its Academic Research Council in 2016.

Agencies jointly release advisory supporting Basel Committee's external audit guidance

The Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency have issued an Interagency Advisory in support of the principles and expectations set forth in the Basel Committee on Banking Supervision's March 2014 guidance on external audits of banks. This guidance was updated in an effort to enhance the quality and usefulness of audits. The Basel Committee's guidance addresses how a bank's audit committee should relate to the bank's external auditors, how auditors should perform audits, and how auditors should interact with the bank's supervisor.

The Interagency Advisory also explains the agencies' supervisory expectations regarding how internationally active U.S. financial institutions should address differences between the standards and practices followed in the United States and the principles and expectations in the BCBS external audit guidance. The Advisory acknowledges that the existing standards and practices in the United States are "broadly consistent" with the BCBS external audit guidance, but it notes that where there are differences between the BCBS external audit guidance and U.S. standards, examiners should encourage institutions' audit committees to follow the practices identified in the advisory.

CFPB issues audit report of bureau operations and budget

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau has released its "Consumer Financial Protection Bureau Independent Audit of Selected Operations and Budget," which the bureau ordered in accordance with the Dodd-Frank Act. According to the bureau, the purpose of this audit is to provide objective analyses to improve program performance and operations, reduce costs, facilitate decision-making, and contribute to public accountability.

This year's independent audit, conducted by KPMG, L.L.P., evaluated: (1) the CFPB's Investment Review Board process relative to the bureau's policies and procedures; (2) the CFPB's budget process relative to its policies and procedures established over budget formulation, execution, and monitoring; (3) the CFPB's information privacy function relative to the CFPB's policies and procedures over the compliance with privacy laws and applicable regulations and guidance, and (4) the corrective actions taken to resolve the findings included in the CFPB's "2014 Independent Audit of Operations and Budget," also completed by KPMG, L.L.P.

The audit concluded that information privacy policies and procedures need to be updated. Specifically, the audit recommended that the bureau complete its automated data cataloguing activities related to compliance with privacy policies and update current privacy policies to include procedures and options available to assure positive destruction of storage that contains personally identifiable information.

FHFA revises regs on FHLBank membership

The Federal Housing Finance Agency has revised its regulations governing Fed­eral Home Loan Bank membership. Among other changes, the final rule defines “insurance company” to exclude so-called “captive insurers” to prevent non-eligible entities from gaining de facto FHLBank membership through a captive insurer.

The final rule does not include two provisions from the 2014 proposed rule that would have required FHLBank members to maintain ongoing minimum levels of investment in specified residential mortgage assets as a condition of remaining eligible for mem­bership, according to the FHFA’s press release. The final rule is effective 30 days after the date of its pub­lication in the Federal Register.

• FHFA press release
• Final rule
• Final Federal Home Loan Bank Membership Rule FAQs

Fed gives final approval to stress test information collection

This story appeared in Bank Digest.

The Federal Reserve Board has given final approval under Office of Management and Budget delegated authority to the proposed revision and three-year extension of an information collection entitled "Annual Company-Run Stress Test Report for State Member Banks, Bank Holding Companies, and Savings and Loan Holding Companies with Total Consolidated Assets Greater Than $10 Billion and Less Than $50 Billion." The Dodd-Frank Act authorizes the Fed to issue regulations implementing the annual stress testing requirements for its supervised institutions.

On July 8, 2015, the Fed published a notice in the Federal Register (80 FR 39117) requesting public comment for 60 days on the proposal. The comment period has expired, and the Fed did not receive any comments, so the information collection will be revised as proposed.