Dodd-Frank News Center

House passes bill limiting operational risk capital requirements

This story appeared in Bank Digest.                                     

The House of Representatives has passed H.R. 4296--which a Financial Services Committee press release describes as "a bill that addresses the burden that unnecessary operational capital requirements have imposed on financial institutions"--by a vote of 245 to 169. According to the release, the bill would ensure that existing capital standards are appropriately tailored and do not needlessly lock up capital by limiting the imposition of operational risk capital requirements on a bank's current activities and businesses and permitting adjustments to mitigate operational risk. 

Committee chairman Jeb Hensarling (R-Texas) said, "H.R. 4296 simply amends the method of how reserve capital is calculated by establishing standards based on an organization's current business activities, making the requirements more accurate and tailored to a bank's current risk profile. That means banks would still retain sufficient reserves to weather an economic storm, but they would also be able to put the billions of dollars currently sitting on the sidelines to work to help fuel the economy."

But in a prepared floor statement opposing the bill, Ranking Member Maxine Waters (D-Calif) said the bill was "simply another rollback of rules put in place after the financial crisis. It would undermine the stability of our country's largest banks by restricting the way regulators set capital requirements for those institutions."         

Senators request answers from Mulvaney on actions benefitting payday lenders

This story appeared in Bank Digest.

Senators Elizabeth Warren (D-Mass), Richard Blumenthal (D-Conn), and Jeff Merkley (D-Ore) have sent a letter to Office of Management and Budget Director Mick Mulvaney, whom President Donald Trump has also appointed Consumer Financial Protection Bureau acting director, urging him to provide clarity on the rationale for his recent actions they said benefit payday lenders. These senators were among those who first wrote to Mulvaney on January 31 questioning his actions to benefit the payday industry. The senators said they were "disappointed" by Mulvaney's response to the original letter, which they said did not explain his actions but "raised questions about our motivations for standing up for consumers." The senators sent the January 31 letter to Mulvaney again and called on him to answer all their questions by no later than March 9, 2018.

OCC's technical changes to stress test rule published in Federal Register

This story appeared in Bank Digest.                                    

The Office of the Comptroller of the Currency has published in the Federal Register its final rule to implement several technical and conforming changes to the OCC's Annual Stress Test regulation (12 CFR 46). The final rule changes the range of possible "as-of" dates used in the global market shock component to conform to changes recently made by the Federal Reserve Board to its stress testing regulations. The final rule also changes the transition period for an institution that becomes an over $50 billion covered institution. Finally, the final rule makes certain technical changes to clarify the requirements of the OCC's stress testing regulation.

 

Bill introduced to ensure state regulation of insurance savings and loan holding companies

This story appeared in Bank Digest.                                     

Representatives Keith Rothfus (R-Pa) and Joyce Beatty (D-Ohio) have introduced the State Insurance Regulatory Preservation Act (H.R. 5059), which is intended to ensure that insurance savings and loan holding companies that meet applicable state and federal capital standards are regulated by the states. According to Rothfus's press release, the Dodd-Frank Act brought ISLHCs, which contain thrifts, under the supervision of the Federal Reserve, creating "regulatory inefficiency and unnecessary duplication of effort." 

The release said this bill would ensure that state regulators are responsible for day-to-day supervision of ISLHCs but would allow the Fed to take a more active role if these companies fail to adhere to the bill's requirements. Under H.R. 5059, thrifts would continue to be regulated by the Office of the Comptroller of the Currency.

 

Treasury report calls for restricting, not abolishing, orderly liquidation authority

This story appeared in Bank Digest.                                     

A report by the Treasury Department says that the federal government's power to take over and resolve insolvent large nonbank financial companies should be subject to stricter limits but not entirely revoked. The orderly liquidation authority, which was created by the Dodd-Frank Act, should be available only if extraordinary circumstances would render a new Bankruptcy Code chapter inadequate, Treasury says. Changes to the OLA itself also are called for.                                  

The report's recommendations rely heavily on benefits from Dodd-Frank Act and other post-financial crisis reforms, including required higher capital and liquidity levels and resolution plans.                                   

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) issued a statement saying the report's failure to call for the complete abandonment of the OLA is inconsistent with President Trump's previously announced principle of avoiding all possible taxpayer bailouts. But House Judiciary Committee Chairman Bob Goodlatte (R-Va) and committee member Tom Marino (R-Pa) issued statements favorable to the report, particularly the fact that it expressed support for the Financial Institution Bankruptcy Act.

 

OIG issues report on CFPB's privacy program

This story appeared in Bank Digest.   

The Office of Inspector General for the Consumer Financial Protection Bureau and the Federal Reserve Board has issued a report presenting the independent audit of the Bureau's privacy program and its implementation that was performed by Cotton & Company LLP, an independent certified public accounting firm. 

The report concluded that overall, the CFPB "has substantially developed, documented, and implemented a privacy program that addresses applicable federal privacy requirements and security risks related to collecting, processing, handling, storing, and disseminating sensitive privacy data." But the report said the program required improvement in the areas of: (1) identification and maintenance of a comprehensive inventory of personally identifiable information; and (2) physical controls over the CFPB's portable media. 

Cotton made two recommendations designed to strengthen the CFPB's privacy and security program.

Trump budget for 2019 would overhaul CFPB

This story appeared in Bank Digest.   

The White House has released its proposed budget for the 2019 fiscal year. Among other things, the budget proposes to restructure the Consumer Financial Protection Bureau, limit the agency's mandatory funding, and provide discretionary appropriations to fund the Bureau beginning in 2020. 

According to the Major Savings and Reforms document published with the budget, the Trump Administration stated that the proposed reforms would impose financial discipline, reduce wasteful spending, and ensure appropriate congressional oversight by subjecting the agency to discretionary appropriations starting in 2020. In addition, the proposed budget would cap transfers by the Federal Reserve Board to the CFPB during 2019 to $485 million and limit the CFPB's "broad" enforcement authority over federal consumer law. 

The White House also issued its Analytical Perspectives, which contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget in perspective.

CFPB releases 2018-2022 strategic plan

This story appeared in Bank Digest.                                     

The Consumer Financial Protection Bureau has released its fiscal year 2018-2022 strategic plan establishing its mission, strategic goals, and strategic objectives for those years. The plan is a revision of the draft released in October 2017. According to the Bureau's press release, the strategic plan draws directly from the Dodd-Frank Act and refocuses the CFPB's mission on regulating consumer financial products or services under existing federal consumer financial laws, enforcing those laws judiciously, and educating and empowering consumers to make better informed financial decisions. 

CFPB Acting Director Mick Mulvaney said that "we have committed to fulfill the Bureau's statutory responsibilities, but go no further." He added, "By hewing to the statute, this Strategic Plan provides the Bureau a ready roadmap, a touchstone with a fixed meaning that should serve as a bulwark against the misuse of our unparalleled powers."

 

Brown opposes reported revision in CFPB's mission

This story appeared in Bank Digest.                                     

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) has released a statement in response to reports that the Consumer Financial Protection Bureau has decided to revise its mission and vision by "further deterring the agency from pursuing its mission of protecting consumers," according to a committee minority press release. The release said the Bureau is reportedly acting under orders from Office of Management and Budget Director Mick Mulvaney, whom President Donald Trump has also appointed CFPB acting director.                                  

In his statement, Brown said, "Banks and payday lenders have enough lobbyists working on their behalf--the mission of the Consumer Financial Protection Bureau must continue to be fighting for working families." Brown added that the Trump Administration should quickly nominate a permanent CFPB Director "who will have full bipartisan support in the Senate and will protect consumers instead of special interests." He said until then, Mulvaney "must take steps to ensure that consumer laws are enforced."

House passes Small Bank Holding Company Relief Act

This story appeared in Bank Digest.                                     

The House of Representatives has passed the Small Bank Holding Company Relief Act of 2018 (H.R. 4771), which would direct the Federal Reserve Board to raise the consolidated asset threshold for its Small Bank Holding Company Policy Statement from $1 billion to $3 billion. According to a press release issued by the bill's sponsor, Rep. Mia Love (R-Utah), the bill would ease overregulation on small banks and savings and loans, which would help these institutions raise capital so they can make loans in their community. 

But House Financial Services Committee Ranking Member Maxine Waters (D-Calif) made a statement on the House floor opposing the bill. In her prepared statement, Waters called the current $1 billion threshold "sensible and reasonable" and warned, "If the threshold is raised too high, it will encourage more mergers and acquisitions, riskier banking activities, and reduce a [sic] banking services and credit availability to rural, low-income, minority, and underserved communities."