Dodd-Frank News Center

OIG issues 'Semiannual Report to Congress'

This story appeared in Bank Digest.                                 

The Office of Inspector General for the Federal Reserve Board and the Consumer Financial Protection Bureau has issued its "Semiannual Report to Congress," covering the period from Oct. 1, 2018, through March 31, 2019. According to an introductory message from Inspector General Mark Bialek, during this period the OIG issued eight reports related to the Fed's programs and four reports on the CFPB's operations. He also noted that the OIG's Office of Investigations pursued allegations of fraud against Fed and CFPB supervision programs and allegations of wrongdoing concerning the agencies' internal operations.

Bialek went on to say, "We processed 262 new hotline complaints and closed 13 investigations, and our work resulted in 10 persons referred for criminal prosecution and more than $1.3 billion in criminal fines, restitution, and special assessments."

OIG issues list of open recommendations made to CFPB

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 document describing open recommendations the OIG has made to the Bureau. The document provides a list of publicly available report recommendations the OIG made to the Bureau that were open for more than 12 months as of March 31, 2019, and their status.

The list also includes the number and title of the report each recommendation appeared in, links to report summaries, and the issuance dates of the reports. As of March 31, 2019, 50 OIG recommendations to the Bureau remained open.

Agencies tell Warren, Brown that Wells Fargo has not satisfied consent order obligations

This story appeared in Bank Digest.                                   

Senators Elizabeth Warren (D-Mass) and Sherrod Brown (D-Ohio) have released new letters from the Federal Reserve Board, Office of the Comptroller of the Currency, and Consumer Financial Protection Bureau in response to inquiries they sent the regulators in March 2019 regarding Wells Fargo.

In separate letters sent to the OCC and CFPB and to the Fed, the senators had expressed concern about Wells Fargo's apparent unwillingness to compensate customers harmed by the bank's illegal auto-lending practices, despite an obligation to do so under its settlement with the OCC and CFPB, and urged the agencies to use their enforcement tools to remove then-CEO Tim Sloan. The senators' letter to the Fed also cited a recent Securities and Exchange Commission fine for overcharging retail mutual fund investors and urged the Fed to refrain from lifting Wells Fargo's growth restriction until Sloan was replaced.

According to Warren's press release, the agencies said in their response letters that Wells Fargo has not satisfied its obligations under existing consent orders, which require the bank to remediate customers harmed by its wrongdoing and impose reforms to end the bank's unlawful activity.

Fed, FDIC propose modifying resolution plan requirements for U.S., foreign banks

This story appeared in Bank Digest.

The Fed and FDIC are inviting public comment on a joint proposal to modify regulations implementing the resolution planning requirements of Section 165(d) of the Dodd-Frank Act for U.S. and foreign banking organizations.”

The rule changes are intended to conform with 2018 amendments made by the Economic Growth, Regulatory Relief, and Consumer Protection Act to the Dodd-Frank Act and to reflect desired improvements to resolution planning that the federal agencies have identified over the past several years.

Principally, the agencies’ proposal seeks to establish “risk-based categories for determining the application of the resolution planning requirement to certain U.S. and foreign banking organizations,” extend the “default resolution plan filing cycle,” and allow for “more focused resolution plan submissions.” According to the draft notice of the proposal, public comments are to be received by June 21, 2019.

Agencies propose rule to limit impact of large bank failures

This story appeared in Bank Digest.                                     

The Federal Deposit Insurance Corporation, Federal Reserve Board, and Office of the Comptroller of the Currency have issued a proposed rule that would limit the interconnectedness of large banking organizations and reduce the impact from large bank failures. According to the joint press release, it would discourage certain firms (generally, those with $250 billion or more in assets or $10 billion in foreign exposure) from purchasing large amounts of total loss-absorbing capacity (TLAC) debt by requiring the organizations to hold additional capital against substantial holdings of TLAC debt. Comments on the proposed rule will be due 60 days after its publication in the Federal Register.

Fed adopts proposal to extend, revise 'Complex Institution Liquidity Monitoring Report'

This story appeared in Bank Digest.                                   

The Federal Reserve Board is adopting a proposal to extend for three years, with revision, an existing information collection entitled "Complex Institution Liquidity Monitoring Report." The revisions are applicable as of March 31, 2019. According to the Fed, this collection is used to monitor the overall liquidity profile of certain institutions it supervises.

On Dec. 28, 2018, the Fed published a notice at 83 Federal Register 67285 requesting public comment for 60 days on the proposal. The comment period has expired, and the Fed did not receive any comments, so the revisions will be implemented as proposed.

Brown comments on regulatory decisions

This story appeared in Bank Digest.                                   

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) has issued statements on several recent regulatory decisions involving: (1) the countercyclical capital buffer, which requires big banks to set aside extra capital to absorb potential loan losses in the event of an economic downturn; (2) a proposed rewrite of the Volcker Rule; and (3) proposed interpretive guidance from the Financial Stability Oversight Council that would change the process for designating nonbank financial companies as systemically important financial institutions.

Regarding the Federal Reserve Board's decision to keep the countercyclical capital buffer at its current level of 0 percent, Brown said he was disappointed with the decision and added, "Banks are doing well, but there are certainly growing risks in the economy. Now is exactly when the buffer should be used to make sure that the banks have enough capital for those eventual bad times."

Commenting on a potential revision of the proposed Volcker Rule rewrite, Brown said it was "no surprise that when Wall Street banks complained that the proposed rewrite of the Volcker Rule wasn't weak enough, Trump regulators went to work watering it down further."

Finally, Brown said the FSOC's new proposed guidance "ignores the damage done to our financial system during the last crisis and the risks still posed by shadow banks and other financial institutions. FSOC is no longer protecting financial stability or taxpayers."

Fed to limit CCAR 'qualitative objection'; CCAR instructions released

This story appeared in Bank Digest.                                   

The Federal Reserve Board has issued a final rule that will limit the use of the "qualitative objection" in its Comprehensive Capital Analysis and Review exercise, effective for the 2019 cycle. The Fed has also released the instructions for this year's CCAR exercise.

The Fed said that for the largest and most complex firms, CCAR includes both a quantitative evaluation of a firm's capital adequacy under stress and a qualitative evaluation of its abilities to determine its capital needs on a forward-looking basis. As applicable, a firm must pass both the quantitative and qualitative evaluation or the Fed may object and restrict the firm's shareholder distributions.

 According to the Fed, the qualitative objection has been eliminated for most firms due to improvements in capital planning made by the largest firms.

Fed issues guidance on new large financial institution rating system

This story appeared in Bank Digest.

The Federal Reserve Board has issued guidance on the new rating system for the supervision of large financial institutions (LFIs). According to the Fed, this "LFI rating system" would replace the current bank holding company rating system (referred to as the "RFI rating system") for these firms.

The LFI rating system supports the Fed's supervisory program for all LFIs, including the largest firms that pose the greatest risk to U.S. financial stability, which are supervised under the authority of the Large Institution Supervision Coordinating Committee (LISCC).

The Fed will assign initial LFI ratings to firms in the LISCC portfolio in early 2019, and for all other firms subject to the LFI rating system, the Fed will assign initial ratings in early 2020.

OIG finds ‘medium’ risk level in CFPB's travel card program

This story appeared in Bank Digest.  

The Office of Inspector General for the Consumer Financial Protection Bureau and the Federal Reserve Board has conducted a risk assessment of the Bureau's travel card program for fiscal year 2018 to determine the necessary frequency and scope of travel card audits.

The specific objective of the report was to analyze the risks of illegal, improper, or erroneous purchases and payments associated with the Bureau's travel card program in order to determine an overall risk level for the program. The scope of the report included travel card purchases from Oct. 1, 2017, through Sept. 30, 2018.

The OIG said the results of the risk assessment show that the risk of illegal, improper, or erroneous use in the Bureau's travel card program is "medium," which means that while illegal, improper, or erroneous use is likely to occur, such an occurrence would be expected to have a limited effect on current operations and long-term objectives.