Dodd-Frank News Center

Fed finalizes changes to stress testing program

This story appeared in Bank Digest.                                     

The Federal Reserve Board has finalized a set of changes intended to increase the transparency of its stress testing program for the nation's largest and most complex banks. The Fed said the changes are intended to improve public understanding of the program while maintaining its ability to independently test large banks' resilience.

According to the Fed's press release, the first change, which will begin for the 2019 stress test cycle and expand in subsequent years, will provide significantly more information about the stress testing models used in the Fed's annual Comprehensive Capital Analysis and Review. In addition, the Fed finalized a stress testing policy statement and modified its framework for the design of the annual hypothetical economic scenarios. The policy statement will take effect 30 days after its publication in the Federal Register.

Fed approves TLAC conversion trigger for IHCs

This story appeared in Bank Digest.

The Fed has sent letters to several intermediate bank holding company subsidiaries of foreign global systemically important banking organizations communicating the Fed’s approval, under Regulation YY, of a contractual provision that must be included in certain debt issued by U.S. intermediate holding companies of foreign GSIBs under the Fed’s regulation regarding total loss-absorbing capacity or TLAC Rule.

The letters were sent to UBS Americas Holding, LLC; MUFG Americas Holdings Corporation; HSBC North America Holdings, Inc.; DB USA Corporation; Credit Suisse Holdings U.S.A; BNP Paribas USA, Inc.; and Barclays US, LLC.

Fed extends 'Pillar 2 Guidance' information collection

This story appeared in Bank Digest.

The Federal Reserve Board is adopting a proposal to extend for three years, without revision, an existing information collection entitled "Basel II Interagency Pillar 2 Supervisory Guidance (Pillar 2 Guidance)." According to the Fed's notice, this collection concerns the maintenance of documentation by banks and bank holding companies in connection with their use of the advanced approaches framework.

On Oct. 22, 2018, the Fed published a notice at 83 Federal Register 53248 requesting public comment on the proposal, but it did not receive any comments.

 

Portman introduces bill to create separate inspector general for CFPB

This story appeared in Bank Digest.                                   

Senator Rob Portman (R-Ohio) has introduced legislation to create a dedicated, Senate-confirmed inspector general for the Consumer Financial Protection Bureau. Several Republican senators served as original cosponsors of the bill.

According to Portman's release, the CFPB currently shares an IG with the Federal Reserve Board, but unlike most major agency IGs, the Fed's is a "designated federal entity IG" hired by the Fed Chairman, rather than one appointed by the President with the advice and consent of the Senate.

Portman issued a statement saying, "Installing a dedicated, Senate-confirmed internal watchdog at the CFPB will provide greater transparency and accountability at the CFPB. Given the vast powers of this large bureaucracy and the CFPB's insulation from congressional oversight, it is critical that it have an independent IG to ensure robust oversight."

CFPB receives funding for second quarter of FY 2019

This story appeared in Bank Digest.

In a funding request letter to the Federal Reserve Board, Consumer Financial Protection Bureau Director Kathy Kraninger said that $122,800,000 would be necessary to carry out the authorities of the Bureau for the second quarter of fiscal year 2019. As required by law, each fiscal quarter the Fed transfers to the CFPB the amount of funds formally requested by the director.

The Fed sent a letter to the CFPB's chief financial officer stating that the requested funds had been deposited into the Bureau of Consumer Financial Protection Fund at the Federal Reserve Bank of New York.

Fed proposes revising stress testing requirements

This story appeared in Bank Digest.  

The Federal Reserve Board has issued a proposed rule that would modify company-run and supervisory stress testing requirements to conform with the Economic Growth, Regulatory Relief, and Consumer Protection Act. Among other changes, the proposal would raise the threshold requiring state-member banks to conduct their company-run stress tests from $10 billion in total consolidated assets to $250 billion and would generally require firms above the threshold to conduct stress tests once every other year instead of annually.

The proposal is similar to separate proposals issued by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. Comments will be accepted until Feb. 19, 2019.

Agencies find weaknesses but not deficiencies in resolution plans of foreign-based banks

This story appeared in Bank Digest.                                   

The Federal Deposit Insurance Corporation and Federal Reserve Board have announced that the resolution plans of four foreign-based banks had weaknesses but not "deficiencies," which are weaknesses severe enough to result in additional prudential requirements if not corrected. Resolution plans, commonly known as living wills, are required by the Dodd-Frank Act and must describe each company's strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company.

The agencies determined that the plans of the four firms--Barclays, Credit Suisse, Deutsche Bank, and UBS--have "shortcomings," which are less severe weaknesses that require additional work in their next plan. The agencies sent feedback letters to each firm detailing the shortcomings and specific actions that can be taken to address them.

The agencies have also announced that they have finalized resolution plan guidance applying to the eight largest and most complex domestic banking organizations.

OIG says CFPB's purchase card program controls appear to be effective

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 regarding the controls for the Bureau's purchase card program for the period of April 1, 2017, through June 30, 2018. According to the report, the Bureau developed the purchase card program to support its purchasing needs and to reduce the administrative cost of purchasing small-dollar items.

The OIG found that the Bureau's purchase card program controls appear to be operating effectively to ensure that purchase card use is appropriate and in compliance with applicable laws, regulations, and the Bureau's policies and procedures. In addition, the report said the controls appear to be operating effectively to prevent and detect potentially improper or fraudulent use of purchase cards. The OIG made no recommendations in its report.

Senators request update on FSOC's progress in reforming nonbank designation process

This story appeared in Bank Digest.  

Senators Thom Tillis (R-NC), Mike Rounds (R-SD), Tom Cotton (R-Ark), and David Perdue (R-Ga) have written a letter to Treasury Secretary Steven Mnuchin requesting an update on the progress being made by the Financial Stability Oversight Council to reform the systematically important designation process for nonbank financial companies in accordance with recommendations the Treasury Department made in a November 2017 report.

The Dodd-Frank Act established the FSOC with the authority to determine that certain nonbank financial companies would be supervised by the Federal Reserve Board and subject to enhanced prudential standards.

In their letter, the senators said Treasury "should prioritize the enactment of reforms recommended in its report as soon as possible" and that the FSOC must make "fundamental changes to the way in which it operates." They went on to say, "Particularly troubling is its history of flawed designations that have subjected individual companies to inappropriate and burdensome regulation by the Federal Reserve." The senators asked for answers to several questions on the implementation of the recommended reforms.

GAO issues report on GSIB actions to mitigate obstacles to orderly resolution

This story appeared in Bank Digest.

The Government Accountability Office has issued a report regarding actions U.S. global systemically important bank holding companies took to mitigate financial and legal obstacles they could face under the Bankruptcy Code that could undermine an orderly resolution. The GAO focused on five U.S. GSIBs with large portfolios of derivatives (because of resolution obstacles such financial contracts pose).

According to the report, the five U.S. GSIBs in the GAO's review incorporated procedures and other controls in their 2017 resolution plans to mitigate financial and legal obstacles to orderly resolution under the Bankruptcy Code. In their review, the Federal Deposit Insurance Corporation and Federal Reserve Board found no deficiencies with the GSIBs' 2017 plans.

Most experts the GAO interviewed viewed GSIB controls to mitigate financial obstacles as potentially somewhat effective, but these experts had mixed views on the potential effectiveness of GSIB controls to mitigate creditor challenges and other legal obstacles.