Dodd-Frank News Center

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.

Brainard speaks in Washington on assessing financial stability

This story appeared in Bank Digest.

Federal Reserve Board Governor Lael Brainard spoke at the Peterson Institute for International Economics in Washington, D.C., on Dec. 7, 2018. The subject of her prepared remarks was "Assessing Financial Stability over the Cycle."

In her prepared remarks, Brainard said that if anything has been learned from the financial crisis, "it is that we must be especially vigilant to safeguard the resilience of our financial system in good times when vulnerabilities may be building." She went on to describe the state of the economy, highlight areas where she saw financial imbalances building, and discuss the implications for policy.

According to Brainard, while the U.S. financial system is much more resilient than before the crisis, "the appetite for risk among financial market participants rose notably over 2017 and much of 2018, and corporate borrowing has reached new heights amid rapid growth and deteriorating underwriting standards in riskier segments, such as leveraged lending." She went on to say, "At a time when cyclical pressures have been building and bank profitability has been strong, it might be prudent to ask large banking organizations to fortify their capital buffers, which could subsequently be released if conditions warrant."

FDIC seeks comments on capital and liquidity thresholds

This story appeared in Bank Digest.

At its Nov. 20, 2018, open meeting, the Federal Deposit Insurance Corporation's Board of Directors approved a notice of proposed rulemaking that would establish a revised framework for large U.S. banking organizations and their subsidiary depository institutions--banking organizations--for determining application of the regulatory capital rule, the liquidity coverage ratio rule, and the proposed net stable funding ratio rule based on a banking organization's risk profile. Comments on the proposed rulemaking are due by Jan. 22, 2019.

The Federal Reserve Board has previously approved the proposed rulemaking, and the Office of the Comptroller of the Currency will probably approve the proposed rulemaking as well.

The proposed rulemaking would more closely align the regulatory requirements that apply to large banking organizations with their risk profiles and would place banking organizations with total assets of more than $100 billion into one of four categories.

TILA threshold for exempt consumer credit transactions increased for 2019

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau and Federal Reserve Board are amending the official interpretations and commentary for the agencies' regulations that implement the Truth in Lending Act to reflect the dollar threshold for exempt consumer credit transactions for 2019. The agencies said that the exemption threshold will increase from $55,800 to $57,200, effective Jan. 1, 2019.

The Dodd-Frank Act amended TILA by requiring that this threshold be adjusted annually by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the Bureau and the Fed will not adjust this exemption threshold from the prior year.

CLA threshold for exempt consumer leases increased for 2019

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau and Federal Reserve Board are finalizing amendments to the official interpretations and commentary for the agencies' regulations that implement the Consumer Leasing Act to reflect the dollar threshold for exempt consumer leases for 2019. The agencies said that the exemption threshold will increase from $55,800 to $57,200, effective Jan. 1, 2019.

The Dodd-Frank Act amended the CLA by requiring that this threshold be adjusted annually by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the Bureau and the Fed will not adjust this exemption threshold from the prior year.

Agencies establish exemption threshold for higher-priced mortgage loan appraisals

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau, Federal Reserve Board, and Office of the Comptroller of the Currency have determined that the threshold amount for exemptions from special appraisal requirements for higher-risk mortgages (higher-priced mortgage loans) under the Truth in Lending Act will increase from $26,000 to $26,700, effective Jan. 1, 2019. This amount must be adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), but if there is no annual percentage increase in the CPI-W, the agencies will not adjust this exemption threshold from the prior year.

CFPB and Fed propose funds availability adjustments

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau and Federal Reserve Board have jointly proposed amendments to Reg. CC--Availability of Funds and Collection of Checks (12 CFR Part 229) that would implement a statutory requirement to adjust for inflation the amount of funds depository institutions must make available to their customers. Reg. CC implements the Expedited Funds Availability Act of 1987. The proposed amendments would apply in circumstances ranging from next business day withdrawal of check deposits to setting the threshold amount for determining whether an account has been repeatedly withdrawn.

 The agencies also propose to implement, in Reg. CC, EFA Act amendments made by the Economic Growth, Regulatory Relief, and Consumer Protection Act, which include extending coverage of the EFA Act to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam.

Finally, the agencies are providing an additional opportunity for public comment on certain funds-availability amendments in Subpart B of Reg. CC that the Fed published in 2011 regarding funds availability schedule provisions and associated definitions. The agencies are accepting comments on all aspects of the proposed amendments, as well as on the 2011 funds availability proposal, for 60 days following publication in the Federal Register.

Fed revises 'Capital Assessments and Stress Testing' information collection

This story appeared in Bank Digest.

The Federal Reserve Board is adopting a proposal to revise for three years, without extension, an existing information collection entitled "Capital Assessments and Stress Testing." This information collection is composed of three reports and is applicable to top-tier bank holding companies with total consolidated assets of $100 billion or more and U.S. intermediate holding companies.

On August 8, 2018, the Fed published a notice at 83 Federal Register 39093 requesting public comment for 60 days on the proposal. The comment period has expired, and the revisions, including draft forms and instructions, will be implemented as proposed as of Dec. 31, 2018.

 

Quarles speaks at Harvard Law School on future of stress testing

This story appeared in Bank Digest.  

Federal Reserve Board Vice Chairman for Supervision Randal K. Quarles spoke at a symposium sponsored by the Harvard Law School Program on International Financial Systems, entitled "An International Perspective on the Future of Bank Stress Testing," at Harvard Law School on Nov. 16, 2018. The subject of his prepared remarks was "Beginning Stress Testing's New Chapter."

In his prepared remarks, Quarles said that "stress testing has meaningfully increased the post-stress resiliency of large financial institutions, and become a critical tool" in keeping the banking system strong. He went on to review proposed changes to the Fed's stress testing program, which he said "are intended to improve the program, maintaining its dynamism and flexibility while providing adequate notice to regulated firms, without altering materially the stringency of the tests or the overall level of capital in the system."

McWilliams speaks in Chicago on simplifying capital rules for community banks

This story appeared in Bank Digest.  

Federal Deposit Insurance Corporation Chairman Jelena McWilliams spoke at the Federal Reserve Bank of Chicago Thirteenth Annual Community Bankers Symposium, entitled "Back to Basics," on Nov. 16, 2018. In her prepared remarks, McWilliams stressed the importance of community banks and said it was necessary to ensure that the regulatory regime for such banks is appropriately tailored. McWilliams said one area where she believed the rules for community banks are too complicated is regulatory capital.

McWilliams said she believed that "robust capital requirements do not need to be complex, particularly as they relate to community banks. The Basel III standards, which may be appropriate for internationally active banks, are unduly complex and unnecessary for community banks."

McWilliams said the first step in the process of simplifying the capital requirements for community banks is enacting the Community Bank Leverage Ratio, which will soon be voted on by the FDIC Board. She said that, "Under the proposed rule, a qualifying bank with less than $10 billion in assets will not have to comply with the existing risk-based capital requirements if the bank meets a simple ratio of tangible equity to total assets."