Comptroller of the Currency visits New York neighborhoods

Community Reinvestment Act (CRA) activity and discussions regarding how regulations promote lending, investment, and services took center stage during Comptroller of the Currency Joseph Otting’s tour of New York neighborhoods. Joseph Otting More than 50 community advocates, community development professionals, civil rights organizations and bankers joined Otting and senior staff from the agency on the […]

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Community Reinvestment Act (CRA) activity and discussions regarding how regulations promote lending, investment, and services took center stage during Comptroller of the Currency Joseph Otting’s tour of New York neighborhoods.

Joseph Otting

More than 50 community advocates, community development professionals, civil rights organizations and bankers joined Otting and senior staff from the agency on the third tour this summer of CRA neighborhoods and CRA modernization discussion.

“Here in New York, we saw great examples of community and bank partnerships to conduct CRA activity that helps meet important needs of underserved neighborhoods,” Otting said following the tour. “We also discussed challenges communities, advocates, and bankers face in lending, investing, and providing services that can be addressed in part by modernizing CRA regulations.”

During the tour, Otting outlined how CRA regulations could be improved in four ways: clarifying what counts for CRA credit, updating where activity qualifies, making evaluations of bank CRA performance more objective, and reporting results in a more timely and transparent manner.

“I thank everyone who has participated on this and other tours for sharing their stories, ideas, and frustrations,” Otting said. “I am encouraged by this discussion and the half dozen others we have had this summer with hundreds of stakeholders about CRA. The conversations confirm broad support for making CRA work better for everyone, for clarifying what activity counts for CRA, updating where it counts, evaluating CRA performance in a more transparent way, and making reporting more timely and transparent.”

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FDIC approves changes to Volcker Rule

The Federal Deposit Insurance Corporation (FDIC) approved a rule to change the requirements the Volcker Rule, which prohibits banks from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds.© Shutterstock The Volcker Rule was established as part of the Dodd-Frank Act. It was a key provision that was designed […]

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The Federal Deposit Insurance Corporation (FDIC) approved a rule to change the requirements the Volcker Rule, which prohibits banks from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds.

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The Volcker Rule was established as part of the Dodd-Frank Act. It was a key provision that was designed to curb the type of speculative investments that led to the financial crisis of 2007-2008.

The new changes would alter the rule’s compliance requirements based on the size of a firm’s trading assets and liabilities. The most stringent requirements would be applied to banks with the most trading activity. It would also retain the short-term intent prong of the “trading account” definition only for banks that are not subject to the market risk capital rule prong. Further, it would replace the rebuttable presumption that instruments held for fewer than 60 days are covered under the short-term intent prong with a rebuttable presumption that instruments held for 60 days or longer are not covered.

In addition, the rule changes stipulate that banks that trade within internal risk limits are engaged in permissible market making or underwriting activity. It also streamlines the criteria that apply when a bank seeks to rely on the hedging exemption from the proprietary trading prohibition. Finally, it limits the impact of the rule on the foreign activities of foreign banking organizations and simplifies the trading activity information that banks are required to provide to the agencies.

“One of the post-crisis reforms that has been most challenging to implement for regulators and industry is the Volcker Rule, which restricts banks from engaging in proprietary trading and from owning hedge funds and private equity funds. Distinguishing between what qualifies as proprietary trading and what does not has proven to be extremely difficult. Meanwhile, banks that do relatively little trading are required to go through substantial compliance exercises to ensure that activities that have long been considered traditional banking activities do not run afoul of the Volcker Rule,” FDIC Chair Jelena McWilliams said.

The rule changes, if approved by all federal regulators, would be effective Jan. 1, 2020 with a compliance date of Jan. 1, 2021. The Office of the Comptroller of the Currency also approved the changes. The Federal Reserve Board, Securities and Exchange Commission, and Commodity Futures Trading Commission have not yet weighed in.

The American Bankers Association applauded the proposed reforms to the Volcker Rule.

“These improvements will allow bank supervisors to focus on systemic risk while providing the tailored and precise oversight that was the Volcker Rule’s original purpose,” Rob Nichols, ABA president and CEO, said. “We also applaud regulators for dropping the proposed accounting test, which was overly broad and unworkable. The decision to instead make meaningful improvements to the 60-day rebuttable presumption is consistent with the agencies’ focus on bright-line rules. We look forward to providing additional input that would simplify and streamline restrictions on covered fund investments while excluding funds that are clearly outside the Volcker Rule’s intent. These further reforms and exclusions will benefit a wide range of bank customers while improving efficiencies at banks subject to the rule.”

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ABA analysis examines security ratings

A recent American Bankers Association (ABA) white paper explains the pros and cons of security ratings, how the ratings work, and how financial institutions should use them.© Shutterstock “As we see more security ratings hit the market, we want to ensure that banks and others understand how they fit into a broader risk management program,” […]

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A recent American Bankers Association (ABA) white paper explains the pros and cons of security ratings, how the ratings work, and how financial institutions should use them.

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“As we see more security ratings hit the market, we want to ensure that banks and others understand how they fit into a broader risk management program,” Paul Benda, senior vice president, risk and cybersecurity policy at ABA, said regarding Security Ratings: A Tool as Part of a Risk Management Program. “A robust plan includes multiple tools in the toolbox, and if used appropriately, security ratings can be one of those tools.”

The paper maintains security ratings can provide insight and serve as a starting point when evaluating a firm’s cybersecurity program, but the association said ratings could not offer a full picture of an organization’s cybersecurity program, because the providers rely on a combination of data points collected or purchased from public and private sources and are unable to evaluate a firm’s internal infrastructure and controls.

“Cybersecurity remains a top priority for banks across the country, and we are continuously looking for ways to improve effectiveness and efficiency,” Benda said. “There are many resources out there, so understanding how they work is key.”

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Analysis examines retirement instability

Lawmakers are encouraging Social Security’s protection and strengthening, following the release of a report examining the nation’s retirement instability.© Shutterstock “Despite Social Security’s success, the other two major components of our nation’s retirement system – private savings and pensions – are failing hard-working Americans,” Rep. Carolyn B. Maloney (D-NY), vice chair of the Congress Joint […]

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Lawmakers are encouraging Social Security’s protection and strengthening, following the release of a report examining the nation’s retirement instability.

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“Despite Social Security’s success, the other two major components of our nation’s retirement system – private savings and pensions – are failing hard-working Americans,” Rep. Carolyn B. Maloney (D-NY), vice chair of the Congress Joint Economic Committee said via a statement accompanying recent publication of Retirement Insecurity, a report written by the Democratic committee members.
“As a result, roughly half of Americans are at risk of losing their current standard of living in retirement. Americans find it increasingly hard to save for retirement amid stagnant wages and the rising cost of housing, healthcare, and college.”

Maloney noted the share of workers who receive pensions has almost fallen in half since the late 1980s, adding only about half of middle-income workers and less than 10 percent of the poorest Americans have defined-contribution accounts like 401(k)s.

“These problems are particularly acute for women, minorities, and people with low earnings or less education,” Maloney concluded. “Women, African Americans, and Hispanics on average have less saved for retirement and less retirement income. Women, in particular African American and Hispanic women, are at greater risk of outliving their retirement savings.”

Maloney emphasized the importance of protecting Social Security while also recognizing that the rest of our retirement system is in crisis.

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CUNA favors national data privacy standard

Credit Union National Association (CUNA) officials said the organization is supporting Federal Trade Commission (FTC) Safeguards Rule amendments addressing national data privacy standards.© Shutterstock “Strong data security laws will not stop criminals or rogue nation states from attempting to penetrate even the most sophisticated data and cybersecurity defenses,” Lance Noggle, CUNA senior director of Advocacy […]

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Credit Union National Association (CUNA) officials said the organization is supporting Federal Trade Commission (FTC) Safeguards Rule amendments addressing national data privacy standards.

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“Strong data security laws will not stop criminals or rogue nation states from attempting to penetrate even the most sophisticated data and cybersecurity defenses,” Lance Noggle, CUNA senior director of Advocacy & Senior Counsel for Payments and Cybersecurity wrote in correspondence to the FTC. “However, American consumers that trust their personal information to businesses deserve the most diligent effort by those businesses and entities to protect this data from theft and misuse.”

The CUNA is recommending the definition of a financial institution be broadened as much as possible to maximize consumer protection, adding enhanced data security requirements should always help safeguard consumers’ private information.

Presently 115 privately insured credit unions are subject to FTC Safeguards Rule requirements, with CUNA maintaining privacy will not have the protection Americans deserve until Congress passes a law with strong privacy and data security protections regulating based on the type of information handled or maintained.

Federally insured credit unions and banks comply with data security and privacy requirements established in the Gramm Leach Bliley Act and examined by federal and state regulators for compliance.

CUNA advocates on behalf of all of America’s credit unions, which are owned by 115 million consumer members.

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FHFA approves final rule allowing GSE’s to use third-party credit score models

The Federal Housing Finance Agency (FHFA) signed off on a rule that says third-party credit score models that can be used by government-sponsored entities, including Fannie Mae and Freddie Mac. © Shutterstock The rule implements the requirements in Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted on May […]

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The Federal Housing Finance Agency (FHFA) signed off on a rule that says third-party credit score models that can be used by government-sponsored entities, including Fannie Mae and Freddie Mac.

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The rule implements the requirements in Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted on May 24, 2018.

The regulation requires a process for validation and approval of credit score models. The first phase calls for the solicitation of applications from credit score model developers. The second phase is the submission and initial review of submitted applications. The third phase is a credit score assessment, while the final step is an enterprise business assessment.

“One of my priorities is to ensure that the American people have a safe and sound path to sustainable homeownership, which requires tools to accurately measure risk,” FHFA Director Mark Calabria said. “The final rule we are publishing today is an important step toward achieving that goal.”

The rule will become effective 60 days after it is published in the Federal Register. Within 60 days of this effective date, FHFA will begin a review of the materials that the government-sponsored entities plan to use in the public solicitation process. After FHFA approves those materials, the GSE’s will make public the details of the solicitation process. FHFA will then determine the date that the initial solicitation will open for credit score model developers to apply.

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Survey probes long-term impact of student loan debt

TD Bank’s Student Debt Impact Survey results have determined loan payments have a dramatic impact on young adults’ daily finances, placing their long term financial health in flux.© Shutterstock “The results of our survey show that student loans can have a ripple effect on borrowers’ financial futures,” Mike Kinane, head of US Bankcard at TD […]

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TD Bank’s Student Debt Impact Survey results have determined loan payments have a dramatic impact on young adults’ daily finances, placing their long term financial health in flux.

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“The results of our survey show that student loans can have a ripple effect on borrowers’ financial futures,” Mike Kinane, head of US Bankcard at TD Bank, said. “Consumers owe money before they even earn their first paycheck, which is troubling.”

The analysis involved asking more than 1,000 Americans who paid off or are currently repaying student loan debt, ages 18 to 39, how the debt is impacting their lives and factors they considered before taking out the loan.

The average total student debt held by survey respondents is $26,495, officials said, with the average debt payment being $579 a month. The reported average monthly take-home pay is $2,689, which officials said translates to one-in-five take-home pay dollars being spent on repaying a student debt.

“The reality is many Americans need to take on student loan debt to finance higher education, but most are unaware of how it will impact their lives long-term,” Kinane said. “We’re seeing an alarming lack of education surrounding student loans, repayment terms and borrowers’ earning potential after graduation.”

The survey results indicated student loan borrowers overwhelmingly lack education about the impact of loans on credit health, as well as how to maintain payments and save for the future.

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SEC looking to update Regulation S-K disclosures

The Securities and Exchange Commission (SEC) is seeking to update the disclosures that registrants are required to make under Regulation S-K. © Shutterstock Regulation S-K is a rule that provides requirements for public company disclosure. The proposed amendments are intended to simplify compliance efforts for registrants and improve disclosures for investors. “The world economy and […]

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The Securities and Exchange Commission (SEC) is seeking to update the disclosures that registrants are required to make under Regulation S-K.

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Regulation S-K is a rule that provides requirements for public company disclosure. The proposed amendments are intended to simplify compliance efforts for registrants and improve disclosures for investors.

“The world economy and our markets have changed dramatically in the more than 30 years since the adoption of our rules for business disclosures by public companies. Today’s proposal reflects these significant changes, as well as the reality that there will be changes in the future,” SEC Chairman Jay Clayton said. “I applaud the staff for their efforts to modernize and improve our disclosure framework, including recognizing that intangible assets, and in particular human capital, often are a significantly more important driver of value in today’s global economy. The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens.”

Specifically, the proposed amendments would revise Items 101(a) (description of the general development of the business), 101(c) (narrative description of the business), and 105 (risk factors) to emphasize a more principles-based approach. This is because businesses differ in terms of which aspects of these disclosures are material to them. A more flexible approach may elicit more relevant disclosures, the SEC says. There is also a proposed amendment of Item 103 (legal proceedings).

“We invite further engagement from market participants on these proposals and any other areas where our approach to ensuring investors have the appropriate mix of information to make investment decisions can be improved,” Clayton said.

The proposal will be open for public comment for 60 days after it is published in the Federal Register.

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ABA report examines banks’ social media use

A newly released American Bankers Association (ABA) report maintains just over eight in 10 banks believe social media is important and are active on their social media accounts.© Shutterstock “It’s remarkable how much bank social media engagement has evolved and matured since we first conducted this survey two years ago,” Jim Edrington, ABA’s chief member […]

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A newly released American Bankers Association (ABA) report maintains just over eight in 10 banks believe social media is important and are active on their social media accounts.

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“It’s remarkable how much bank social media engagement has evolved and matured since we first conducted this survey two years ago,” Jim Edrington, ABA’s chief member engagement officer, said. “Bankers overwhelmingly recognize the power of social media to increase visibility and humanize their brand as they connect directly with their customers on a personal level.”

The State of Social Media in Banking report showed 40 percent of institutions revealed they have used social media for five years or more, which represents a rise from 25 percent two years ago. In addition, only 6 percent of banks do not currently use social media and 3 percent indicated they plan to begin social media engagement within the next one to two years.

The most preferred social media platforms are Facebook, LinkedIn and Twitter, Instagram, YouTube and blogs.

An examination of the numbers also determined 52 percent of survey respondents planned to increase spending on social media resources this year and an additional 8 percent sought to increase that budget.

“Social media engagement is rewarding in so many ways, and can provide a big return on a modest investment,” Edrington added.

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NY leads multistate probe of payroll advance industry

New York’s Department of Financial Services (DFS) said last week it is leading a multistate investigation of the payroll advance industry as a means of examining unlawful online lending allegations.© ShutterstockLinda A. Lacewell “High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious […]

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New York’s Department of Financial Services (DFS) said last week it is leading a multistate investigation of the payroll advance industry as a means of examining unlawful online lending allegations.

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Linda A. Lacewell

“High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious and harming consumers,” Financial Services Superintendent Linda A. Lacewell said. “Protecting consumers is our top priority and New York is leading the charge to expand the investigation of illegal online lending by including regulators from ten additional states and Puerto Rico.”

Lacewell said the agency would also partner with peer regulators to safeguard consumers from predatory lending and scams ensnaring families in endless cycles of debt.

The scope of work, officials said, is rooted in determining whether companies are in violation of state banking laws, including usury limits, licensing laws and other applicable laws regulating payday lending and consumer protection laws.

The following regulators have joined DFS in investigating the payroll advance industry:

Connecticut Department of Banking;
Illinois Department of Financial Professional Regulation;
The Office of the Commissioner for Financial Regulation in the State of Maryland;
New Jersey Department of Banking and Insurance;
North Carolina Office of the Commissioner of Banks;
North Dakota Department of Financial Institutions;
Oklahoma Department of Consumer Credit;
Puerto Rico Comisionado de Instituciones Financieras;
South Carolina Department of Consumer Affairs;
South Dakota Department of Labor and Regulation’s Division of Banking; and
Texas Office of Consumer Credit Commissioner.

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