On Thursday, October 21, 2021, the Financial Stability Oversight Council released a Report on Climate-Related Financial Risk (the “Report”). The Report represents the culmination of a deliberative process that began on May 20, 2021, when President Biden signed an Executive Order on Climate-Related Financial Risk. The Report is a milestone for the Biden Administration, and it confirms a clear new consensus among regulatory leadership that climate risk mitigation is a core priority for federal financial agencies.

Click here to read our Seven Things to Know about the Report.

On Tuesday, July 13, 2021, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (collectively, the “Agencies”) invited public comment on proposed interagency guidance on managing risks associated with third-party relationships (the “Proposed Guidance”). By harmonizing for the first time the Agencies’ supervisory expectations and guidance on third-party risk management, which has become a significant supervisory priority in recent years, the Proposed Guidance would promote consistency in how the Agencies will assess banking organizations’ third-party risk management.

Click here to read our Five Things to Know about the Proposed Guidance.

On June 30, President Biden signed into law a joint resolution to repeal the Office of the Comptroller of the Currency’s (OCC) so-called true lender rule.  The rule was repealed under the Congressional Review Act (CRA), which allows Congress to repeal new federal regulations by passing a joint resolution of disapproval that must be later signed by the president.  Federal regulations repealed under the CRA are treated as if they had never gone into effect.

Continue Reading Congress Repeals the OCC’s True Lender Rule

On June 23, the Supreme Court issued a decision in Collins v. Yellen, a case which concerned the Federal Housing Finance Agency (“FHFA”) and the two government sponsored enterprises (“GSEs”) which the FHFA regulates and currently holds in conservatorship—the Federal National Mortgage Association (“Fannie Mae” or “Fannie”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “Freddie”).  The case presented a challenge by a group of Fannie and Freddie shareholders to a provision of the conservatorship which has effectively precluded the GSEs from paying dividends to shareholders.  Among other things, the plaintiffs targeted the constitutionality of the protection from removal enjoyed by the FHFA’s Director, which allowed the President to remove the Director only “for cause.”  This provision mirrored the removal protection provided to the Director of the Consumer Financial Protection Bureau (“CFPB”) and which the Court invalidated in Seila Law.

The Supreme Court declined to strike down the challenged provision of the conservatorship, but it did invalidate the FHFA Director’s “for cause” removal protection.  Not only does this decision have clear ramifications for the FHFA and GSEs, but it also may preview issues relating to the legal status of decisions rendered by CFPB Directors during the period in which they were unconstitutionally protected from removal from office.

Continue Reading Supreme Court Finds FHFA For-Cause Removal Structure Unconstitutional; Decision May Have Implications for CFPB

On June 3, 2021, in Lacewell v. OCC, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) dismissed the New York State Department of Financial Services’ (“DFS”) lawsuit against the Office of the Comptroller of the Currency (“OCC”). DFS challenged the OCC’s decision to commence accepting applications for special-purpose national bank (“SPNB”) charters from financial technology companies (“fintechs”) that do not accept deposits. The Second Circuit ultimately decided the case on justiciability grounds, holding that DFS lacked standing and that its claims were constitutionally unripe without reaching the merits of DFS’s claims. Continue Reading Second Circuit Rejects New York State Department of Financial Services’ Lawsuit Against the Office of the Comptroller of the Currency

On March 31, 2021, the Consumer Financial Protection Bureau (“CFPB”) rescinded a range of policy statements issued under the leadership of former Director Kathleen L. Kraninger.  These rescissions concerned one policy statement governing communications between institutions subject to CFPB supervision and their examiners, and seven policy statements issued during the COVID-19 pandemic to provide regulatory relief to affected institutions.  Click here to read our recent article on the ABA Business Law Today website analyzing these rescissions and what they may signal regarding the future of the Bureau.

On Tuesday, May 18, 2021, the Office of the Comptroller of the Currency (“OCC”) announced that it will reconsider its June 5, 2020 final rule (“final rule”) overhauling its regulations implementing the Community Reinvestment Act (the “CRA”).  The final rule, which applies only to national banks, federal savings associations, and insured federal branches (“OCC-regulated banks”), made the first major revisions to CRA regulations in nearly twenty-five years and would have established new general performance standards based on more quantitative measures of CRA performance than the tests set forth in existing CRA regulations.  Our client alert summarizes key aspects of the final rule.

Continue Reading OCC to Reconsider June 2020 Community Reinvestment Act Final Rule

The European Commission has published a proposal for a Corporate Sustainability Reporting Directive (2021/0104) (“CSRD”), which forms just one part of a comprehensive package of sustainable finance measures (see our blog here).  The Commission has put forward these measures in response to demand for stronger and wider sustainability reporting standards, over and above what the EU Non-Financial Reporting Directive currently provides.  The CSRD seeks to mandate sustainability reporting and assurance through the amendment of existing EU laws, including the Transparency Directive, the Accounting Directive, and the Audit Directive.  More fundamentally, according to the Commission, it will move the EU one step closer to realizing its aim of having sustainability reporting be “on a par” with financial reporting, in terms of attached weight and importance.  This is reflected in the change of terminology used in the CSRD proposal, from a focus on “non-financial” information reporting, to “sustainability”.

We cover below the background and detail, but in summary, these are the key elements of the CSRD proposal that corporates should be aware of:

  • Scope: The CSRD reporting requirements will apply to all large EU companies and all listed companies, including listed small and medium-sized enterprises (“SMEs”). This is estimated to cover around 49,000 companies.
  • Reporting: The so-called “double materiality” principle remains, but in-scope companies will now have to report according to mandatory sustainability standards. Simpler and “proportionate” standards will apply to listed SMEs.
  • Audit: The CSRD will require, for the first time, a general EU-wide audit (assurance) requirement for sustainability information.
  • Digitization: The sustainability information must be published in companies’ management reports — and not separately reported — and the information will need to be digitized or “tagged” so it can be incorporated into a planned European Single Access Point.
  • Timing: If the proposal is adopted and standards can be agreed in line with current ambitious estimates, large in-scope companies must comply from financial years starting on or after 1 January 2023, publishing reports from 2024; whilst SMEs have to comply from 1 January 2026.

Continue Reading The EU Corporate Sustainability Reporting Directive Proposal: What Companies Need to Know

The European Commission has presented a package of key enabling legislation on sustainable finance (the “Sustainable Finance Package”).  This includes the much-awaited first technical screening criteria under the Taxonomy Regulation — outlined in the Taxonomy Climate Delegated Act (“TCDA”) — and a proposal for a Corporate Sustainability Reporting Directive (“CSRD”), which significantly revises and expands on the existing Non-Financial Reporting Directive’s remit and disclosure rules for corporates. While the former is directly aimed at financial institutions and investors, and the latter at large and listed entities, the package has broader implications for all corporates.

Continue Reading The EU’s Green Capitalism Takes Shape: Taxonomy Screening Criteria and Corporate Sustainability Reporting

On Monday, May 17, 2021, the Federal Deposit Insurance Corporation (“FDIC”) issued a request for information and comment (“RFI”) regarding the current and potential digital asset activities of insured depository institutions (“IDIs”).  The RFI is intended to inform the FDIC’s understanding of digital asset activities, including associated risk and compliance management issues.  Comments on the RFI are due by July 16, 2021.

The RFI categorizes digital asset activities into five use cases and solicits comments based on this framework.  The five use cases are (i) technology solutions, such as token-based systems and distributed ledgers; (ii) asset-based activities, such as investments and margin lending; (iii) liability-based activities, such as deposit services and reserves; (iv) custodial services; and (v) other activities, which could include market-making and decentralized financing.  The RFI requests comment on whether additional use cases should be included within this framework and which use cases have the greatest demand in the marketplace.  The RFI also requests that commenters provide more detailed information about the use cases that IDIs currently conduct or are considering conducting.

Continue Reading FDIC Issues Request for Information on Digital Assets