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
On March 31, 2021, the Consumer Financial Protection Bureau (“CFPB”) rescinded a range of policy statements issued under the leadership of former Director Kathleen L. Kraninger.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.
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.
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.
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.
On Wednesday, May 5, 2021, the Board of Governors of the Federal Reserve System (“Federal Reserve”) issued a notice requesting public comment on proposed guidelines articulating a series of principles to be used by Federal Reserve Banks in evaluating requests for Reserve Bank master accounts and payment services (the “Proposed Guidelines”). The Federal Reserve intends for the Proposed Guidelines to promote key policy goals with respect to the banking system, financial stability, monetary policy, consumer protection, and the payment system. Comments on the Proposed Guidelines are due 60 days after publication in the Federal Register.
Click here to read our Eight Things to Know about the Federal Reserve’s Proposed Guidelines.
On May 3, 2021, media outlets reported that Treasury Secretary Janet Yellen will appoint Michael Hsu to serve as Acting Comptroller of the Currency. Mr. Hsu currently serves as an Associate Director of the Division of Supervision and Regulation at the Board of Governors of the Federal Reserve System, where he heads the Large Institution Supervision Coordinating Committee (“LISCC”), which oversees the largest U.S. banking organizations.
On April 22, the Supreme Court unanimously ruled in AMG Capital Management v. Federal Trade Commission that § 13(b) of the Federal Trade Commission (“FTC”) Act does not authorize the FTC to obtain equitable monetary relief, such as restitution for consumer harm. This development will make it more complicated for the FTC to obtain consumer redress. While the FTC will still be able to seek consumer redress through other legal avenues, especially § 19 of the FTC Act, these avenues generally impose additional legal requirements beyond what § 13(b) required. This decision may prompt Congress to consider amending the FTC Act to increase the availability of consumer redress. It may also encourage the CFPB to be more assertive in areas where the agencies share jurisdiction.
On April 22, 2021, the Federal Reserve Board, FDIC, and OCC (the “agencies”) issued a notice of proposed rulemaking that would require banks that file tax returns as part of a consolidated tax filing group to enter into income tax allocation agreements with their parent companies and other members of the consolidated group that join in the filing, and would set forth specific requirements for the contents of those agreements. The proposal would apply to all insured depository institutions and OCC-chartered uninsured institutions that are not registered as Subchapter S corporations (collectively, “covered institutions”).