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.
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Federal Reserve’s LISCC Program to Apply Only to U.S. G-SIBs
On November 6, 2020, the Board of Governors of the Federal Reserve System (the “FRB”) announced that, beginning in 2021, its Large Institution Supervision Coordinating Committee (“LISCC”) supervisory program will apply only to Category I firms as defined in the FRB’s tailoring framework. This change will have the effect of removing three foreign banking organizations (“FBOs”) with U.S. operations from the LISCC portfolio. Going forward, only U.S. firms that are designated as global systemically important banks (“U.S. G-SIBs”) will be included in the LISCC portfolio.
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Federal Reserve Releases Capital Planning Proposal
On September 30, 2020, the Federal Reserve released a proposal to update its capital planning requirements in a number of respects, including to integrate the capital plan rule with the Federal Reserve’s October 2019 final rules tailoring its enhanced prudential standards. The proposal would make the following notable changes:
- Replacement of Company-Run Stress Testing for
OCC Interpretation Paves Way for Banks to Custody Cryptocurrency
Today, the OCC released an interpretive letter concluding that national banks and federal savings associations (together, “banks”) may permissibly provide cryptocurrency custody services for customers. The letter, written by Chief Counsel Jonathan Gould, describes custody of cryptocurrency as a modern form of the traditional banking activity of providing safekeeping and custody services, which the agency has previously permitted banks to conduct through electronic means. The letter also “reaffirms the OCC’s position that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law.”
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Temporary SLR Relief Extended to Banks, With Condition
On May 15, 2020, the federal banking agencies issued an interim final rule to permit depository institutions to exclude from their supplementary leverage ratio (“SLR”) denominators through March 31, 2021 the balance sheet value of U.S. Treasury securities and funds on deposit at a Federal Reserve Bank, subject to restrictions on capital distributions. The interim final rule complements a similar interim final rule that the Federal Reserve issued in April, which excluded the same set of assets from the SLR denominator of bank holding companies, savings and loan holding companies, and intermediate holding companies of foreign banking organizations subject to the SLR (the “Holdco Rule”).
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LCR Effects of PPPLF and MMLF Participation Neutralized
Today, May 5, 2020, the federal banking agencies released an interim final rule to neutralize the effect of participating in the Paycheck Protection Program Liquidity Facility (“PPPLF”) and Money Market Liquidity Facility (“MMLF”) on a banking organization’s Liquidity Coverage Ratio (“LCR”).
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Federal Reserve Eases Application of TLAC Buffer
Today, March 23, 2020, the Federal Reserve issued an interim final rule that revises the definition of “eligible retained income” for purposes of the total loss-absorbing capacity (“TLAC”) buffer requirements that apply to global systemically important banking organizations (“G-SIBs”). The rule amends the “eligible retained income” definition in the same manner as the federal banking agencies’ interim final rule of March 17, 2020, which, as we summarized previously, revised that definition for purposes of the regulatory capital rules that apply to all U.S. banking organizations.
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House Committee Holds Hearing on Financial Services and the LGBTQ+ Community
On October 29, 2019, the House Committee on Financial Services held a hearing entitled “Financial Services and the LGBTQ+ Community: A Review of Discrimination in Lending and Housing.” Witnesses at the hearing included Harper Jean Tobin, the Director of Policy at the National Center for Transgender Equality, Michael Adams, CEO of SAGE (Services and Advocacy for GLBT Elders), and Alphonso David, President of the Human Rights Campaign.
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Federal Banking Agencies Permit First Quarter 2020 Adoption of Capital Simplifications Rule
The federal banking agencies issued a final rule today that permits banking organizations not subject to the advanced approaches capital rules to adopt simplifications to the calculation of their regulatory capital beginning January 1, 2020, rather than April 1, 2020 as was originally finalized in July 2019.
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GAO Concludes Three SR Letters Are Rules Under Congressional Review Act
On October 22, 2019, the U.S. Government Accountability Office (“GAO”) issued two letters concluding that three Federal Reserve Supervision and Regulation letters, SR 12-17: Consolidated Supervision Framework for Large Financial Institutions, SR 14-8: Consolidated Recovery Planning for Certain Large Domestic Bank Holding Companies, and SR 11-7: Guidance on Model Risk Management, are “rules” under the Congressional Review Act (“CRA”) and therefore must be submitted to Congress and the Comptroller General for review before they can take effect. The GAO letters respond to requests made by several senators for determinations of whether the three SR letters, as well as SR 15-7: Governance Structure of the Large Institution Supervision Coordinating Committee (LISCC) Supervisory Program, are rules under the CRA. The GAO concluded that SR 15-7 is not a rule under the CRA.
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