February 18, 2022

Luetkemeyer Calls For Changes To CFPB’s Section 1071 Proposal

Legislation filed by Congressman Blaine Luetkemeyer addresses the Consumer Financial Protection Bureau’s pending rulemaking to implement Section 1071 of the Dodd-Frank Act. The Bank Loan Privacy Act would require the CFPB to do a separate notice-and-comment rulemaking to determine what information will be published by the bureau.

The bill stems from concerns that Luetkemeyer and Reps. French Hill, R-Ark., and Roger Williams, R-Texas, have about the Section 1071 proposal. In a letter to the CFPB, the lawmakers flagged several issues and called on CFPB to remedy these issues within the final rulemaking. In particular, they:

• expressed concerns about the potential effects of the rule on small banks
• urged CFPB “to exclude as many small financial firms as possible”
• called for a longer implementation period, given the complexity of the rule

The lawmakers also took issue with a provision of the proposed rule that would require financial institutions to guess the race of applicants who choose not to provide their information.

“Loan officers at financial institutions have no expertise to determine the race or ethnicity of individuals, nor should they,” the lawmakers wrote, calling for the removal of the provision. Finally, they emphasized that the CFPB “must fully disclose what information will become public before the final rule is issued and must conduct a separate rulemaking process, including notice and comment, related to this provision of the law.”

The lawmakers’ concerns echoed several previously raised by MBA, the American Bankers Association and state bankers associations in their comment letters to the bureau last month.

MBA Accepting Applications For Bankers To Serve On Boards, Committees

Help lead the MBA and grow your career! MBA seeks bankers to serve on various committees to increase their engagement with MBA and the banking community. Serving on MBA's boards and committees allows bankers to share their knowledge and expertise with fellow bankers. This leadership opportunity offers bankers more engagement with MBA and the banking community. Please review the leadership opportunities and email completed applications  to Peggy Mantle by Friday, Feb. 25. MBA appreciates your involvement with the association.

OCC’s Hsu: Agencies To Release CRA NPR In ‘Not-Too-Distant Future’

During remarks at a recent industry event, Acting Comptroller of the Currency Michael Hsu addressed upcoming plans to modernize the regulation implementing the Community Reinvestment Act. Hsu said that “in the not-too-distant future” the OCC, along with the Federal Reserve and Federal Deposit Insurance Corporation would release a joint notice of proposed rulemaking, adding that “several objectives” are guiding the agencies’ work.

He said revised regulations are intended to increase levels of CRA activity to help address existing disparities and ensure that banks are being responsive to the local needs of low- and moderate-income communities, not just applying “one-size-fits-all” solutions. In addition, Hsu said it is important to increase the “clarity, consistency and transparency” of CRA supervisory expectations and standards regarding activities that are eligible for CRA credit and how eligible activities are evaluated. He also noted that CRA standards needed to be brought up to date, reflecting “changes in the business of banking,” in particular the increased use of mobile and internet delivery channels that were not in place when the regulation was last updated.

He also noted that the Fed’s 2020 advance notice of proposed rulemaking on CRA modernization served as the “basic framework” for the interagency conversations around this latest attempt to modernize the three-decade-old regulations. The OCC previously issued a unilateral rule to modernize the CRA under former Comptroller Joseph Otting, but that rule was later rescinded.

ABA Calls For Principles-Based Approach To Climate-Related Financial Risk Guidance

The American Bankers Association called on the Office of the Comptroller of the Currency to continue taking a “principles-based approach that is flexible and iterative” to climate-related financial risk management for large financial institutions. ABA also urged the agency not to extend its guidance to midsize and community banks “until more robust data is available, and the climate-related financial risks and opportunities are better understood.” The OCC in December issued draft principles outlining a framework for climate risk management for banks with more than $100 billion in total consolidated assets.

In a comment letter, ABA cautioned that climate risk-related assessments and practices are still in nascent stages and that “attaching regulatory consequences to climate-related risk exposures would be premature.” ABA added that banks are already have comprehensive, well-understood frameworks for measuring traditional bank risks and that large institutions in particular have already begun incorporating climate information in their risk assessments.

ABA also recommended that the OCC further clarify its expectations regarding climate scenario analysis. Specifically, ABA said that the term should “connote an exploratory exercise for banks’ assessment of the impact of climate-related risks and opportunities over short, medium, and long-time horizons,” and should be an internal and confidential supervisory process. The association also urged the OCC to continue to tailor any climate-related guidance and work with other banking agencies and financial services regulators as climate risk management evolves.

ABA Raises Concerns About Basel Committee Climate Risk Consultation Document

The American Bankers Association offered feedback on a recent consultation document from the Basel Committee on Banking Supervision regarding climate-related financial risk. While reiterating its support for a principles-based approach, ABA warned that “certain principles and supporting text in the consultation are overly prescriptive and assume a level of analytical sophistication that is challenging.”

“Climate-related financial assessment tools and approaches are evolving and there is significant uncertainty about the policies governments will take to mitigate climate change, which institutions they will affect, and under what timeframe,” ABA wrote. “There is also an absence of robust market data, standardized definitions surrounding what is meant by climate-related financial risk, or consensus on how climate-related risk can be incorporated into the management of traditional financial risks. Together, these foundational gaps mean that the processes, procedures, and methodologies surrounding climate-related risk identification and monitoring are in the earliest stages of development.”

ABA Makes Recommendations For Improving AML Rules

As the Financial Crimes Enforcement Network works to update its anti-money laundering framework, the American Bankers Association urged FinCEN to continue working with regulators, law enforcement and the financial sector to keep up with evolving financial products, technologies and developments related to illicit finance.

In a comment letter responding to a request for information about modernizing current AML rules, ABA noted that financial institutions spend billions of dollars annually on their anti-money laundering and combating the financing of terrorism programs. However, ABA noted that current rules and compliance obligations are “outdated and ill-suited for identifying and preventing 21st-century criminal activity and terrorist financing.”

ABA also told FinCEN that while advances in technology have led to beneficial financial products and services, they also have created opportunities for new illicit finance that “the existing framework may be poorly suited to identify and prevent.”

ABA made several recommendations for FinCEN to consider as it contemplates updates to the current AML regime. Among other things, ABA encouraged the agency to continue providing advisories to help banks identify possible illicit activity but also to collect all advisories in guidance in one easily accessible location to make them easier to use. ABA also recommended the agency take steps to update and streamline the current reporting systems and reexamine the currency transaction report system as well as the suspicious acting reporting system. ABA also urged FinCEN to update the rules under Patriot Act to make it easier for banks to share information.

FSB: Crypto Assets Could be Threat To Global Financial Stability

The crypto-asset market could reach a point where it presents a threat to global financial stability, according to a new report released by the Financial Stability Board.

The fast-evolving nature of crypto assets, scale, structural vulnerabilities and “increasing interconnectedness” with the traditional financial system could threaten global financial stability, the FSB warned. The international nature of crypto markets “also raise the potential for regulatory gaps, fragmentation or arbitrage,” according to the report.

Although the nature and use of crypto assets varies across jurisdictions, financial stability risks could rapidly escalate, the FSB said in the report, adding that there is a need for an evaluation of possible policy responses.

The FSB acknowledged there are significant data gaps impeding risk assessments of crypto assets because of trading and lending platforms falling outside of regulatory boundaries and reporting requirements. The FSB also warned that crypto asset participants, products and markets “may be failing to comply with applicable laws and regulations.”

DOL Seeks Input On Climate-Related Financial Risks For Retirement Plans

The Department of Labor filed a request for information seeking public input on its forthcoming work on retirement savings and climate-related financial risks. The request is intended to assist the department in identifying steps it can take “to further protect the life savings and pensions of U.S. workers and families from the threat of climate-related financial risk.” The RFI stems from an executive order directing DOL to ensure the resilience of retirement savings through regulatory action.

Among the questions for public comment, the RFI asks how DOL should address the protection of retirement savings from climate-related financial risks, as well as what data should be collected from plan sponsors, administrators and service providers.

Other questions DOL is seeking information on include whether the annual reporting Form 5500 or other form or method should be used to collect the data, whether plan administrators should be required to publicly report the steps they take to manage climate-related financial risks and the results and outcomes of any such steps taken. The deadline for comments is May 15.

CFPB Allows Consumers To Directly Petition For Rulemakings

The Consumer Financial Protection Bureau announced a new process through which consumers may petition the bureau directly for rulemaking actions. All petitions and related materials submitted will become part of public record and will be subject to public disclosure, and the CFPB will respond to petitions for the issuance, amendment or repeal of an existing rule as required by the Administrative Procedures Act.

Consumers may email their petitions to petitions@cfpb.gov or submit them to the bureau by mail or hand delivery. Petitions should include contact information, the type of action being requested, the factual and legal reasons for the proposed action and the expected effects the proposed action would have on relevant parties.

In its press release, the bureau added that “[f]ormer government employees and other individuals who are paid to influence the agency’s rulemaking agenda behind the scenes will be asked to submit their petition for public inspection instead.”

ABA To Host Webinar On Anti-Money Laundering Act Of 2020

The American Bankers Association will host a webinar at 1 p.m. Feb. 23 about the existing whistleblower provisions of the Bank Secrecy Act that was enhanced by Congress’ passing of the Anti-Money Laundering Act of 2020. Attendees will hear from a panel about the new incentives for individuals reporting violations to federal authorities, as well as private cause of action against employers for retaliation. 

ABA, FS-ISAC To Host Free Webinar On Computer-Security Incident Notification Rule

The American Bankers Association and the Financial Services Information Sharing and Analysis Center will host a free webinar at 2 p.m. Feb. 24 about how banks can prepare for the upcoming final computer-security incident notification rule. The webinar is the first in a series reviewing implementation from two perspectives: a bank and a critical service provider. The series is designed to help banks understand their obligations under the rule and what to expect from their third-party partners.