September 9, 2022

FOIA Request Seeks Commercially Sensitive EEOC-1 Report Data

A Freedom of Information Act request has been filed with the Labor Department’s Office of Federal Contract Compliance Programs seeking the disclosure of employee diversity data collected in “EEO-1 Reports” submitted between 2016 and 2020. OFCCP has asserted in an FAQ that banks are federal contractors because of deposit insurance, but that conclusion is disputed by many. The FOIA request does not specifically target banks, but MBA believes it will be used to report on the diversity characteristics of any federal contractors.

If you consider your bank to be a federal contractor, MBA strongly recommends that you submit an objection to the disclosure of your EEO-1 Reports by OFCCP’s Sept. 19 deadline.

The American Bankers Association has published a members-only staff analysis that may be helpful in better understanding the issue and filing your objection.

FDIC: Bank Net Income Down But Sector Shows Signs Of Strength

FDIC-insured banks and savings associations earned $64.4 billion in the second quarter of 2022, an 8.5% decrease from the year prior, the Federal Deposit Insurance Corporation reported Thursday in its Quarterly Banking Profile. The decrease was driven by an increase in provision expense. Still, FDIC Acting Chairman Martin Gruenberg said the banking industry reported generally positive results for the quarter but added that looking forward, “downside risks from inflation, rising interest rates, slowing economic growth and continuing pandemic and geopolitical uncertainties will continue to challenge bank profitability, credit quality and loan growth.”

The average net interest margin increased 26 basis points from the prior quarter to 2.8%, the highest quarterly growth since first quarter 2010, according to the report. Total loan and lease balances increased 3.7% from the previous quarter, with growth in several loan portfolios, including family residential loans, commercial and industrial loans, and consumer loans. Community banks reported a decline in net income of $523 million from a year ago.

Meanwhile, the average net charge-off rate fell four basis points year-on-year to 0.23. During the second quarter, six banks opened and no banks failed. The number of banks on the FDIC’s problem bank list held steady at a record low of 40.

ABA Urges FDIC To Rethink Deposit Insurance Assessment Increases

American Bankers Association Chief Economist Sayee Srinivasan said the Federal Deposit Insurance Corporation Quarterly Banking Profile reveals a strong banking sector that continues to support the economy during challenging times, noting the report shows bank lending experienced the largest year-to-year increase in 14 years. Srinivasan pointed out, however, that “total deposits fell for the first time in four years, signaling that the unprecedented surge since the onset of the pandemic is beginning to run off.”

“With FDIC-insured deposits declining at a 2.8% annualized rate in the second quarter, the FDIC should reexamine its proposed increase in bank assessments, which assumed that elevated deposit balances would continue,” he said. “The new data suggest that the proposed assessment increase is not necessary to assure that the insurance fund achieves the statutory goal of 1.35% by September 2028.”

Barr Signals Fed Climate Exercises To Start In 2023

The Federal Reserve will launch a “pilot micro-prudential scenario analysis exercise” next year “to better assess the long-term, climate-related financial risks facing the largest institutions,” Michael Barr said Wednesday in his first speech as Fed vice chairman for supervision. Barr did not offer additional details beyond the timing but added that the Fed also is planning to work with the other banking agencies “to provide guidance to large banks on how we expect them to identify, measure, monitor and mange the financial risks of climate change.” During the Q&A after his remarks, Barr also noted that “with respect to community banks, we are quite a way from even being able to offer even good advice to community banks on the issue of climate change.”

Outlining his overall priorities, Barr noted his preference for a “risk-focused” regulatory capital framework but said that non-risk-based approaches, including leverage ratios, “also serve an important role in this framework.” He also advocated for tiered requirements for firms as they increase in complexity and systemic importance. Turning to resolvability, he signaled that the Fed would begin “looking at the resolvability of some of the other largest banks as they grow and as their significance in the financial system increases.”

Barr also touched on several other priorities, including reviewing the Fed’s existing guidelines for mergers and acquisitions and supporting responsible innovation while balancing risk. Regarding digital assets, he emphasized that “banks engaged in crypto-related activities need to have appropriate measures in place to manage novel risks associated with those activities and to ensure compliance with all relevant laws, including those related to money laundering,” and also expressed the view that “Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter.”

OCC Strategic Plan Calls For Promoting Community Banks

The Office of the Comptroller of the Currency released a strategic plan for fiscal years 2023-2027 that calls on the agency to diversify its workforce, prioritize safeguarding public trust and enhance the implementation of risk-based supervision. The 11-page document also directs the OCC to promote strengthening and modernizing community banks, with a focus on small businesses and underserved communities.

The strategic plan outlines broad goals over the coming five fiscal years. Priorities include creating a workforce culture that attracts diverse talent and enhancing communications with the public. At the same time, the agency seeks to continue to be a leader in traditional and emerging bank supervision issues. In terms of action, the OCC plans to support effective execution of risk-based supervision, such as through timely adaptation to changing risks, technologies and priorities, according to the document.

The OCC also will reinforce its commitment to community banks, including minority depository institutions, mutual savings associations and federal savings associations, the agency said. The plan directs the agency to develop guidance and outreach to facilitate community banks’ digital transition, minimize the regulatory burden on banks as much as possible, and facilitate de novo community bank activity, particularly to reaching unbanked and underbanked customers.

Powell: Public Perception Can Hinder Inflation Fight

The Federal Reserve must act “strongly” to fight inflation “until the job is done,” Fed Chair Jerome Powell said Thursday in his final public appearance before the Federal Open Market Committee meets Sept. 20-21. Pointing to the high inflation of the early 1980s, Powell said one reason regulators at the time failed repeatedly to fix the problem was the public had come to view high inflation as the norm.

‌“The longer inflation remains well above target, the greater the risk of the public does begin to see higher inflation as the norm, and that has the capacity to really raise the costs of getting inflation down,” Powell said. “So history cautions strongly against prematurely loosening policy.”

FOMC has raised the federal funds rate four times this year. Powell didn’t hint at any specific actions the committee may take when it meets again later this month but has previously said he expects it to take a “restrictive policy stance for some time.”

Banking Groups Call Out CFPB’s Vague Request For Input On Credit Card Terms

The American Bankers Association and several banking trade groups called on the Consumer Financial Protection Bureau to provide additional information on a recent request for comment on proposed revisions to an existing information collection on credit card terms for consumer and college credit card agreements. The groups noted that the CFPB failed to specify in its initial notice what revisions it is proposing and has not provided appropriate supporting documentation to the public about the request.

Although the CFPB published a blog post concurrent with the request that provides several high-level actions it is contemplating — such as requiring selected issuers to submit data on the median APR offered to consumers in three broad credit score tiers — the groups pointed out that this does not fulfill the bureau’s obligations under the Paperwork Reduction Act.

The groups requested a supplemental notice offering more clarification on the proposed revisions and for the bureau to extend the comment deadline by 60 days.

Hsu: Community Banks Voice Concerns About Climate Risk Regulation

In remarks Wednesday, Acting Comptroller of the Currency Michael Hsu said community banks and their state trade associations have raised concerns about the Office of the Comptroller Currency’s supervisory and regulatory actions related to climate change in "every meeting" he has had with them. 

“I want to acknowledge those concerns and commit to continued open dialogue and constructive engagement as we move forward,” Hsu said. “In the coming weeks, I will be traveling to Lubbock and Midland, Texas, to meet with local OCC-supervised community banks and hear directly from them about the risks and issues impacting their communities. I intend to listen actively and to provide more clarity on the commonsense approach we are taking to climate-related risk management.”

The American Bankers Association in February called on the agency to continue taking a “principles-based approach that is flexible and iterative” to climate-related financial risk management for large financial institutions but urged the agency not to extend its guidance to midsize and community banks until more robust data is available and the risks and opportunities are better understood.

Under Hsu’s leadership, the agency has published a draft set of principles for climate risk management for large banks, and Hsu noted that “two imperatives for large banks have become much clearer to me over the past year: one, the need for coordination and harmonization across jurisdictions, and two, the need to operationalize scenario analyses and to prioritize diverse approaches to such efforts over one-size-fits-all stress tests.” He also signaled plans to appoint a new climate risk officer in the coming weeks to head up the agency’s recently formed Office of Climate Risk.

OCC Issues Bulletin On Video Conferencing, Data Privacy

The Office of the Comptroller of the Currency issued a bulletin for community banks on the legal requirements for protecting non-public OCC information in video teleconferencing services. Banks and other parties in possession of such information, such as supervisory correspondence and investigatory files, are prohibited from disclosure without the agency’s prior approval, except in very limited circumstances, according to the OCC. The agency listed several security expectations for any videoconference in which non-public OCC information will be communicated. They include using an encrypted connection, moderating the meetings, making no recordings or transcriptions, and ensuring the videoconference service is securely configured and routinely patched to protect against cyber intrusion.

ABA Foundation Releases Infographic On Avoiding Scholarship, Student Loan Scams

The American Bankers Association Foundation released a new infographic providing consumers with information on common scholarship and student loan scams and tips on how to avoid falling for them. The infographic is the first of four to be released in the coming weeks highlighting scams targeting college-aged students as part of the foundation’s Get Smart About Credit campaign.

More than $100 million is lost in scholarship scams every year, and more than half of students who applied for a private loan reported receiving a fraudulent loan, according to the Federal Trade Commission. The ABA Foundation is encouraging banks of all sizes participating in the campaign to share the infographics with their customers and distribute the information in the communities they serve.

"We think it’s critically important to help spread the word on the prevalence of these scams and what students and parents can do to protect themselves during the application process,” said Lindsay Torrico, executive director of the foundation. In the wake of President Biden administration’s plan to cancel some student loan debt, "we want consumers to be particularly vigilant and informed as they navigate the new forgiveness program.”

Report: Bank Customers’ Financial Condition Deteriorates As Inflation Persists

A growing number of bank customers say inflation is taking a toll on their finances, including those classified as financially healthy, according to the most recent monthly survey data from research firm J.D. Power. The company polled 4,000 retail bank customers in June and found that 70% said prices are increasing faster than their incomes, up from 61% earlier this year. The largest month-over-month increase was among respondents classified as financially healthy, the firm said.

Bank customers also expressed low levels of confidence in their ability to handle inflation, although the ratio of healthy to unhealthy customers remained relatively unchanged, J.D. Power said. At the same time, a growing number of customers are leaning more heavily on credit cards even though higher balances will affect their credit ratings.

“Customers whose financial health is stressed are most likely to agree that their credit score helps with more than getting a loan/borrowing money (75%) and, to that end, 41% of customers have a personal goal to improve their credit score in the next 12 months. That includes half of the vulnerable population and 48% of those under age 40,” the firm said.