March 24, 2022

White House Urges Private Sector To ‘Double Down’ On Cyber Defenses

President Biden this week reiterated the call for the private sector to remain vigilant against the threat of Russian cyberattacks targeting critical infrastructure entities, noting that “we need everyone to do their part.” The White House also issued a fact sheet outlining specific steps companies can take to strengthen their cyber defenses.

‌In a press conference Monday, Deputy National Security Adviser Anne Neuberger said that she does not see a more significant threat to the banking sector compared to other critical infrastructure entities and spoke to the efforts by the industry and the Treasury department to prepare for a cyberattack.

“The U.S. banking sector truly takes cyber threats seriously, both individually and as a group,” Neuberger said. “Treasury has worked extensively with this sector to share sensitive threat intelligence at the executive level, at the security executive level [and] repeatedly at the classified and unclassified level. I do not believe they’re more at risk, but it is always important for every critical infrastructure sector to double down in this heightened period of geopolitical tension.”

MBA Reviews Exam Manual Changes Evaluating UDAAP

On March 16, the Consumer Financial Protection Bureau issued a press release announcing changes to its supervisory operations by publishing an updated exam manual for evaluating UDAAPs (Unfair, Deceptive, or Abusive Acts or Practices). The 2022 UDAAP module showing the new language is available for your review (password required), with the new language highlighted in yellow as compared to the 2012 version. Most of the new language focuses on how CFPB examiners are to examine for discriminatory bank practices that could be UDAAP violations. At this time, the Office of the Comptroller of the Currency, the Fed and the Federal Deposit Insurance Corporation have not issued similar updates to their exam manual UDAAP modules.

DOJ Issues Website Accessibility Guidance

The Department of Justice issued guidance providing additional clarity about website accessibility and how businesses and others can ensure compliance with the Americans with Disabilities Act. The guidance provides examples of website accessibility barriers, clarifies when the ADA requires web content to be accessible and offers tips for improving website accessibility. It also includes links to additional accessibility resources and existing technical standards.

‌“Even though businesses and state and local governments have flexibility in how they comply with the ADA’s general requirements of nondiscrimination and effective communication, they still must ensure that the programs, services and goods that they provide to the public — including those provided online — are accessible to people with disabilities,” the guidance noted.

This guidance comes after a letter sent by 181 disability organizations last month requested the DOJ promulgate enforceable online accessibility standards by the end of the current administration.

MBA discusses how the guidance affects MBA members (password required).

SEC Proposes First-Ever Climate Risk Disclosures For Public Companies

The Securities and Exchange Commission proposed a much-anticipated set of requirements for public companies to disclose information about climate risks affecting them, their greenhouse gas footprints and any emissions-reduction plans they may have adopted. The proposed rule — for which comments are due by May 20 or 30 days after publication in the Federal Register, whichever is longer — has varying compliance dates, with deadlines for large accelerated filers coming as soon as 2024 for fiscal years ending in 2023 while smaller reporting companies will face their earliest deadlines in 2026 for FYs ending in 2025.

‌The proposal requires disclosure of a registrant’s direct GHG emissions (scope 1), indirect emissions from purchased energy (scope 2) and indirect emissions from activities upstream and downstream in a registrant’s “value chain,” if material (scope 3, which would include “financed emissions” in a bank’s lending portfolio). SRCs would be exempt entirely from scope 3 disclosures and, because of their complexity, scope 3 disclosures would phase in after scope 1 and 2 for larger registrants and also be subject to a safe harbor. Accelerated and large accelerated filers would need to obtain independent attestation reports for their disclosures of scopes 1 and 2 emissions.

‌Under the proposal, SEC registrants’ registration statements and periodic reports like Form 10-K would be required to disclose:

• how their boards and managers are overseeing climate-related risks
• the material effects of climate-related risks on business plans, strategies and financial statements over various terms
• how companies identify and manage climate-related risks
• any transition plans, scenario analyses or internal carbon pricing used by the registrant

There also will be a new requirement to disclose the effect of climate-related severe weather and other conditions within a registrant’s financial statements.

If a registrant has made a so-called net-zero commitment or adopted a plan to reduce its GHG footprint or exposures, it would be required to disclose the scope of covered activities, how it intends to achieve these goals, progress toward achieving them and the use of carbon offsets toward those goals.

Powell: High Inflation Could Push Longer-Term Expectations ‘Uncomfortably Higher’

With the U.S. economy experiencing a period of high inflation and with new economic uncertainties prompted by the Russian invasion of Ukraine, Federal Reserve Chairman Jerome Powell warned that these conditions could push the Federal Open Market Committee’s longer-term expectations “uncomfortably higher,” underscoring a need for the FOMC “to move expeditiously” to raise interest rates.

“Price stability is essential if we are going to have another sustained period of strong labor market conditions,” Powell said. “If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well. He added, however, that “today the economy is very strong and is well positioned to handle tighter monetary policy.”

ABA Urges Treasury To Raise Awareness of Coin Circulation Slowdown

The American Bankers Association and a coalition of trade groups urged the Treasury Department to raise public awareness of the current coin circulation slowdown and the need to get coins moving in the economy.

‌In a letter to Treasury Secretary Janet Yellen, the groups asked that the department amplify the message of the U.S. Coin Task Force, of which ABA is a member, that coin circulation has slowed and that coins are being rationed. The groups recommended that Treasury amplify the message through public engagements and its many communication channels, including public service announcements.

‌The pandemic caused consumers to largely shift from cash-based payments to card-based payments, and the U.S. Mint has made it clear that it does not have the capacity to produce enough new coins to make up for the circulation slowdown, the groups wrote.

“The consequences of a coin circulation slowdown fall hardest on consumers that do not have the ability to pay electronically,” the groups wrote, adding that “if retailers are not able to offer change for cash purchases, consumers who rely on cash will be vulnerable.”

NACHA Expands Same-Day ACH Limit To $1M

As expected, NACHA increased the dollar limit for same-day ACH transactions from $100,000 to $1 million. The change was executed in collaboration with the Federal Reserve and The Clearing House, the network’s two ACH operators.

‌“The growth of Same Day ACH in just over five years has been phenomenal as the payments community has welcomed this faster payment method,” said NACHA President and CEO Jane Larimer. “The success of Same Day ACH and the enacting of the new $1 million limit is further proof that the modern ACH Network is helping meet America’s growing need for faster payments.”

NACHA previously announced its plans to phase-in ACH limit increases. The second stage will take the limit from $1 million to $10 million in March 2023 and finally to the standard ACH limit of $99,999,999.99 by March 2024. 

Interagency Task Force Issues Action Plan To Address Appraisal Bias

An interagency task force that includes the Department of Housing and Urban Development, the Federal Housing Finance Agency and the federal banking agencies released an action plan to ensure appraisal and valuation equity for all Americans. The task force was created through an executive order issued by President Biden. The action plan is “limited, with few exceptions, to actions that can be undertaken by federal agencies using existing authorities.”

‌Broadly, the task force recommended a series of actions that:

• strengthen guardrails against unlawful discrimination in all stages of residential valuation
• enhance fair housing and fair lending enforcement
• foster a skilled, diverse appraiser workforce
• empower consumers to take action
• provide researchers and agencies better data to study and monitor valuation bias

In the future, the task force also plans to begin exploring the following.

• the expanded use of alternatives to traditional appraisals
• the potential use of “range-of-value” estimates in appraisals
• the potential use of alternatives and modifications to the sales comparison approach
• the public sharing of a subset of historical appraisal data

OCC: Mortgage Performance Improves In Q4

The share of current and performing first-lien mortgages in the fourth quarter rose to 96.3%, up from 93.3% a year ago, according to the Mortgage Metrics Report released by the Office of the Comptroller of the Currency.‌

Foreclosure activity increased 39.9%, with 1,294 new foreclosures initiated. That figure was up 64% from a year ago. OCC noted that these metrics were significantly affected by events associated with the COVID-19 pandemic, including foreclosure moratoriums.

Mortgages that were considered seriously delinquent fell to 2.3% from 3.1% in the previous quarter and 5.2% a year ago. Meanwhile, loans that were 30 to 59 days delinquent increased slightly from 1.1% to 1.2%. The report is generated from seven large national banks representing 22% of all outstanding residential mortgages.

Federal Banking Regulators Propose Modernizing Administrative Proceedings Rules

The Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the National Credit Union Administration proposed to update rules governing administrative proceedings for financial institutions to allow the use of electronic communications and technology. The interagency proposal would update the uniform rules of practice and procedure that have largely remained unchanged since 1996.

‌In the proposal, the Fed said that by 2006, paper pleadings were virtually eliminated in administrative hearings. However, without rules in place to address electronic pleadings, the administrative law judges opted to dictate procedures regarding electronic filing and other items on an ad hoc basis in their scheduling orders.

The proposal also would remove remaining references to the Office of Thrift Supervision, which was abolished in 2011. Other changes include replacing gender references such as “him or her,” “his or her” and “himself or herself” with gender neutral terminology and replacing the word “shall” in the rule with the terms “must,” “will,” or other appropriate language. Comments are due 60 days after publication in the Federal Register.

CFPB Releases Bank-Level HMDA Data

The Consumer Financial Protection Bureau published Home Mortgage Disclosure Act modified loan application registers for each financial institution that filed HMDA data collected in 2021. The data from the CFPB is modified to protect applicant and borrower privacy.

Survey: Firms Facing Challenges In Libor Transition

While financial services firms are “largely on track” for a successful transition away from Libor, half of them are still facing challenges related to systems and operations readiness, according to a new Bloomberg survey. Of those surveyed, 36% said repapering of existing transactions and agreements continues to be a challenge and 45% said they face difficulty around choosing new alternative rates and conventions. The survey of 130 executives from global financial services firms also found that 15% said that customer outreach and negotiation remained a challenge.

‌Firms are still working on how to handle noncentrally cleared derivatives, with 28% indicating that they were “not sure” how to address these derivatives before the cessation date and 13% responding that they are still formulating a transition strategy.

The transition is well underway, the survey found, with 51% of firms no longer trading U.S. dollar Libor-indexed products, including floating-rate notes, cross-currency swaps and Eurodollar futures. 

ABA Bank Marketing Article Explores How Banks Can Maintain Trust with Consumers

The banking industry response to COVID-19 helped bolster trust in banks, but the challenge in the coming days will be maintaining that momentum and goodwill, according to a new article in ABA Bank Marketing. The article notes that one way to build and maintain a strong relationship with customers is to offer support for how consumers want to manage their finances.

“[B]anking is not one-size-fits-all,” the article says. “Not every consumer has the same digital needs or demands. Socioeconomic status, income, age, location and other factors can all impact a consumer’s ability to leverage digital and mobile banking tools. Consumers who still rely on tools such as physical checkbooks and paper statements need to feel they won’t be left behind, while digital natives who want real-time capabilities will expect their financial tools to keep pace with the digital transformation curve.”

ABA To Host Interest Meeting For Black Banker Network

The American Bankers Association will host a call at 2 p.m. Wednesday, April 6, to gauge interest in an ongoing cross-bank network for Black bankers and all bank professionals seeking to advance Black employees’ sense of belonging in the industry. During the meeting, ABA is seeking to determine the needs of the participants for planning future meetings and identify leaders.

At many larger firms, employee resource groups provide a space for groups of people who share a common identity to network and engage in professional development; ERGs also help with recruitment and retention of employees. However, because many Black bankers work in smaller organizations without access to other Black peers to share experiences, ask questions, to mentor and be mentored, ABA is exploring ways to support inclusion at an industry-wide level.

ABA To Host Free Webinar On Surcharge-Free ATM Networks

ABA will host a free webinar at 11:30 a.m. Wednesday, March 30, about independent surcharge-free ATM networks. Attendees will learn about the advantages of using an ATM network that extends service delivery through cash out and cash in kiosks coast-to-coast. The webinar also will cover the importance of an ATM network in providing a consistent connection point to customers and the benefits of using a neutral network that does not send customers to another bank’s ATMs. 

Survey Shows Some Improvement in Mandatory Financial Education

The latest biennial Survey of the States from the Council for Economic Education revealed some progress in personal finance education in public schools, but no growth in required economic education.

‌Twenty-three states now require high school students to take a personal finance course to graduate, an increase of two states since 2020. Twenty-five states require an economics course in high school, the same number as the last survey. However, Georgia and South Carolina are considering removing economics from graduation requirements, according to the survey.

The survey also found that fewer states are requiring students to be tested in economics in 2022 than in 2011. All 50 states include economic education in their K-12 standards.