COMPLIANCE MONTHLY NEWSLETTER Compliance Monthly is intended to keep you informed of regulatory changes in advance of their effective date so your institution can have the necessary policies, procedures and processes in place to be compliant at the time of enactment. Information contained in Compliance Monthly is not intended to provide specific advice and guidance. You should consult your own professional services provider in connection with matters affecting your own interests. August 2019
Transcript
COMPLIANCE MONTHLY
NEWSLETTER
Compliance Monthly is intended to keep you informed of regulatory changes in advance of their effective date so your institution can have the necessary policies, procedures and processes in place to be compliant at the time of enactment. Information contained in Compliance Monthly is not intended to provide specific advice and guidance. You should consult your own professional services provider in connection with matters affecting your own interests.
August 2019
Table of Contents ACCUMULATE KNOWLEDGE, VALUE, RESOURCES
Focus of the Month 02
Regulator Roundup 03
04 Finalized Rules 05
04 Other Compliance News 08
04 Recommended Actions to Take 12
04
Proposed Rules 07
04
Of the Month
Focus
Availability of Funds and Regulation CC Final Rule
Effective Date: July 1, 2020
In June 2019, the FRB and CFPB finalized amendments to Regulation CC implementing a statutory adjustment to adjust the dollar amounts under the Expedited Funds Availability (EFA) Act for inflation. The final rule applies to all depository institutions regardless of their size. Highlights of the amendments are:
• The dollar amounts will be adjusted every five years beginning July 1, 2020. The next adjustment of the dollar amounts will occur on July 1, 2025 and on July 1 of every fifth year after 2025. The adjustments to the Regulation CC thresholds that will impact financial institutions as a result of this amendment are:
o The minimum amount of deposited funds that financial institutions must make available for withdrawal by opening of business on the next day for certain check deposits will increase to $250 from the current $200.
o The amount a financial institution must make available when using the EFA Act’s permissive adjustment to the funds-availability rules for withdrawals by cash will increase to $450 from the current $400.
o The amount of funds deposited by certain checks into a new account that are subject to next-day availability will increase to $5,525 from the current $5,000.
o The threshold for using an exception to the funds-availability schedules if the aggregate amount of checks on any one banking day exceeds the threshold amount increase of $5,525 from the current $5,000.
o The threshold for determining whether an account has been repeatedly overdrawn is increased to $5,525 from the current $5,000.
• The civil liability amounts for noncompliance will not less than $100 (no change from current amount) to no more than $1,100 (an increase from the current $1,000) for an individual action and no more than $552,500 ( an increase from the current $500,000), or 1% of the net worth of the financial institution in a class action law suit.
• The agencies also amended Regulation CC to incorporate the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) amendments to the EFA Act, which extends coverage to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam as well as certain other technical amendments.
Action Plan Checklist:
• Regulatory Impact Analysis. Perform an assessment of the impact that it will have. Impact may be limited for financial institutions with next day availability or based on your exception and case-by-case hold policies.
• Risk Assessment. Update your compliance risk assessment as well as departmental risk assessments if you are a financial institution impacted by the extended coverage provisions or for any changes to current process.
• Systems. Work with your third party provider to ensure that system changes are scheduled I regard to availability amounts and to understand the timeline for such changes.
• Policies and Procedures. Ensure that policies and procedures are updated based on the results of the risk assessment and the changes in the threshold amounts.
• Educate. Schedule training for front line, call center, deposit operations and compliance personnel concerning the changes. Not only should training address the regulatory change but it should also address how the change will be handled operationally.
• Consumer Awareness. Review signage and disclosures to ensure that the adjusted thresholds are incorporated. Ensure that old disclosures are removed from the system, or if preprinted, are destroyed.
• Monitoring. Revisions must be made to monitoring and internal audit programs to ensure that the proper controls are in place.
Federal Bank Regulatory Agencies and FinCEN Improve Transparency of Risk-Focused BSA/AML Supervision As a result of a working group established by the U.S. Department of the Treasury's Office of Terrorism and Financial Intelligence, the federal bank regulatory agencies and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued a joint statement as part of continuing efforts to improve transparency into their risk-focused approach to Bank Secrecy Act (BSA)/anti-money laundering (AML) supervision. The risk-focused approach enables federal agencies to better tailor examination plans and procedures based on the unique risk profile of each bank. The statement outlines common practices for assessing a bank's money laundering/terrorist financing risk profile, assisting examiners in scoping and planning the examination and initially evaluating the adequacy of the BSA/AML compliance program. Using this approach, the agencies generally are able to allocate more resources to higher-risk areas and fewer resources to lower-risk areas when conducting BSA/AML examinations. The statement does not establish new requirements, and also notes that having a risk-based compliance program enables a bank to allocate compliance resources commensurate with its risk. This statement was developed by a working group aimed at improving the effectiveness and efficiency of the BSA/AML regime. Members include the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and FinCEN. Source: Board of Governors of the Federal Reserve System (July 22, 2019)
Finalized Rules
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Finalized Rules
Agencies Adopt Final Rule to Exclude Community Banks From the Volcker Rule The joint regulatory agencies have adopted a final rule to exclude community banks from the Volcker Rule, consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds. Under the final rule, which is unchanged from the proposal, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets are excluded from the Volcker Rule. The final rule also permits a hedge fund or private equity fund, under certain circumstances, to share the same name or a variation of the same name with an investment adviser as long as the adviser is not an insured depository institution, a company that controls an insured depository institution, or a bank holding company. FDIC Board Finalizes Changes to Recordkeeping Requirements for Deposit Insurance Determinations The FDIC approved amendments to two rules to simplify the process for making insurance determinations in the event a bank is placed into receivership. Part 370 of the FDIC's Rules and Regulations "Recordkeeping for Timely Deposit Insurance Determination" has been amended to address a number of issues. Most notably, it will now allow for an optional one-year extension of the rule's original compliance deadline of April 1, 2020. Other changes are more technical and are intended to address issues that became apparent as the FDIC staff worked with institutions to comply with Part 370 since it was first adopted in November 2016. Part 370 is currently applicable to the 32 FDIC-insured institutions that have more than two million deposit accounts and establishes recordkeeping requirements to facilitate rapid payment of insured deposits to customers if one of those institutions were to fail. The FDIC also amended Part 330 of its Rules and Regulations to expand the types of evidence it would consider when determining whether joint accounts qualify for increased deposit insurance coverage. This change affects all insured depository institutions regardless of size. The FDIC will continue to look to signature cards when determining deposit insurance coverage on joint accounts but may now also rely on other information contained in a bank's deposit account records that establishes co-ownership of a joint account. This change does not expand or contract deposit insurance coverage for joint accounts and does not place any increased burden on depositors or FDIC-insured institutions. Agencies Simplify Regulatory Capital Rules The joint agencies have adopted a final rule to simplify certain aspects of the capital rule. The key elements of the final rule apply solely to banking organizations that are not subject to the advanced approaches capital rule (non-advanced approaches banking organizations). Under the final rule, non-advanced approaches banking organizations will be subject to simpler regulatory capital requirements for mortgage servicing assets, certain deferred tax assets arising from temporary differences, and investments in the capital of unconsolidated financial institutions than those currently applied. The final rule also simplifies, for non-advanced approaches banking organizations, the calculation for the amount of capital issued by a consolidated subsidiary of a banking organization and held by third parties (sometimes referred to as a minority interest) that is includable in regulatory capital. In addition, the final rule makes technical amendments to, and clarifies certain aspects of, the agencies' capital rule for both non-advanced approaches banking organizations and advanced approaches banking organizations (technical amendments).
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Proposed Rules
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Proposed Rules Home Mortgage Disclosure Act
On June 27, 2019, the Consumer Financial Protection Bureau (Bureau) announced that it is extending until October 15, 2019, the comment period on the Bureau’s Advance Notice of Proposed Rulemaking relating to Regulation C, which implements the Home Mortgage Disclosure Act. The Bureau is proposing two alternatives to amend Regulation C to increase the threshold for reporting data about closed-end mortgage loans so that institutions originating fewer than either 50 closed-end mortgage loans, or alternatively 100 closed-end mortgage loans, in either of the two preceding calendar years would not have to report such data as of January 1, 2020. The proposed rule would also adjust the threshold for reporting data about open-end lines of credit by extending to January 1, 2022, the current temporary threshold of 500 open-end lines of credit and setting the threshold at 200 open-end lines of credit upon the expiration of the proposed extension of the temporary threshold. The Bureau is also proposing to incorporate into Regulation C the interpretations and procedures from the interpretive and procedural rule that the Bureau issued on August 31, 2018, and to implement further section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Capital Treatment of Land Development Loans The joint agencies have invited public comment on a proposal to clarify the treatment of land development loans under the agencies' capital rules. This proposal expands on the agencies' September 2018 proposal to revise the definition of high volatility commercial real estate (HVCRE) as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The land development proposal would clarify that loans that solely finance the development of land for residential properties would meet the revised definition of HVCRE, unless the loan qualifies for another exemption. The land development proposal would apply to all banking organizations subject to the agencies' capital rules. Comments will be accepted for 30 days after publication in the Federal Register (August 12, 2019). Agencies Complete Resolution Plan Evaluations and Extend Deadline for Certain Firms The Federal Reserve Board and the Federal Deposit Insurance Corporation today announced several resolution plan actions, including completing their evaluations of the 2018 resolution plans for 82 foreign banks and extending the deadline for the next resolution plans from those firms, as well as 15 domestic banks. The extensions will give the banks additional time to prepare their plans in light of resolution plan rule changes proposed by the agencies in April 2019. The agencies extended the filing deadline for the 82 foreign banks and 15 domestic banks until July 1, 2021. This extension will mitigate uncertainty around the banks’ filing requirements while the agencies’ April proposal to revise the resolution plan rule remains pending.
Other Compliance News FAQ on TRID Integrated Disclosures On July 31, 2019, the Bureau released frequently asked questions on providing Loan Estimates to consumers. Payday Lending Rule Small Entity Compliance Guide On June 28, 2019, the Bureau updated the small entity compliance guide summarizing the Payday Lending Rule’s payment-related requirements. The guide has been updated to incorporate the changes that the Delay Final Rule made to the 2017 Payday Lending Rule. OCC Guidelines for Requesting a Strategic Plan The OCC has issued Bulletin 2019-39 to inform national banks, federal savings associations, and federal branches of foreign banking organizations (collectively, banks) about current guidelines for requesting approval to be evaluated under the Community Reinvestment Act (CRA) using the strategic plan option or to request approval to amend an approved CRA strategic plan. This bulletin rescinds:
• OCC Bulletin 1996-11, “Community Reinvestment Act: Guidelines for Approval for a Strategic Plan & Wholesale or Limited Purpose Institution.”
• OTS CEO Memo 268, “Strategic Plan and Wholesale/Limited Purpose Designations Under the CRA.” These guidelines do not represent new requirements but instead summarize the OCC’s process for addressing bank requests for approval or amendment of a CRA strategic plan, including:
• information that a bank should provide to substantiate its request.
• the email address for banks to submit requests.
• the OCC’s review and approval processes. Agencies Complete Resolution Plan Evaluations and Extend Deadline for Certain Firms The Federal Reserve Board and the Federal Deposit Insurance Corporation today announced several resolution plan actions, including completing their evaluations of the 2018 resolution plans for 82 foreign banks and extending the deadline for the next resolution plans from those firms, as well as 15 domestic banks. The extensions will give the banks additional time to prepare their plans in light of resolution plan rule changes proposed by the agencies in April 2019. The agencies extended the filing deadline for the 82 foreign banks and 15 domestic banks until July 1, 2021. This extension will mitigate uncertainty around the banks’ filing requirements while the agencies’ April proposal to revise the resolution plan rule remains pending.
Other Compliance News NCUA Amends Real Estate Appraisal Rules The NCUA Board (Board) amended the agency’s rule requiring real estate appraisals for certain transactions. The final rule accomplishes four objectives:
• Increasing the threshold below which appraisals are not required for commercial real estate transactions from $250,000 to $1,000,000.
• Restructuring the rule to enhance clarity.
• Exempting from the rule certain federally related transactions involving real estate in a rural area.
• Making conforming amendments to the definitions section.
The final rule is effective October 22, 2019. NCUA Finalizes Amendment Regarding Fidelity Bonds The NCUA Board (Board) finalized a rule that amends its regulations regarding fidelity bonds for corporate credit unions and natural person credit unions. The rule:
• Strengthens a board of directors’ oversight of a federally insured credit union’s (FICU) fidelity bond coverage.
• Ensures an adequate period to discover and file fidelity bond claims following a FICU’s liquidation,
• Codifies a 2017 NCUA Office of General Counsel legal opinion that permits a natural person credit union’s fidelity bond to include coverage for certain credit union service organizations (CUSOs).
• Addresses Board approval of bond forms. The final rule is effective October 22, 2019.
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Recommended Actions to Take
Recommended Actions to Take
➢ Review the amendments to Expedited Funds Availability Act and its implementing Regulation CC and checklist provided in Focus of the Month to ensure compliance.
➢ Review the FDIC’s changes to recordkeeping requirements for deposit insurance determinations and update policies and procedures.
➢ Review interagency and FinCEN joint statement on improving Transparency of Risk-Focused BSA/AML Supervision.
➢ Review the FRB and FDIC resolution plan actions and filing deadline. ➢ Review the OCC’s guidance on Fraud Tisk Management Principles. ➢ Review the CFPB’s Small Entity Payday Lending guidance as applicable.
If you have questions about any of the above recommendations,
or about their implementation, feel free to reach out to Accume
