ABA Dodd-Frank Tracker

ABA Seeks Pause on Basel Transition Period

2017-06-21T10:20:00.000-04:00

ABA wrote to the heads of the federal regulatory agencies requesting that regulators pause the Basel III transition period until projected amendments to the risk-based capital standards can be promulgated.

The agencies earlier this year acknowledged in a joint Economic Growth and Regulatory Paperwork Reduction Act report that many of the Basel rules were “too complex given community banks’ size, risk profile, condition, and complexity,” and announced that they would propose amendments to simplify the regulatory capital treatment for mortgage servicing assets, timing difference deferred tax assets and holdings of regulatory capital instruments issued by financial institutions. These changes were echoed by the Treasury Department in its report on regulatory reform. The association explained its position in the letter:

[ABA] share[s] the view that regulatory capital standards are more complex than necessary for the intended prudential supervisory value. This is an appropriate time to consider the effectiveness of prudential supervision standards implemented in recent years, with a view toward how they can be improved.

Read the letter.

Fed Grants Extension on Liquidity Reporting for GSIBs

2016-12-12T09:50:00.000-05:00

The Fed issued an interim final rule delaying certain filing deadlines for banks required to submit the FR Y-15, the Banking Organization Systemic Risk Report. The change will harmonize this reporting requirement with the Fed’s complex liquidity reporting regime, FR 2052a -- a step ABA had encouraged the board to take in a comment letter.

Under the rule, banks with less than $700 billion in total consolidated assets and $10 trillion or less in assets under custody but total consolidated assets of $250 billion or more or foreign exposure of $10 billion or more will have until Dec. 31, 2017, to file the FR Y-15. Banks between $50 billion and $250 billion in total consolidated assets and less than $10 billion in on-balance-sheet foreign exposure will have until June 30, 2018, to file. The deadline is unchanged, however, for firms with more than $700 billion in consolidated assets or with $10 trillion or more in assets under custody. These banks must file the FR Y-15 by Dec. 31, 2016.

Read the interim final rule.
View the updated filing deadlines.

ABA Supports Bill Slowing Overtime Rule Implementation

2016-07-15T09:28:00.002-04:00

ABA wrote to Rep. Kurt Schrader (D-Ore.) in support of his Overtime Reform and Enhancement Act, which would provide a gradual, three-year phase-in for the Department of Labor’s controversial overtime rule. While Schrader’s bill would not stop the DoL overtime rule – which doubles the salary level used to determine whether employees are exempt from overtime pay under the Fair Labor Standards Act from $23,660 to $47,476 – it would provide the transition time necessary for employers to make the switch.

ABA said

Our members believe that DoL’s increase to the salary threshold in the first year is simply too much too soon. This drastic increase will present significant challenges for our members that provide banking services in lower cost-of-living areas of the country, particularly community banks.

  

Under Schrader’s bill, the overtime threshold would rise over three years, with the first increase reaching $35,984 in December 2016. It would also stop the final rule’s automatic salary threshold increases. ABA continues to support the separate Protecting Workplace Advancement and Opportunity Act, which would require DoL to fully examine the rule’s impact before implementing the final rule, and urges all bankers to send letters to Congress in support.

Read the letter.
Take grassroots action.

ABA Applauds Consumer Compliance Rating System Proposal

2016-06-30T09:37:00.003-04:00

ABA expressed support for proposed revisions to the Federal Financial Institutions Examinations Council’s Consumer Compliance Rating System that reflect the significant regulatory, supervisory, technological and market changes that have occurred since the FFIEC adopted the existing consumer compliance evaluation process in 1980.

When the current rating system was adopted, examinations focused on transaction testing rather than on a risk-based evaluation of an institution’s compliance management system. ABA in a comment letter expressed support for the proposal’s risk-based and CMS-focused evaluation and recommended further improvements, including assigning responsibility for the CC Rating to the appropriate prudential regulator (rather than the Consumer Financial Protection Bureau) for banks with more than $10 billion in assets; using oversight to ensure that the proposed CC Rating System will not result in new or increased supervisory expectations; and clarifying the proposal’s discussion of “violations of law and consumer harm.”

Read ABA's comment letter.

ABA Calls for Simplified Capital, Liquidity Standards

2016-06-24T12:00:00.000-04:00

Testifying before the Senate Banking Committee, ABA EVP Wayne Abernathy made the case for reducing the complexity of capital and liquidity rules, which he said would not only enhance bank supervision and management, but benefit bank customers.

Abernathy said,

There are ways to reduce complexity for banks and supervisors that will result in improved application of the regulatory principles involved. We need to begin that conversation. If not, we may find ourselves with a regulatory program that in practice is too complex to realize the supervisory success to which we all aspire.

Over the past several years, new prudential regulations have required banks to keep a higher level of capital in reserve, which Abernathy pointed out leaves banks with less available money to meet the needs of their customers. Abernathy said,

While adequate capital allows a bank to expand its activities, excessive capital requirements mean pulling even more money out of circulation to provide the same amount of financial services.

With the nation’s largest banks tracking more than a dozen different capital requirements, Abernathy questioned whether all capital measures have equal supervisory value, and suggested that if not, regulators might improve efficiency by focusing on those measures that provide the most value to prudential supervision.

Specifically, ABA recommended that regulators recognize highly capitalized banks as already meeting Basel III capital standards without having to go through the complex Basel III calculations; involve the public, Congress and affected industries through the publication of an advanced notice of proposed rulemaking before starting international negotiations on financial standards; withdraw the proposed rules implementing the Basel NSFR liquidity regime; and, with respect to the treatment of trust preferred securities under Basel capital rules, hold existing TruPS issuances and investments harmless, which was Congress’ intent in the Dodd-Frank Act.

Read Abernathy's testimony.

FDIC Budget, Headcount Declines to Continue

2015-12-16T10:25:00.000-05:00

The FDIC board approved a $2.21 billion agency operating budget for 2016, down 4.7% from the 2015 budget. The board also authorized a 2016 staffing level of 6,569 employees, a net reduction of 317 positions from the 2015 authorization of 6,886.

FDIC Chairman Martin Gruenberg said:

As the U.S. banking industry continues to show improvement and the number of bank failures steadily declines, we remain focused on fulfilling the responsibilities of our mission while prudently managing costs.

CFTC Proposes Rule for Margin on Cross-Border Uncleared Swaps

2015-06-30T09:20:00.000-04:00

The CFTC issued a proposal on when margin requirements would apply to uncleared swap transactions in a cross-border context.

The CFTC described the proposed approach as a hybrid of the entity and transaction-level approaches found in the agency’s advance notice of proposed rulemaking last fall. When finalized, the rule will apply to CFTCregistered swap dealers and major swap participants that do not have a prudential regulator, while the prudential regulators’ proposal describing margin requirements for uncleared swaps contains its own cross-border framework.

ABA’s new Center for Bank Derivatives Policy will comment on the proposal; comments are due 60 days after publication in the Federal Register.

Read the proposed rule.

Curry Emphasizes Board Role in Setting Tone

2015-06-10T09:39:00.003-04:00

The OCC looks to boards of directors in addition to senior management to set a tone at a bank that "encourages ethical and responsible behavior and demands individual accountability," Comptroller of the Currency Thomas Curry said at an industry event in New York. The board must "articulate what the institution stands for" and set boundaries of unacceptable behavior, he added.

We don’t expect directors to manage the bank, but we do expect the board to look at high-level issues that relate to culture, from the compensation structure to how management deals with deviations from the standards the board has established.

He added that the lengthy rulemaking on the Dodd-Frank Act's incentive compensation provision will soon be complete. "This has been an exceedingly long rulemaking process, even if I understand the reasons, and I am working to see to it that we are nearing the end of the process," he said.

Read the speech.

OIG: CFPB and Prudential Regulators Generally Coordinating

2015-06-04T10:10:00.000-04:00

The OIG for the FDIC, Fed/CFPB, Treasury, and NCUA jointly evaluated how the CFPB and prudential regulators are coordinating their regulatory responsibilities and avoiding duplication of regulatory oversight responsibilities.

The OIGs found that the CFPB and prudential regulators were generally coordinating their regulatory oversight activities for Federal consumer financial laws, consistent with the Dodd-Frank Act and provisions of a memorandum of understanding (MOU) governing coordination activities, the report states.

The OIGs did not identify regulatory duplication of oversight responsibilities, but they determined that there are opportunities for enhanced coordination. These opportunities include conducting additional simultaneous examinations, better communicating matters identified in draft supervisory letters among the regulators, establishing a framework to address the potential for conflicting supervisory determinations, developing a standard CFPB process for notifying the prudential regulators of Federal consumer financial law violations by other institutions and timely notifying the prudential regulators of CFPB information requests to their regulated institutions.

To determine the extent to which CFPB and prudential regulators were coordinating their supervisory activities and avoiding duplication, the OIGs reviewed the Dodd-Frank Act, interviewed CFPB and regulator officials, reviewed MOU developed by the CFPB and prudential regulators, conducted research on complaints from regulators and financial institutions and coordinated with the GAO to understand its completed, ongoing and planned activities.

Read the OIG report.

Bipartisan Policy Center Argues Against Big Bank Breakup

2014-10-28T10:04:00.000-04:00

The Bipartisan Policy Center’s Financial Regulatory Reform Initiative wrote a paper assessing the costs and benefits of breaking up the big banks. The paper concludes that:

“[T]he reforms undertaken since the financial crisis have gone a long way toward addressing the TBTF issue. Proposals to break up major financial institutions entail greater costs than the benefits they would provide and are potentially outright counterproductive.”

Rather than break up the big banks, the Bipartisan Policy Center finds that it would be better to allow the Dodd-Frank Act and other global reforms enacted in the wake of the financial crisis to work as intended.

The paper points out several ways recent regulations have addressed the TBTF issue:

The new legal authority created by Dodd-Frank to resolve a large, complex institution has lessened market expectations of future government rescues, reducing the cost-of-funding advantage
The enhanced prudential requirements placed on large banks, like higher capital requirements and annual stress tests, further reduces the funding advantage
Dodd-Frank permits regulators to restrict activities of financial institutions they deem to pose a “grave threat” to the U.S. financial system
Dodd-Frank caps the size of large banks at 10% of total U.S. consolidated financial liabilities

The paper also points out that breaking up the big banks would reduce the value they provide the economy, businesses and consumers. Large global financial institutions benefit consumers and business by facilitating international trade, spreading socially beneficial innovations and promoting economic growth.

Furthermore, the paper notes that a breakup presents difficulties, such as how to divide the company’s assets, debts and customers among its successor institutions, and how the breakup would disrupt existing customer relationships.

Finally, the Bipartisan Policy Center finds that there is little reason to believe that breaking up the largest institutions would reduce the risk in the financial system over the long-term. If a large, $2 trillion bank were broken up, it is likely the breakup would result in several $400 billion to $500 billion banks, not multiple small, easy-to-resolve banks. In fact, creating more banks just under the threshold for a breakup could be riskier for the economy, not safer.

Read the paper.

Curry Testifies on Dodd-Frank Implementation

2014-09-10T10:28:00.001-04:00

Comptroller of the Currency Thomas Curry discussed implementation of the Dodd-Frank Act to improve the safety and soundness of national banks and federal savings associations and enhance consumer protection.

Requiring higher supervisory standards for the largest and most complex banks we oversee is consistent with the Dodd Frank Act’s broad objective of strengthening the stability of the financial system. These heightened standards address the need for comprehensive and effective risk management; an engaged board of directors that exercises independent judgment; a more robust audit function; talent development, recruitment and succession planning; and a compensation structure that does not encourage inappropriate risk taking.

Read Curry's prepared remarks.

New Infographic Illustrates Regulatory ‘Avalanche’

2014-07-23T08:23:00.000-04:00

ABA is sending to members of Congress a new infographic documenting the enormous cumulative weight of new and existing regulations on community banks. The graphic shows that Call Report items have more than tripled since 1990, that the majority of small banks have a sole compliance officer to wade through several-hundred-page rules and that reg burden has helped drive community bank consolidation.

The avalanche of regulatory activities in recent years has included mortgage rules, Basel III, liquidity proposals, the Durbin Amendment, municipal adviser registration, derivatives and remittances. The graphic also shows the cost to consumers of heavy burdens, with 58% of banks canceling or holding off on a new product because of increased regulation and 44% limiting current products or services in order to comply.

View the infographic.

ABA Keating Assesses Dodd-Frank on Anniversary

2014-07-22T09:59:00.001-04:00

In connection with the fourth anniversary of the Dodd-Frank Act yesterday, ABA President and CEO Frank Keating made several media appearances. The bill is a mixed bag, he noted on Bloomberg’s “Bottom Line” program.

“There are some good things in the law,” he noted -- for example, “it says that no institution is too big to fail” and provides “a mechanism to ensure that’s the case.” It also furnishes a mechanism for regulation of systemically significant nonbanks, he pointed out.

However, Keating added, the CFPB needs more oversight, and mortgage rules based on Dodd-Frank are hindering the housing market. “I hope both Republicans and Democrats go back to the drawing board and amend those things that harm us as an economy and leave in those things that save us from reckless lending and the collapse of a big institution.”

Watch the Bloomberg interview.

Morrison & Foerster Report: Dodd Frank Act at 4

2014-07-21T10:13:00.000-04:00

Morrison & Foerster released a publication to mark the four-year anniversary of the enactment of the Dodd-Frank Act: Dodd-Frank at 4: Where do we go from here? The report provides a brief summary of the “most significant Dodd-Frank Act related regulatory developments of the last year” and additional thoughts on what is left to implement. The regulatory developments the report focuses on include: regulatory capital requirements, the Volcker rule, enhanced prudential standards, derivatives developments and more.

Read the full report by Morrison & Foerster.

SEC Commissioner Powowar on FSOC

2014-07-16T08:01:00.001-04:00

SEC Commissioner Michael Piwowar made remarks at the AEI Conference on Financial Stability regarding whether the Financial Stability Oversight Council (FSOC) can be effective in fostering financial stability in the United States. Piwowar noted that FCOS has become notorious for being unaccountable and non-transparent. The Commissioner focused his comments on two areas—“first, the outsized role the prudential regulators, and especially the Federal Reserve, play on the Council, and, second, the Council’s apparent disdain for non-banking subject matter expertise.”

Piwowar concluded his prepared remarks by reiterating his fear that the SEC’s mission is being compromised by the activities of prudential regulators on the Council.

With the Council’s steady march, led by its self-appointed “alpha-dog”—the Fed—into areas that are solely within the SEC’s jurisdiction, I am concerned that our mission to protect investors, maintain fair, orderly, and efficient markets, and promote capital formation is being compromised.

Read Piwowar’s full prepared remarks.

Fed’s Tarullo Pitches Reg Relief Ideas

2014-05-09T09:02:00.001-04:00

Speaking at a bank regulatory conference in Chicago, Federal Reserve Governor Daniel Tarullo offered several regulatory relief suggestions for banks of different asset sizes. Tarullo advised:

It would be worthwhile to have a policy discussion of statutes that might be amended explicitly to exclude community banks [those with under $10 billion in assets] from their coverage. In my view, two candidates would be the Volcker rule and the incentive compensation requirements in section 956 of Dodd-Frank. The concerns addressed by these statutory provisions are substantially greater at larger institutions.

Tarullo also questioned the Dodd-Frank Act’s imposition of financial stability regulation — stress tests, capital plan submissions, resolution plans and a form of the Basel III liquidity coverage ratio — on banks with over $50 billion in assets. He explained:

Experience to date suggests to me, at least, that the line might better be drawn at a higher asset level — $100 billion, perhaps. Requirements such as resolution planning and the quite elaborate requirements of our supervisory stress testing process do not seem to me to be necessary for banks between $50 billion and $100 billion in assets.

ABA welcomed Tarullo’s remarks and thanked him for recognizing the problems inherent in applying arbitrary $10 billion and $50 billion asset thresholds in statute and regulation. ABA President and CEO Frank Keating said:

We look forward to working with regulators and legislators on efforts to replace these arbitrary triggers with standards that are more closely tied to identifiable risks. Moving from an arbitrary to a more tailored supervisory program will improve our safety and soundness supervision, and will more effectively address risks to America’s financial system.

Tarullo’s suggestions came in the context of broader remarks on the evolution of prudential regulation in the United States as supervisors have added financial stability oversight to their portfolio of responsibilities.

Read the speech.

Tarullo Testifies before U.S. Senate

2014-02-06T10:33:00.001-05:00

Governor Daniel K. Tarullo spoke about the Federal Reserve’s recent Dodd-Frank Act implementations, its key regulatory and supervisory priorities for 2014 and its expectations regarding information security in his testimony before the Committee on Banking, Housing, and Urban Affairs at the U.S. Senate.

Tarullo noted that the Federal Reserve, often in tandem with other regulatory agencies, has made progress on a number of Dodd-Frank reforms including, the liquidity coverage ratio (LCR), the Comprehensive Capital Analysis and Review (CARR) process, the Volcker Rule, rules related to the Federal Reserve’s emergency lending authority, various risk retention reforms and the restructuring of assessment fees of large financial companies.

The Federal Reserve’s 2014 regulatory and supervisory priorities will focus on establishing enhanced prudential standards for large banking firms and on further enhancing the resiliency and resolvability of U.S.-based global systemically important banks, according to Tarullo.

In conclusion, Tarullo remarked:

“[t]he financial regulatory architecture is considerably stronger today than it was in the years leading up to the crisis, but work remains to complete the post-crisis global financial reform program… [The Federal Reserve is] focused on reducing the probability of failure of systemic financial firms, improving the resolvability of systemic financial firms, and monitoring and mitigating emerging systemic risks."

Read Tarullo’s prepared testimony.
Watch the hearing live.

Bill Introduced to ‘Enhance’ SIFI Criteria

2013-08-06T08:34:00.002-04:00

Representative Blaine Luetkemeyer (MO) has introduced the Systemic Risk Designation Improvement Act that would more closely base regulation of financial institutions on risk rather than on arbitrary asset size.

The Systemic Risk Designation Improvement Act would enhance the criteria used to make SIFI designations, and therefore subject to stricter regulatory standards, are those institutions that are not only large in size, but also globally interconnected and complex.

The Dodd- Frank Act used a numeric threshold of $50 billion to subject all institutions, regardless of business lines or complexity, to enhanced regulatory assessment through the SIFI designation.

Read more.

Gruenberg on Dodd-Frank Rulemaking Progress

2013-07-11T09:21:00.000-04:00

In prepared remarks for a Senate Banking Committee hearing today Chairman Martin Gruenberg commented on the FDIC’s progress on policies and strategies to build a more effective resolution framework for large, complex financial institutions as mandated by the Dodd-Frank Act.

The FDIC is working on a Statement of Policy which would provide more clarity on the resolution process. Gruenberg noted the FDIC anticipates to release a proposal for public comment before the end of the year.

Gruenberg also commented on the banking industry’s progress in raising the quality and quantity of capital in the industry. Speaking of the new capital rules released this week, Gruenberg stated: “Going forward, the rule would have the effect of preserving and maintaining the gains in capital strength the industry has achieved in recent years.”

Read Gruenberg’s prepared testimony.

Tarullo: U.S. G-SIFIs Should Expect Four More Proposals to Enhance Capital Standards

2013-07-03T08:18:00.001-04:00

Yesterday, Federal Reserve Governor Tarullo identified four additional rules that are in various stages of development to enhance the capital requirements for the eight U.S. banking organizations already identified as of global systemic importance.

First,the Federal reserve is close to completing a proposed rule that will establish a leverage ratio threshold for these firms above the Basel III required minimum.

Second, a proposed rule will be issued in the next few months "concerning the combined amount of equity and long-term debt these firms should maintain in order to facilitate orderly resolution in appropriate circumstances."

Third, late this year the Federal Reserve will issue a proposal to implement a framework of capital surcharges on U.S. banking organizations of global systemic importance.

Fourth, Federal Reserve "staff is currently working on a recommendation ... on possible approaches to requiring additional measures that would directly address risks related to short-term wholesale funding, including a requirement that large firms substantially dependent on such funding hold additional capital."

Read Tarullo's statement.

Prudential Financial Will Contest SIFI Designation

2013-07-03T07:58:00.000-04:00

The Hill is reporting that Prudential Financial Inc. announced on Tuesday it would challenge its proposed designation as a “systemically important” institution. The announcment comes nearly a month after the Financial Stability Oversight Council (FSOC) voted to move forward with plans to designate “an initial set” of undisclosed firms as systemically important financial institutions (SIFI).

Read more.

Public Section of Resolution Plans Released for Four Institutions

2013-07-02T16:28:00.000-04:00

The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board today made available the public portions of resolution plans for four firms with U.S. nonbank assets between $100 billion and $250 billion.

The Dodd-Frank Act requires that bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council submit resolution plans to the FDIC and Federal Reserve. Each plan must describe the company's strategy for rapid and orderly resolution in the event of material financial distress or failure of the company.

Read the press release.

Tarullo on Financial Stability Regulations

2012-10-11T11:08:00.001-04:00

Federal Reserve Governor Daniel Tarullo spoke at the University of Pennsylvania Law School on financial stability regulations, primarily the Dodd-Frank Act and its effect on financial stability.

Dodd-Frank creates a legal and institutional framework within which financial stability regulation is to be developed but, with a couple of notable exceptions, it does not delineate the steps that should actually be taken to promote financial stability.

The necessarily somewhat extemporized character of Dodd-Frank has had several consequences for the development of financial stability regulation.

First, many of the new authorities and requirements of Dodd-Frank require extensive elaboration through administrative rulemaking, often coordinated or agreed among three or more agencies.

Second,…the provisions of the law that use the concept of risk to financial stability as a directly applicable legal standard provide only general guidance for regulators in applying that standard.

Third, broad as Dodd-Frank is in some respects, it does not grant direct regulatory authority in some areas that academic and agency analysis suggests may pose systemic risk.

Finally, the law made important institutional changes, creating novel governmental entities specifically designed to address financial stability, and binding existing agencies more closely together in their rulemaking and supervisory activities. The relationships among existing agencies and the evolving practice of these new entities may in turn pose some novel practical and administrative law issues.

Tarullo also spoke of the money market mutual funds market, noting it was unfortunate the SEC has not begun to form new regulations and rules for the market. Tarullo noted the money market funds remain a threat to financial stability and that having the Financial Stability Oversight Council (FSOC) or the Federal Reserve step in to regulate the market would be a worse option for all involved.

FSOC could designate money market funds as systemically important and thus subject the market to the prudential requirements under the Dodd-Frank Act.

Read Tarullo’s full speech.

ABA Issues Guide to Help Community Bankers Analyze Basel III Impact

2012-08-20T08:43:00.004-04:00

ABA has developed a guide to help community bankers start evaluating how the Basel III capital proposals would affect their institutions. The guide -- “Top 12 Questions to Apply to Your Bank” -- describes relevant Basel III issues and then lists several questions that bankers can use to determine an issue's likely impact on their bank's business.

The questions also are designed to help community bankers gather factual data for writing Basel III comment letters. The new comment deadline is Oct. 22. Meanwhile, ABA also is encouraging bankers to consult its Basel III resource page that contains the latest information on the capital proposals.

Read the Basel III guide for community bankers.
Access ABA’s Basel III resource page.

Clearinghouses First for "Systemically Important" Designation

2012-07-30T17:32:00.000-04:00

The Federal Reserve today issued a final rule to designate as "Systemically Important" the payment, clearing, and settlement activities of designated FMUs. The risk-management standards are based on the recognized international standards developed by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO).

The final rule includes a new provision that would allow the Board to waive the application of certain Regulation HH standards to a particular type of designated FMU, where the risks presented by or the design of that designated FMU would make application of certain standards inappropriate.

The vote was unanimous.

Read the press release.

Read the final rule.