ABA Dodd-Frank Tracker

OCC Requests Comment on Volcker Rule Improvements

2017-08-03T10:00:00.000-04:00

The OCC issued a request for comment on revisions to the Volcker Rule, which prohibits all banks — regardless of size or risk — from engaging in any activities that might be characterized as “proprietary trading” or “covered fund investments.” The agency is seeking feedback that could support changes to these prohibitions and to the rule’s compliance and reporting requirements. Comments will be due 45 days after the notice is published in the Federal Register.

"A bipartisan consensus has emerged that the Volcker Rule needs clarification and recalibration to eliminate burden on banks that do not engage in covered activities and do not present systemic risk,” said Acting Comptroller of the Currency Keith Noreika, noting that the request for information is part of an ongoing interagency effort to improve the rule’s implementing regulations.

ABA has been vocal in its opposition to the Volcker Rule and has long sought changes to it. In a recent white paper to the U.S. Treasury Department — which was referenced heavily in the OCC’s request for information — the association called for a full repeal of the rule, and in the meantime, for substantial regulatory revisions that focus on prohibited activities and that redefine key terms. ABA noted that the Volcker Rule has been “a drag on the economy,” and has imposed a significant cost and compliance burden on banks of all sizes.

“At the end of the day, we all seek an implementation program that is clear and promotes financial stability and economic growth," said ABA President and CEO Rob Nichols. "We appreciate that the OCC statement references several of ABA’s past comments regarding the Volcker Rule, and we intend to be active participants in the public reform discussion.”

Reform of the Volcker Rule was also a key focal point of the recent Treasury report on financial regulation, which supported an exemption from the rule for banks under $10 billion.

Read the OCC’s request for information.

Mnuchin Underscores Tailored Regulatory Approach

2017-07-28T09:40:00.000-04:00

Testifying before the House Financial Services Committee, Treasury Secretary Steven Mnuchin outlined his recommendations for financial reform, including tailoring capital requirements, reducing regulatory overlap, remedying the Volcker Rule and making the Consumer Financial Protection Bureau more accountable.

As an example, during the question-and-answer period Mnuchin suggested that the Dodd-Frank Act’s $50 billion asset threshold for designation as a systemically important financial institution “should be raised substantially, at least to $250 or $300 billion.” He recommended further tailoring the designation process so that regulators have discretion to exempt “simple, un-complex banks” above whatever asset threshold is established.

ABA has long supported a tailored approach to regulating SIFIs based on a broader range of systemic risk indicators, including business model, geographic exposure and interconnectedness. The association supports Rep. Blaine Luetkemeyer’s recently introduced bipartisan Systemic Risk Designation Improvement Act, which would eliminate the arbitrary $50 billion threshold.

Read Mnuchin’s testimony.

Agencies Take Steps to Address Volcker Rule Implementation Problems

2017-07-25T10:00:00.000-04:00

The federal banking agencies began taking steps to address certain challenges with implementing the Volcker Rule. They announced additional time for foreign banks to address certain foreign funds that may have been unintentionally covered under Volcker, and the Federal Reserve announced guidelines for how banks can seek extensions for certain kinds of investments in hedge funds and private equity.

The Fed's action provides a conformance period until July 21, 2018, during which agencies will not take action against foreign banking entities based on whether the activities and investments of a qualifying foreign excluded fund are attributed or connected to the foreign bank. Under the guidelines, the Fed said that banks seeking an up-to-two-year extension of the requirement to conform certain “seeding” investments in hedge funds and private equity funds may apply to their local Federal Reserve Bank, which has been delegated authority to approve but not deny these requests.

While some changes depend on legislation in Congress, regulators have in recent months signaled their willingness to address Volcker Rule concerns. As it did in its recent white paper on the Volcker Rule, ABA continues to advocate with Congress and regulatory agencies for changes to improve the effectiveness of Volcker.

Read the interagency guidance on foreign funds.
Read the Fed's guidance on requesting an extension.

Bipartisan Group of Lawmakers Calls for Better Exam Coordination

2017-07-14T09:00:00.000-04:00

In a letter to Treasury Secretary Steven Mnuchin, a group of bipartisan lawmakers led by Reps. Scott Tipton (R-Colo.) and Kyrsten Sinema (D-Ariz.) urged Treasury to prioritize policy changes that would increase coordination between regulatory agencies conducting bank examinations to help reduce the compliance burden on financial institutions.

“Financial holding companies and their affiliates are annually subject to a number of different examinations, including capital adequacy, liquidity, cybersecurity, vendor management, the Volcker Rule, Bank Secrecy Act/anti-money laundering requirements, and business continuity planning,” the lawmakers wrote. “Institutions subject to multiple exams on the same issue results in a never-ending cycle of examinations, which diverts critical resources and detracts from the real work of the institution to serve its customers, develop innovative ideas and defend against cyberattacks.”

In its recent report on financial regulation, Treasury raised similar concerns about the examination process and made recommendations on how it could be better streamlined. The lawmakers said that they intend to evaluate the department’s recommendation for assigning a lead regulator on issues where agencies have conflicting or overlapping jurisdiction, adding that the agencies themselves should also take action to address the issue. They also welcomed Treasury’s recommendation calling for increased coordination, transparency and accountability between the regulatory agencies.

Read the letter.

Yellen Highlights Opportunities for Reg Relief

2017-07-13T09:50:00.000-04:00

Testifying before the House Financial Services Committee, Federal Reserve Chairman Janet Yellen highlighted opportunities for Congress and financial regulators to streamline and reduce regulatory burdens. For example, she urged Congress to exempt community banks from the Volcker Rule and suggested that the Fed is interested in a “simplified capital regime” for community institutions and in revisiting the high-volatility commercial real estate guidance issued by federal agencies.

She also praised the Treasury Department’s recent report on financial regulation, noting that it includes “many useful and productive suggestions that mirror things we have been doing with respect to tailoring regulations” and adding that while she does not agree with every recommendation, there is “a lot in it that’s very useful.”

Yellen’s testimony principally addressed monetary policy and economic conditions, and she noted that due to the historically low “neutral rate,” the federal funds rate “would not have to rise all that much further to get to a neutral policy stance.” However, she expects the neutral rate to rise over time, meaning that “gradual rate hikes are likely to be appropriate over the next few years.”

She added that the Fed expects to begin its balance sheet unwinding this year, should the economy continue on its present course.

Once we start to reduce our reinvestments, our securities holdings will gradually decline, as will the supply of reserve balances in the banking system. The [Federal Open Market] Committee currently anticipates reducing the quantity of reserve balances to a level that is appreciably below recent levels but larger than before the financial crisis.

Read the testimony.

Fed Gov. Powell Highlights Focal Points for Reg Reform

2017-06-27T10:00:00.000-04:00

Noting the progress made over the last several years to improve the strength and resiliency of the U.S. financial system, Federal Reserve Governor Jerome Powell pointed to several key areas that the Fed is currently focusing on for regulatory reform. Powell’s comments echoed his previous testimony before the Senate Banking Committee.

Specifically, Powell noted that the Fed will look to simplify and recalibrate existing regulations for small and medium-sized banks, including call report and exam cycle requirements and certain capital rules. The agency is also considering changes to resolution plans, including an extension of the cycle from one year to two years; a reassessment of the Volcker rule; changes to increase the transparency of the stress testing process; and recalibrations to the supplementary leverage ratio.

“U.S. banks today are as strong as any in the world,” he said. “As we consider the progress that has been achieved in improving the resiliency and resolvability of our banking industry, it is important for us to look for ways to reduce unnecessary burden.”

Read the speech.

State Associations Call on Senate to Advance Reg Relief Legislation

2017-06-23T10:00:00.000-04:00

As the debate over financial regulatory reform now shifts to the Senate, 52 state bankers associations called on Senate leadership to support a bipartisan reg relief bill that would help create economic growth and improve the availability of credit to consumers.

The associations encouraged lawmakers to support several measures included in ABA’s Blueprint for Growth, including a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model, greater flexibility for savings associations, relief from various reporting requirements and repeal of the Volcker Rule. They also called for a review of arbitrary asset thresholds, and for regulators to consider changes to capital and liquidity requirements.

With the Treasury Department, regulators and individual lawmakers all expressing support recently for various reg reform initiatives, the associations expressed optimism for a bipartisan bill to move through the Senate.

It is encouraging to see lawmakers of both parties, the House of Representatives, and the Treasury Department lay the foundation for changes – regulatory calibrations that can kick-start our economy while maintaining a financial system that is safe, sound, and resilient. We urge the Senate not to allow partisanship to stand in the way of promptly passing much-needed reforms, and we stand ready to work with you in support of the financial needs of America’s communities.

Read the letter.

Regulators to Support Certain Reg Relief Measures in Hearing

2017-06-22T10:30:00.000-04:00

The heads of the regulatory agencies are expected to endorse various proposals for regulatory relief in a hearing in the Senate Banking Committee.

In written testimony submitted in advance of the hearing, representatives from the Federal Reserve, FDIC and the OCC expressed support for various actions to simplify the stress testing process, more closely tailor regulation and encourage the formation of new banks. Several measures addressed by the regulators echoed recommendations from the recent Treasury report on regulatory reform that was released earlier this month.

Notably, Federal Reserve Governor Jerome Powell expressed his agency’s support for extending the timeline for living will submissions from annually to every two years. FDIC Chairman Martin Gruenberg agreed, calling the change “worthwhile” and adding that “there may be opportunities to greatly reduce the submission requirements for a large number of firms due to their relatively small, simple and domestically-focused banking activities.” Regulators also supported revisiting various asset-size thresholds, including the $10 billion threshold for company-run stress tests and the $50 billion threshold for enhanced prudential standards.

As part of efforts to remove outdated, unnecessary or overly burdensome regulation, Acting Comptroller of the Currency Keith Noreika proposed that Treasury conduct a periodic review of all Bank Secrecy Act Regulations, similar the EGRPRA process. This “would give financial institutions an opportunity to express their concerns directly to the agency with the authority issue, repeal and modify BSA rules,” Noreika said in his written statement.

In addition, Noreika proposed that Congress streamline the de novo application process by giving new banks the ability to obtain FDIC deposit insurance upon receiving a charter from the OCC. Currently, banks are required to submit an application to both the FDIC and the chartering authority (either the OCC or state regulatory agency, depending on charter type). Noreika recommended that Congress consider designating a time period that the FDIC could object to the granting of deposit insurance following the charter approval by OCC or state regulator.

Regulators also said they would be receptive to, among other things, an exemption for small banks from the Volcker Rule, additional enhancements to the capital planning and stress-testing process and additional exam relief, particularly for community banks.

Read the regulators' testimonies.

House Passes Financial Choice Act

2017-06-09T11:59:00.000-04:00

The House passed the Financial Choice Act by a mostly party line vote of 233 to 186. The legislation is Financial Services Committee Jeb Hensarling’s sweeping, 600-page bill aimed at reforming parts of the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief for banks.

The bill includes a number of regulatory relief provisions long sought by ABA as part of its Blueprint for Growth, including a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model, greater flexibility for savings associations, relief from various reporting requirements, and repeal of the Volcker Rule.

Included in the bill is a “regulatory off-ramp” for larger institutions subject to DFA’s heightened prudential standards and Basel III’s capital and liquidity standards, provided those institutions elect to maintain a 10 percent non-risk weighted leverage ratio. The Choice Act also focuses on ending “too big to fail” by replacing DFA’s Orderly Liquidation Authority with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution.

Also targeted for reform by the bill is the CFPB, which would be renamed the Consumer Law Enforcement Agency and stripped of its examination powers and “UDAAP” enforcement authority. The agency would be led by a single director removable at will by the president, and subject to the congressional appropriations process.

The bill’s passage reflects an important step toward providing meaningful regulatory reform that will help America’s banks better serve their customers and communities, ABA President and CEO Rob Nichols said, though he noted that the bill “would have been much stronger had a provision to repeal the Durbin Amendment been retained.” With the bill’s passage, the fight for regulatory reform now shifts to the Senate.

Read ABA's statement.

ABA Commends House Reg Reform Effort Ahead of Choice Act Vote

2017-06-08T11:50:00.000-04:00

As Congress prepares to vote on the Financial Choice Act, ABA wrote to House leadership commending the House Financial Services Committee Chairman Jeb Hensarling (R-Texas) for his efforts to bring regulatory relief to the nation’s banks. The full House is expected to vote on the bill on June 8, 2017. The ABA said:

We agree with members of Congress on the need for strong regulation of our financial system. However, within the 25,000 pages of new and proposed rules since Dodd-Frank became law are requirements that are harming our ability to serve creditworthy customers and our communities… The Financial Choice Act will help address many of these concerns and allow banks to get back to serving their customers.

The bill includes several ABA-supported provisions that would provide regulatory relief for banks, including a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model, greater flexibility for savings associations, relief from various reporting requirements and repeal of the Volcker Rule.

ABA also applauded an amendment by Rep. John Faso (R-N.Y.) that would help level the playing field for mutual holding companies and allow them to raise additional capital without placing their mutual structure at risk.

Read the letter.

Fed Issues First Volcker Rule Extensions for Illiquid Funds

2017-06-08T11:15:00.000-04:00

Pursuant to a process announced in December 2016, the Federal Reserve issued five-year extensions for three banking firms to conform legacy illiquid fund investments with the Volcker Rule’s prohibition on ownership interests in legacy covered funds. ABA persistently urged the Fed over several years to set up the process. Applications were due to the Fed in January 2017. Banks that do not seek extensions or are not granted extensions have until July 21 to divest interests in prohibited funds, provided they were in place by the end of 2013.

Read more.

With Choice Act Up for Vote and Treasury Report Expected, Nichols Tees Up Week Ahead

2017-06-05T11:00:00.000-04:00

The week ahead is expected to be a busy one for financial reform in Washington, D.C. In an essay posted on Medium, ABA President and CEO Rob Nichols teed up the expected release of the Treasury Department's report responding to President Trump's call to streamline financial regulations, as well as Rep. Jeb Hensarling's Financial Choice Act, which comes up for a vote later this week.

Nichols emphasized that all Americans have a stake in the future of financial reform.

This busy week in D.C. will be a significant start on the regulatory reforms we need to accelerate this economy, grow jobs and create opportunity. If you’re concerned about job creation, local economic growth and access to affordable credit, you might want to pay attention to this other Washington story this week.

Nichols was interviewed on NPR’s “All Things Considered” about the Financial Choice Act, which includes many provisions advocated by ABA as part of its Blueprint for Growth. He emphasized that ABA is not seeking a total repeal of the Dodd-Frank Act.

We are not seeking to roll back all of Dodd-Frank. Our intention is to acknowledge what many regulators and legislators will tell you, publicly and privately, which is: aspects of Dodd-Frank overshot.

Examples of ABA-supported provisions in the Choice Act include a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model, greater flexibility for savings associations, relief from various reporting requirements, and repeal of the Volcker Rule.

Read Nichols' Medium article.
Listen to the interview.

Financial Choice Act Clears House Committee

2017-05-05T11:30:00.000-04:00

The House Financial Services Committee has voted to advance the Financial Choice Act, Chairman Jeb Hensarling’s (R-Texas) sweeping, 600-page bill aimed at reforming parts of the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief for banks. ABA President and CEO Rob Nichols saluted the committee for its “very important step toward reforming the Dodd-Frank Act and providing much-needed regulatory relief,” adding that “we look forward to working with lawmakers from both parties as this important process moves forward.”

The Choice Act, which passed on a party-line vote, includes a number of regulatory relief provisions long sought by ABA as part of its Blueprint for Growth, including a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model and repeal of the Durbin Amendment, which capped prices on debit interchange, as well as the Volcker Rule.

The bill would also reform the CFPB, renaming it the Consumer Law Enforcement Agency and stripping it of examination powers and “UDAAP” enforcement authority and replace Dodd-Frank’s Orderly Liquidation Authority provision with a new Bankruptcy Code. In addition, it would also allow banks maintaining a 10 percent non-risk weighted leverage ratio to elect into an alternative regulatory regime that would, among other things, exempt qualifying institutions from federal capital and liquidity requirements, blocks on capital distributions, systemic risk regulations and limitations on mergers and acquisitions provided that any new entity also maintains the minimum leverage ratio.

Nichols said:

The thousands of pages of new regulations facing banks have become a tremendous driver of decisions to sell or merge. Given the cost of complying with all the new rules, some community banks are having to choose between meeting those regulatory requirements and meeting the financial needs of their individual and business customers.

Read Nichols' statement.

Treasury Designates Acting Comptroller of the Currency

2017-05-04T09:30:00.000-04:00

Comptroller of the Currency Thomas Curry will step down Friday May 5, 2017 and will be replaced by Keith Noreika, who is to be named first deputy comptroller by Treasury Secretary Steven Mnuchin. In that capacity, Noreika will serve as acting comptroller of the currency until President Trump appoints and the Senate confirms a new comptroller. Curry’s five-year term expired on April 9.

Noreika is currently a partner in the financial institutions practice at Simpson Thatcher and Bartlett LLP and was a member of the Trump transition team for the Treasury Department. Throughout his career, he has focused on banking regulation, advising financial institutions on compliance-related matters including the Volcker Rule, CFPB regulations and BSA/AML rules, and representing national banks before the Supreme Court.

Read more.

Hensarling Releases Full Text of Financial Reform Bill

2017-04-20T10:30:00.000-04:00

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has released the latest legislative text of his Financial Choice Act, a 600-page bill aimed at rolling back and reforming parts of the Dodd-Frank Act’s extensive supervisory regime, as well as providing regulatory relief for banks of all sizes. A similar version of the legislation cleared the committee in the previous Congress. The committee is scheduled to hold a hearing on the bill next week.

Title V of the Choice Act contains numerous provisions long sought by ABA. These regulatory relief measures would provide a Qualified Mortgage safe harbor to mortgage loans held in portfolio, tailor supervision to banks’ risk profiles and business models, raise the small bank holding company policy statement asset threshold to $5 billion, create an independent exam appeals process, provide charter flexibility for thrifts, stop data collection on small business loans, clarify the QM rule’s points and fees test, expand the short-form Call Report, enhance mortgage relief for smaller banks and smaller mortgage originators and prevent future “Operation Choke Point” activities.

The bill further details plans to reform the CFPB, which would be renamed the Consumer Law Enforcement Agency and would be stripped of examination powers and “UDAAP” enforcement authority. The Choice Act would also repeal the Durbin Amendment, impose more stringent penalties for Wall Street in cases of fraud or deception and repeal sections of Dodd-Frank that limit capital formation, including the Volcker Rule. It would bring the new CLEA, FDIC, OCC, Federal Housing Finance Agency, National Credit Union Administration and supervisory functions of the Federal Reserve into the congressional appropriations process, mandate cost-benefit analyses of regulations and require congressional approval for “major rules.”

Additional regulatory relief would be available for banks maintaining a 10% non-risk weighted leverage ratio that elect into the alternative regime. Qualifying banks would be exempt from federal capital and liquidity requirements, blocks on capital distributions, systemic risk regulations and limitations on mergers and acquisitions provided any new entity also maintains the minimum leverage ratio.

Another key component of the Choice Act is ensuring no institution is “too big to fail” by replacing Dodd-Frank’s Orderly Liquidation Authority provision with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution. Additionally, it significantly restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors.

View the full text of the bill.

Fed to Evaluate Large Bank ‘Living Wills,’ Fintech in 2017

2017-01-09T09:30:00.000-05:00

Speaking at a legal event in Washington, D.C., Federal Reserve General Counsel Scott Alvarez outlined several issues the agency will focus on in 2017, including certain regulatory relief measures and the entrance of nonbank fintech companies into the Federal Reserve System.

The Fed is currently exploring whether to change its annual filing requirement for banks submitting “living wills” detailing how they would be resolved in the event of bankruptcy, Alvarez said. He noted that the agency is also considering creating different asset-based schedules for banks required to file. Additionally, the Fed will continue streamlining reporting and capital requirements for community banks this year, and plans to move forward with rulemakings related to derivatives contracts for global systemically important banks, physical commodities activities and metrics reporting for the Volcker rule, he said.

Another important focus will be the treatment of fintech firms entering the Fed system under the OCC’s proposed limited-purpose national bank charter, which was announced by Comptroller of the Currency Thomas Curry in December 2016. The OCC and the Fed are currently working closely to determine how fintech companies under a limited-purpose charter will access the benefits of the Federal Reserve System, such as the payments network, Alvarez said.

Fed Details Extensions of Volcker Deadline for Illiquid Funds

2016-12-13T10:10:00.000-05:00

As ABA has long and persistently advocated, the Federal Reserve provided details on how banks can request an extension to conform legacy illiquid fund investments with the Volcker Rule’s prohibition on ownership interests in legacy covered funds. While banks have until July 21, 2017, to divest interests in prohibited funds – provided they were in place by the end of 2013 – the Dodd-Frank Act authorizes the Fed to provide an additional five years for conformance of illiquid funds.

To request the extension, the Fed said banks must provide a list of funds for which an extension is sought, a description of each fund and of the bank’s efforts to divest or conform the funds, a certification from the general counsel or chief compliance officer that the funds meet the definition of illiquid funds, the length of the desired conformance period and a description of the bank’s plans to divest or conform the funds by the end of that period.

Requests are due to the appropriate Federal Reserve Bank no later than Jan. 22, 2017. The Fed may grant extensions of up to five years from July 21, 2017, or for shorter periods should the funds mature or be conformed sooner. The Fed said it expects to act on applications within 30 days and that “the illiquid funds of banking entities will generally qualify for extensions, though extensions may not be granted in certain cases,” such as insufficient conformance planning or deficient Volcker Rule compliance programs.

The Fed noted that legacy illiquid funds – which are largely private equity, real estate and venture capital funds supporting long-term development and growth – can be very difficult to liquidate before maturity, especially since the expected value of the funds may not be reached until maturity and liquidation may involve termination of contractual obligations and reputational risk to the bank, among other challenges.

Read more.

Fed’s Tarullo Defends Large Bank Regulatory Regime

2016-12-05T09:19:00.002-05:00

Federal Reserve Governor Daniel Tarullo recently defended the post-financial crisis regulatory regime for the nation’s largest banks and said regulators should be cautious when determining whether to roll back regulatory provisions. Speaking at a conference in Washington, D.C., he argued that since the crisis “the progressive implementation of this capital regime has substantially increased the resiliency of the largest banks.” However, he added that regulators should be continually assessing the efficacy and efficiency of the current regulatory framework and making adjustments as lessons are learned and new data becomes available.

In particular, regulators should consider the effects of regulation on smaller institutions, Tarullo said, acknowledging the significant compliance burden that community banks in particular have faced since the financial crisis. He voiced support for revising the tiered supervision structure to ensure thresholds are set at appropriate levels, and for providing exemptions for community banks under $10 billion from regulations such as the Volcker rule or incentive compensation rules. When considering regulatory change, however, he stressed that the Fed “will not weaken the essential elements of the existing regime that guard against another financial crisis.”

Looking ahead, Tarullo said that the Fed will continue to focus on ensuring that the largest banks have solid resolution plans and are appropriately structured to facilitate orderly resolution in the event of failure. In addition, the agency will develop metrics to help determine firms’ vulnerabilities to various economic shocks, increase its efforts to understand the systemic risk posed by U.S. branches of foreign banks and monitor new systemic threats that could arise in the shadow banking sector.

Read Tarullo's speech.

Dodd-Frank Author: Current SIFI Threshold Is ‘Mistake’

2016-11-22T09:50:00.000-05:00

The $50 billion asset threshold in the Dodd-Frank Act for designation as a systemically important financial institution was a “mistake,” former Rep. Barney Frank (D-Mass.) said in a radio interview. “That’s too low,” he said. “That was a mistake. We should have made it much higher.” Frank tossed out $125 billion as an alternative, noting that he also regretted not indexing the threshold to inflation.

“When it comes to lending and job creation, the regional banks are obviously very, very important,” said the former chairman of the House Financial Services Committee and lead co-sponsor of Dodd-Frank, speaking on John Catsimatidis’ radio program. “I hope that if we get some regulatory changes, we give some regulatory relaxation to those banks.”

Frank also said he regretted that banks with less than $10 billion in assets have been affected by provisions like the Volcker Rule. “We did not think they were going to [be] affected by some of these rules,” he explained, arguing that banks under this level should be explicitly exempted from Volcker and that the threshold should also be indexed.

ABA has consistently argued for an end to arbitrary asset thresholds and cliffs, to be replaced with a tailored supervisory approach that takes into account a broader view of bank characteristics, including asset size, business model and risk profile.

Listen to the broadcast.

Yellen: Agencies Exploring Ways to Reduce Capital, Appraisal Burdens

2016-09-29T10:00:00.000-04:00

As part of its response to the recently concluded Economic Growth and Regulatory Paperwork Reduction Act review process, the federal banking agencies are looking to reduce burdens of appraisal requirements and to simplify regulatory capital rules for community banks, Federal Reserve Chairman Janet Yellen told the House Financial Services Committee. ABA has long advocated with regulators to recognize highly capitalized banks as already meeting Basel III capital standards without having to go through the complex calculations.

“Themes emerging from [the EGRPRA process] include streamlining the Call Report, reducing examination frequency, raising long-standing dollar-based thresholds for appraisals, and reducing the complexity of capital requirements for smaller banks,” Yellen said, noting that the agencies have proposed a streamlined Call Report and have implemented a statute extending the exam cycle for smaller, well-capitalized banks.

She said Congress might also “consider carving out community banks” from the Volcker Rule and Dodd-Frank’s incentive compensation limits. She said:

The risks addressed by these statutory provisions are far more significant at larger institutions than they are at community banks. Community banks and supervisors would benefit from not having to focus on regulatory compliance for matters that are unlikely to pose problems at smaller banks.

Yellen emphasized the “very special role” community banks play in the financial system. “Reducing regulatory burden is important and is something that we will seek to foster using every available tool that we have.”

She also reiterated remarks from Fed Governor Daniel Tarullo earlier this week on options the Fed has proposed or is considering to recalibrate the Comprehensive Capital Analysis and Review process for banks with less than $250 billion in assets.

Read the testimony.

Agencies Issue Report and Propose Action to Limit Bank Activities

2016-09-09T10:20:00.000-04:00

The Federal Reserve, FDIC and OCC have issued a long-awaited report mandated by Section 620 of the Dodd-Frank Act in which they called for sweeping changes to banks’ powers. Notably, the Fed recommended that Congress repeal the following: merchant banking authority for financial holding companies; grandfathered authority for physical commodities activities for certain FHCs; regulatory exemptions for industrial loan companies; and regulatory exemptions for grandfathered unitary savings and loan holding companies.

The Fed said it believes that “the existing statutory merchant banking authority enables FHCs to engage in activities that pose risks to the organizations’ safety and soundness,” adding in a footnote that it is “considering regulatory measures” to limit risks it associates with merchant banking authority independent of any action Congress might take.

ABA and other financial trade groups roundly opposed the “unfortunate and ill-considered” merchant banking recommendation. The groups said:

For the last 15 years, bank holding companies have successfully used the merchant banking authority granted to them by law to finance startups and growing companies, fueling jobs and economic growth. The regulators have made these recommendations without pointing to any evidence that these activities have ever posed any problem, and have made no attempt to assess the costs to businesses and jobs.

As part of its Section 620 review, the OCC issued a proposed rule that would prohibit national banks from dealing or investing in industrial and commercial metal. The rule – which would exempt the buying and selling of exchange, coin and bullion – would principally target bank involvement in the copper market, which was permitted under an OCC interpretive letter issued two decades ago. Comments are due on the proposal 60 days after it is published in the Federal Register.

The OCC also said it would clarify minimum prudential standards for national banks engaged in swap dealing, review risks posed to banks by membership in clearinghouses, update its investment securities regulations to reflect restrictions in the Volcker Rule, issue guidance or propose regulations to address concentration in mark-to-model assets and liabilities and reconsider whether to allow national banks to hold asset-backed securities as Type III securities. ABA staff will thoroughly review the recommendations and provide appropriate feedback to the agencies.

Read the report.
Read the OCC’s proposed rule.

Fed Formalizes 2017 Extension for Volcker Fund Conformance

2016-07-08T11:38:00.001-04:00

The Federal Reserve formalized the compliance period for the Volcker Rule’s prohibition on ownership interests in legacy covered funds. Under the now-formal order – previously announced in 2014 – banks have until July 21, 2017, to divest interests in prohibited funds, provided they were in place by the end of 2013. The Fed also said it would issue information on how it will address a banking entity’s application for an additional conformance period for investments in “illiquid covered funds.”

Read more.

Hensarling Unveils Proposal for Dodd-Frank Overhaul

2016-06-08T10:00:00.000-04:00

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has announced plans for new legislation that he called a “market-based, equity financed Dodd-Frank off-ramp.” The Financial Choice Act would effectively roll back the Dodd-Frank Act’s regulatory regime by allowing banks that elect to hold high capital levels to be exempt from certain regulatory requirements of DFA and Basel III.

Hensarling said that Dodd-Frank has imposed excessive regulation on the financial system, particularly on community banks. Hensarling said,

We are losing, on average, one community financial institution each day – and they are not dying from natural causes but from the sheer weight, volume, complexity and expense of Washington’s rules. [E]nding and replacing the mistake of Dodd-Frank is the necessary start if we ever hope to restore real economic growth in America.

To take advantage of the regulatory exemptions under the Financial Choice Act, banks would need to have a composite CAMELS rating of 1 or 2 and maintain a 10% non-risk weighted leverage ratio – a significantly higher standard than those currently required by DFA or Basel III. Hensarling said

Banks will opt into the…new regime only if it makes them more competitive – in other words, if it lets them better serve customers at lower cost.

In an alternative approach to addressing “too big to fail” institutions, Hensarling’s plan also replaces Dodd-Frank’s Orderly Liquidation Authority provision with a new chapter of the Bankruptcy Code designed to accommodate the failure of a large, complex financial institution, repeals the authority of the Financial Stability Oversight Council to designate firms as systemically important and restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors. In addition, Hensarling’s proposal would reform the CFPB, impose enhanced penalties for fraud or deception and create greater opportunity for investment by repealing the Volcker Rule and other DFA provisions limiting capital formation.

ABA EVP James Ballentine

Members from both sides of the aisle agree that parts of Dodd-Frank just aren’t working. Any law that generates more than 24,000 pages of proposed and final rules will inevitably include problems that should be fixed. We look forward to working with the committee and anyone who will help remove obstacles that make it harder for America’s banks to serve their customers and meet the needs of their local communities.

Read Hensarling’s speech.
Read ABA’s executive summary.

The Week Ahead: April 25 - 29

2016-04-22T11:39:00.000-04:00

Monday

Comments Due CFPB: Operations in Rural Areas Under the Truth in Lending Act (Regulation Z); Interim Final Rule Read more.

Comments Due FHFA: American Survey of Mortgage Borrowers (PRA) Read more.

Comments Due FRB: Written Security Program for State Member Banks/Risk-Based Capital Guidelines: Market Risk (PRA) Read more.

Comments Due OCC: Disclosure of Financial and Other Information by National Banks Read more.

Tuesday

Meeting SEC: Equity Market Structure Advisory Committee Read more.

Meeting CFTC: Reporting Requirements Associated with Regulation Y (Extension of Time to Conform to the Volcker Rule) Read more.

Wednesday

Comments Due FRS: Regulation C Home Mortgage Disclosure Read more.

House Hearing: How Can the U.S. Make Development Banks More Accountable? Read more.

Friday

Comments Due FRB: Notice By Financial Institutions of Government Securities Broker or Government Securities Dealer Activities; Notice By Financial Institutions of Termination of Activities as a Government Securities Broker or Government Securities Dealer (PRA) Read more.

Comments Due OCC: Annual Company-Run Stress Test Reporting Template and Documentation for Covered Institutions With Total Consolidated Assets of $10 Billion to $50 Billion Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (PRA) Read more.

Comments Due OCC: Consumer Protections for Depository Institution Sales of Insurance (PRA) Read more.

Comments Due OCC: Funding and Liquidity Risk Management (PRA) Read more.

All times in Eastern Standard Time. See future events on the Dodd-Frank Calendar.

The Week Ahead: April 18 - 22

2016-04-15T11:30:00.000-04:00

Monday

Comments Due CFPB: Emergency Processing Request (PRA) Read more.

Comments Due OCC: Leveraged Lending (PRA) Read more.

Tuesday

Comments Due FRB: Recordkeeping and disclosure requirements associated with the Truth in Lending Act (TILA) (Regulation Z) Read more.

Comments Due FRB: Reporting Requirements Associated with Regulation Y (Extension of Time to Conform to the Volcker Rule) Read more.

Effective Date SEC: Security-Based Swap Transactions Connected With a Non-U.S. Person's Dealing Activity That Are Arranged, Negotiated, or Executed by Personnel Located in a U.S. Branch or Office or in a U.S. Branch or Office of an Agent; Security-Based Swap Dealer De Minimis Exception Read more.

House Hearing: Preventing Cultural Genocide: Countering the Plunder and Sale of Priceless Cultural Antiquities by ISIS Read more.

Senate Hearing: Understanding the Role of Sanctions Under the Iran Deal Read more.

Thursday

Meeting CFPB: Community Bank Advisory Council Meeting Read more.

All times in Eastern Standard Time. See future events on the Dodd-Frank Calendar.