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Agencies simplify community bank capital requirements

The Federal Reserve Board, FDIC, and OCC announced Tuesday morning they have finalized a rule that simplifies capital requirements for community banks by allowing them to adopt a simple leverage ratio to measure capital adequacy. The community bank leverage ratio framework removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that opts into the framework. o qualify for the framework, a community bank must have less than $10 billion in total consolidated assets, limited amounts of off-balance-sheet exposures and trading assets and liabilities, and a leverage ratio greater than 9 percent. This rule becomes effective January 1, 2020.

The agencies also finalized a rule to allow non-advanced approaches banks, including community banks, to elect to adopt simplifying changes to the capital rule beginning on January 1, 2020, a quarter earlier than the mandatory compliance date of April 1, 2020. The agencies issued the simplifying changes in July 2019.

UPDATE: These rules were published 11/13/2019, at 84 FR 61776 and 84 FR 61804, respectively.


Bureau revises threshold amounts for 2020

The CFPB has published final rules in this morning's Federal Register adjusting exemptions thresholds in Regulations Z and M for the year 2020.

  • [84 FR 58013] Comment 35(c)(2)(ii)-3.vii will be added to the Official Interpretations of § 1026.35 of Regulation Z to increase the threshold amount to $27,200 for the exemption from the special appraisal requirements for higher-priced mortgage loans.
  • [84 FR 58020] Comment 3(b)-3.xi will be added to the Official Interpretations of § 1026.3 of Regulation Z to increase the threshold amount to $58,300 for exempt consumer credit transactions (except for (1) those secured by real property or by personal property use or expected to be used as the principal dwelling of a consumer and (2) private education loans)
  • [84 FR 58017] Comment 2(e)-11.xii will be added to the Official Interpretations of § 1013.2 of Regulation M to increase the threshold amount to $58,300 for exempt consumer leases.

The BankersOnline Regulations pages for Regulations Z and M have been updated to include these changes.


Large firm resolution plan requirements changed

The Federal Reserve Board and the Federal Deposit Insurance Corporation have announced that they had finalized a rule that modifies their resolution plan requirements for large firms. The rule retains resolution plan elements in place for the largest firms, while reducing requirements for smaller firms that pose less risk to the financial system. The final rule is substantially the same as the proposal from earlier this year. It uses a separate framework developed by the banking agencies for application of prudential requirements, and establishes resolution planning requirements tailored to the level of risk a firm poses to the financial system. The changes will be effective 60 days following publication in the Federal Register.


Proposed rule to amend swap margin rules

The Fed, FDIC, OCC, FHFA, and Farm Credit Administration have announced a proposal to change the swap margin rules to facilitate the implementation of prudent risk management strategies at certain banks and swap entities. The swap margin rule would no longer require swap entities to hold initial margin for uncleared swaps with affiliates. However, inter-affiliate transactions would still be subject to variation margin requirements. Swap entities regulated by the FDIC, the OCC, and the Fed also would be subject to requirements under sections 23A and 23B of the Federal Reserve Act. Comments will be accepted for 30 days following publication.
UPDATE: Published 11/7/2019 with comments due in 32 days, or by 12/9/2019.


HUD and Justice sign MOU on FCA

The Department of Housing and Urban Development has announced that a Memorandum of Understanding has been signed by HUD and the Justice Department that provides guidance on the use of the False Claims Act for violations by FHA lenders. The MOU makes clear that HUD expects that FHA requirements will be enforced primarily through HUD's administrative proceedings, but the MOU specifically addresses how HUD and DOJ, including the U.S. Attorneys' Offices, will consult with each other regarding use of the FCA in connection with defects on mortgage loans insured by FHA.


Transparency of permissible trade supporting Iranians

The Treasury and State Departments have announced a new humanitarian mechanism to ensure unprecedented transparency into humanitarian trade with Iran. The mechanism will help the international community perform enhanced due diligence on humanitarian trade to ensure that funds associated with permissible trade in support of the Iranian people are not diverted by the Iranian regime to develop ballistic missiles, support terrorism, or finance other malign activities. Treasury and State will establish a process to help ensure that participating governments and financial institutions commit to conducting enhanced due diligence to mitigate the higher risks associated with Iran-related transactions.


FinCEN prohibits Iranian correspondent accounts

FinCEN has issued a final rule to prohibit the opening or maintaining of correspondent accounts in the United States for, or on behalf of, Iranian financial institutions, and the use of foreign financial institutions’ correspondent accounts at covered U.S. financial institutions to process transactions involving Iranian financial institutions. The rule will be effective 10 days after publication in the Federal Register.

UPDATE: Published at 84 FR 59302 on 11/4/2019, with effective date of 11/14/2019.


Judge fines Ed Dept $100K in student loan fiasco

The Hill reported overnight that a federal judge has found Department of Education Secretary Betsy DeVos in violation of a preliminary injunction and fined the department $100,000 for continuing to collect loan payments from Corinthian Colleges students. The Hill reports that, earlier this month, more than 16,000 students from the now-defunct Corinthian College asked the judge to hold DeVos in contempt for pursuing their debts despite a court order prohibiting their collection. Magistrate Judge Sallie Kim of the U.S. District Court in San Francisco had ordered DeVos to stop collecting loans from the former students in May 2018.


U.S. financial regulators join GFIN

The FDIC, OCC, SEC, and Community Futures Trading Commission (CFTC) have announced they are joining the Global Financial Innovation Network (GFIN). The agencies join 46 other financial authorities, central banks, and international organizations from around the globe that are members of the GFIN to foster greater cooperation among financial authorities on a variety of innovation topics, regulatory approaches, and lessons learned.


Venezuela- and Iran-related general licenses issued

OFAC has issued the following General Licenses and FAQs:

  • An amended Venezuela-related General License 5A, “Authorizing Certain Transactions Related to the Petróleos , S.A. 2020 8.5 Bond on or After January 22, 2020"
  • FAQ 595, pertaining to amended GL 5A
  • Iran General License K, “Authorizing Maintenance or Wind Down of Transactions Involving Cosco Shipping Tanker (Dalian) Co. Ltd."


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