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10/05/2020

SBA issues procedural notice on PPP ownership changes

The SBA has issued a Procedural Notice on "Paycheck Protection Program Loans and Changes of Ownership," effective October 2, 2020. A change of ownership for this purpose occurs when—

  1. at least 20 percent of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity,
  2. the PPP borrower sells or otherwise transfers at least 50 percent of its assets (measured by fair market value), whether in one or more transactions, or
  3. a PPP borrower is merged with or into another entity.

Prior to the closing of any change of ownership transaction, the PPP borrower must notify the PPP Lender in writing of the contemplated transaction and provide the PPP Lender with a copy of the proposed agreements or other documents that would effectuate the proposed transaction.

10/05/2020

Larger small business size standards proposed

The SBA is requesting public comments on two proposed rules that would revise the small business size standards for businesses in eight North American Industrial Classification System (NAICS) sectors to increase small business eligibility for SBA’s loan and contracting programs. The sectors reviewed in the first proposed rule [85 FR 62239] are: Agriculture, Forestry, Fishing, and Hunting; Mining, Quarrying, and Oil and Gas Extraction; Utilities; and Construction. The NAICS sectors reviewed in the second proposed rule [85 FR 62372"] are: Transportation and Warehousing; Information; Finance and Insurance; and Real Estate and Rental and Leasing. The SBA proposes to increase size standards for 113 industries in those sectors. Comments can be submitted on these proposed rules on or before December 1, 2020.

10/05/2020

September jobs report released

The Bureau of Labor Statistics has released its monthly employment situation report for September. The U.S. added 661,000 jobs, and the unemployment rate fell to 7.9 percent. In the last five months, 52 percent of the job losses from the pandemic have been recovered, and the country has gained more than 11.4 million jobs, including a combined upward revision in July and August of 145,000 jobs.

10/02/2020

Ransomware advisories

The Treasury Department announced yesterday that its Office of Terrorism and Financial Intelligence today issued a pair of advisories to assist U.S. individuals and businesses in efforts to combat ransomware scams and attacks, which continue to increase in size and scope.

FinCEN issued an advisory [FIN-2020-A006], entitled "Advisory on Ransomware and the Use of the Financial System to Facilitate Ransom Payments," to provide information on the role of financial intermediaries in payments, ransomware trends and typologies, and related financial red flags. It also provides information on effectively reporting and sharing information related to ransomware attacks.

OFAC also issued an advisory, entitled "Advisory on Potential Sanctions Risks for Facilitating Ransomware Payments," to highlight the sanctions risks associated with facilitating ransomware payments on behalf of victims targeted by malicious cyber-enabled activities.

10/02/2020

OFAC settles with travel assistance company

OFAC has announced a settlement with Generali Global Assistance, Inc. (GGA), a New York-incorporated travel assistance services company. GGA agreed to remit $5,864,860 to settle its potential civil liability for 2,593 apparent violations of the Cuban Assets Control Regulations. GGA intentionally referred Cuba-related payments to its Canadian affiliate, thereby avoiding processing reimbursement payments directly to Cuban parties and to travelers while they were located in Cuba. GGA subsequently reimbursed its Canadian affiliate for those payments.

The statutory maximum civil monetary penalty applicable in this matter is $168,545,000. OFAC determined, however, that GGA voluntarily self-disclosed the Apparent Violations and that the Apparent Violations constitute an egregious case. Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines (“Enforcement Guidelines”), the base civil monetary penalty amount applicable in this matter is $84,272,500. The settlement amount of $5,864,860 reflects OFAC’s consideration of the General Factors under the Enforcement Guidelines.

In its notice of the settlement, OFAC said this enforcement action highlights the importance of ensuring that sanctions compliance policies and procedures address both direct and indirect sanctions compliance risks, and in particular, highlights the risks of implementing a procedure to process, indirectly, transactions whose direct processing would be prohibited by U.S. sanctions.

10/02/2020

NMLS reminder on renewals

The NMLS has posted a reminder that the NMLS 2021 annual renewal period for federal registrations begins November 1. According to federal regulations, all mortgage loan originators registered prior to July 1, 2020, must renew their registrations for 2021. The renewal period ends December 31.

10/02/2020

Fed extends expansion of intraday credit

The Federal Reserve Board yesterday extended to March 31, 2021, temporary actions aimed at increasing the availability of intraday credit extended by Federal Reserve Banks on both a collateralized and uncollateralized basis. These temporary actions: (1) suspend uncollateralized intraday credit limits (net debit caps) and waive overdraft fees for institutions that are eligible for the primary credit program; (2) permit a streamlined procedure for secondary credit institutions to request collateralized intraday credit (max caps); and (3) suspend two collections of information that are used to calculate net debit caps.

The Fed's temporary actions were due to expire on September 30, 2020.

10/02/2020

Fed Written Agreement with Pennsylvania bank

The Federal Reserve Board has announced the execution of a Written Agreement with Atlantic Community Bankers Bank, Camp Hill, Pennsylvania, regarding deficiencies in the bank's program for compliance with BSA/AML requirements.

10/02/2020

OCC 2021 bank supervision operating plan

The OCC yesterday released its bank supervision operating plan for fiscal year 2021. The plan provides the foundation for policy initiatives and for supervisory strategies as applied to individual national banks, federal savings associations, federal branches, federal agencies, and technology service providers. OCC staff members use this plan to guide their supervisory priorities, planning, and resource allocations.

Supervisory strategies for FY 2021 will focus on:

  • credit risk management, commercial and residential real estate concentration risk management, allowances for loan and lease losses, and allowances for credit losses
  • cybersecurity and operational resilience
  • BSA/AML compliance management
  • compliance risk management associated with 2020 pandemic-related bank activities
  • Community Reinvestment Act performance
  • fair lending examinations and risk assessments
  • the impact of a low-rate environment and preparation for the phaseout of LIBOR
  • proper oversight of significant third-party relationships
  • change management over significant operational changes
  • payment systems products and services

    10/02/2020

    CFPB assessment of TRID disclosure rule

    The CFPB has released a report to Congress on its formal five-year assessment of its Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) Rule (the "TRID Rule"), which took effect October 3, 2015. In its assessment, the Bureau used both its own research and external sources to evaluate the effectiveness of the Rule in meeting (1) the purposes and objectives of the Bureau and (2) the specific goals of the Rule as stated by the Bureau prior to the Rule’s effective date.

    Some highlights from Director Kraninger's message covering the report:

    • In laboratory testing, borrower understanding of mortgage transactions has improved due to their receipt of the required disclosures.
    • The TRID Rule appears to have created sizeable implementation costs for lenders and closing companies. Based on the industry surveys, a typical cost for a lender to implement the TRID Rule was $146 per mortgage originated in 2015, or roughly 2.0 percent of the average cost of originating a mortgage. Similarly, a typical cost for a closing company to implement the TRID Rule was $39 per closing in 2015, or about ten percent of the average cost of closing.
    • The TRID Rule’s effects on ongoing costs is less clear. Industry data indicate that mortgage lending costs have steadily increased over the past decade. However, the Bureau does not have any data that demonstrates how much, if any, of these increased costs are attributable to the TRID Rule.
    • The TRID Rule appears to have decreased mortgage originations and increased closing times, but these measures returned to pre-TRID Rule levels in a relatively short period of time.

    10/02/2020

    OCC Bulletins posted

    The OCC yesterday posted two Bulletins:

    • Bulletin 2020-85 - "Current Expected Credit Losses: Final Rule" - announced the rule finalizing the interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of Accounting Standards Update No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (CECL) by banks.
    • Bulletin 2020-86 - "Community Reinvestment Act: Small Bank Compliance Guide" includes a compliance guide for small banks, an initial illustrative list of qualifying activities, and a form to request consideration of items to be added to the list of qualifying activities

    10/02/2020

    OCC releases CRA ratings

    The OCC has released a list of CRA performance evaluations that became public during September. Of the 12 evaluations made public this month, one is rated needs to improve, 10 are rated satisfactory, and one - Inwood National Bank, Dallas, Texas, was rated outstanding.

    10/01/2020

    Treasury continues targeting facilitators of Assad regime

    On Wednesday, Treasury announced that it took action against key enablers of the Assad regime that are associated with the Fourth Division of the Syrian Arab Army, the Syrian General Intelligence Directorate, and the Central Bank of Syria. Specifically, Treasury's Office of Foreign Assets Control (OFAC) added three individuals and 13 entities to the Specially Designated Nationals and Blocked Persons List, pursuant to Syria sanctions authorities.

    At the same time, the State Department acted against three Syrian persons pursuant to Section 2 of Executive Order (E.O.) 13894, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria.”

    For identity information on the six individuals and 13 entities added to the SDN List, and another individual added under the Cuba sanctions, plus information on a new Syria General License, see BankersOnline's OFAC Update.

    10/01/2020

    FinCEN seeks comments on CDD and EDD requirements

    FinCEN published [85 FR 61104] in the September 29 Federal Register a 60-day notice to renew the Office of Management and Budget (OMB) control number assigned to the regulatory requirements to conduct due diligence and enhanced due diligence over foreign correspondent accounts and private banking accounts.

    In the notice, FinCEN proposes for review and comment a methodology to expand the scope of future estimates of cost and time for purposes of the Paperwork Reduction Act to be more granular in the estimates of resources expended to comply with these regulatory requirements. The notice requests feedback from the industry on or before November 30, 2020.

    10/01/2020

    Fed extending capital resilience measures

    The Federal Reserve Board announced yesterday it will extend for an additional quarter several measures to ensure that large banks maintain a high level of capital resilience in this period of continued economic uncertainty during the pandemic. For the fourth quarter of this year, large banks—those with more than $100 billion in total assets—will be prohibited from making share repurchases. Additionally, dividend payments will be capped and tied to a formula based on recent income.

    10/01/2020

    NCUA Issues one prohibition notice

    The NCUA issued one prohibition notice in September to a former employee of Members 1st Federal Credit Union in Mechanicsburg, Pennsylvania, who had been sentenced on the charge of theft in connection with her employment. She is prohibited from participating in the affairs of any federally insured financial institution.

    10/01/2020

    OCC updates TILA exam procedures booklet

    The OCC has issued Bulletin 2020-84 announcing its issuance of a revised "Truth in Lending Act" booklet of the Comptroller's Handbook to reflect revised interagency examination procedures adopted by the Task Force on Consumer Compliance of the Federal Financial Institutions Examination Council (FFIEC). The Bulletin rescinds OCC Bulletin 2018-31, “Truth in Lending Act: Revised Comptroller's Handbook Booklet and Rescissions.”

    10/01/2020

    New and amended OFAC sanctions regulations

    OFAC has posted a notice of recent actions announcing it is adding new Part 520 to 31 CFR Chapter V regulations [85 FR 61816] to implement Executive Order 13928 of June 11, 2020 (“Blocking Property of Certain Persons Associated With the International Criminal Court”).

    In addition, OFAC is amending the Weapons of Mass Destruction Proliferators Sanctions Regulations and Iranian Transactions and Sanctions Regulations at 31 CFR Parts 544 and 560 [85 FR 61823].

    The new regulation and the amendments to Parts 544 and 560 are effective upon publication today in the Federal Register,

    10/01/2020

    Fed proposes update to capital planning requirements

    The Federal Reserve Board has invited public comment on a proposal that would update the Board's capital planning and stress testing requirements in Regulations Y, LL, and YY to be consistent with other Board rules that were recently modified.

    The Board has finalized a framework that sorts large banks into different categories based on their risks, with rules that are tailored to the risks of each category. The current proposal updates the Board's capital planning requirements—which help ensure that firms plan for and determine their capital needs under a range of different scenarios—to reflect that new framework. In particular, firms in the lowest risk category are on a two-year stress test cycle and not subject to company-run stress test requirements and the proposal reflects those changes. The proposal also would seek comment on the Board's existing capital planning guidance applicable to all firms.

    The proposed rule, which would not change firms' capital requirements, has a comment period that will end November 20, 2020.

    PUBLICATION UPDATE: Published at 85 FR 63222 in the October 7, 2020, Federal Register

    10/01/2020

    Morgan Stanley pays $5M for SHO violations

    The SEC announced yesterday it had settled charges against Morgan Stanley & Co. LLC for violations of Regulation SHO, the regulatory framework governing short sales. According to the SEC’s order, the structure of Morgan Stanley’s prime brokerage swaps business resulted in violations of teh regulation. As set forth in the SEC Administrative Order, Morgan Stanley hedged synthetic exposure to swaps by purchasing or selling the securities referenced in the swaps, and it separated its hedges into two aggregation units – one holding only long positions, and the other holding only short positions. According to the order, Morgan Stanley was able to sell its hedges on the long swaps and mark them as “long” sales without concern for Reg SHO’s short sale requirements.

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