Development of the regulatory framework
OCC Calls for Study of Financial Technology Implications for Banking
On July 25, the OCC sought academic and policy-focused research on the impact that fintech and non-bank entities are having on the banking industry and the markets for lending, deposit-taking and payment services by August 21, 2022. The OCC will then invite authors of selected reports to present to OCC staff and guests at OCC headquarters in Washington, DC, to be held November 7-8, 2022. These presentations are intended to serve as a platform for academic, regulatory, and other industry experts to discuss research and clarify how the banking system, with a particular focus on community banks, will use fintech-related technology and in turn respond to the influx of new banking service providers. The call for documents shall state the requested scholarship; interested parties are invited to submit papers to [email protected]
CFTC extends public comment period on request for information on climate-related financial risk
On July 18, the CFTC extended the deadline for the public comment period on the RFI on climate-related financial risk from August 7 to October 7. The RFI seeks public comment to better inform the CFTC’s understanding and oversight of climate-related financial risk, which refers to physical risks characterized by harm caused by acute climate-related events and transition risks characterized by with stress on financial institutions or sectors as a result of changes in policy, regulations, customer and business preferences, etc. Climate-related financial risk may directly or indirectly impact CFTC-registered entities, registrants and other market participants, as well as the derivatives and underlying commodity markets themselves, including causing increased market volatility, disruption of historical price correlations and challenges against existing risk management assumptions. The RFI also seeks answers to questions specific to data, scenario analysis and stress testing, risk management, disclosure, product innovation, voluntary carbon markets, digital assets, green cleanup, financially vulnerable communities, and public-private partnerships and engagement.
“It is critical that the Commission proactively understands how climate-related financial risk may affect commodity and derivatives markets, as well as our registered entities, registrants and other market participants as they increasingly rely on derivatives markets , to manage their climate change-induced physical and transition risk.”
– CFTC Chairman Rostin Behnam
CFPB issues new debt collection FAQs
On July 27, the CFPB published four new topics to the Debt Collection Rule Frequently Asked Questions: (1) Prohibitions on communicating with third parties; (2) Electronic Communication; (3) Electronic Communication: Opt-Out Notice; and (4) Unusual or inconvenient times or places. Among the new answers to FAQs, the CFPB confirms that nothing in the Debt Collection Rule requires a debt collector to communicate with consumers electronically, that consumers can limit a debt collector’s communications through specific methods or media, and that all electronic communications or attempts to electronically communicate with a consumer in connection with debt collection must contain a clear and prominent opt-out notice by a simple method (eg, hyperlink, text message “STOP” or similar language) by which the consumer can opt out of further electronic communications by a debt collector on the specific electronic medium to which the message was sent.
Notice of Proposed Rulemaking for Valuations, Amendments to Incorporate Update of Accounting Standards for Troubled Debt Restructuring
On July 20, the FDIC issued a notice of proposed rulemaking (the Proposal) in Federal Register to incorporate updated accounting standards into the risk-based assessment system for deposit insurance. The proposed regulations apply to all large and highly complex insured depository institutions. The proposal would amend the valuation regulations to specifically incorporate the new accounting term “modifications of borrowers experiencing financial difficulties (the Term)” recently introduced by the Financial Accounting Standards Board (FASB) to replace distressed debt restructurings (TDRs) in ratio of underperforming assets and ratio of higher risk assets in the scorecards for large and highly complex banks. In addition, the FDIC Board and other members of the Federal Financial Institutions Examination Council plan to revise the call report forms and instructions to include the term as it will be defined in the Call Report Instructions Glossary.
The proposal would not affect the deposit insurance rating system for FDIC-insured and/or FDIC-supervised institutions with less than $10 billion in total consolidated assets.
FDIC Updates Guidance Regarding Termination of Cease and Desist and Consent Orders
On July 25, the FDIC revised guidance regarding the termination of consent orders and cease and desist orders under section 8(b) of the Federal Deposit Insurance Act (FDI). Under the FDI Act, the FDIC has the authority to issue cease and desist orders when an insured depository institution conducts business in an unsafe or unsound manner or violates a law, regulation, or agreement with the FDIC. Under the new guidance in the Guidance on Enforcement Actions, cease and desist orders may be terminated when (1) the institution has fully complied with the order and corrected the violations that gave rise to the order; (2) the provisions that the institution fails to comply with have ceased to be relevant to the institution’s circumstances; or (3) new or revised official actions have been taken against the institution by the FDIC. The Enforcement Action Manual guides FDIC staff in their interactions with all financial institutions regulated by the FDIC.
Litigation and enforcement
SEC Claims ‘Crypto Asset Securities’ Insider Trading; The case has significant implications for the digital asset industry
On July 21, the SEC charged three individuals with insider trading in digital assets through a trading scheme ahead of multiple announcements about crypto assets being offered to a United States-based digital asset exchange, where one individual is a former product manager. In the complaint, the SEC identified nine “crypto asset securities” (the first time the agency has used that term) that the agency claims are securities. The SEC also alleges that the individuals orchestrated the scheme more broadly across at least 25 digital assets — 16 of which have not been identified — making illegal profits of more than $1.1 million.
Read the client alert to learn more about the case and its implications.