OBL Previews Important Regulatory Engagement

08/10/22

CRA Modernization: Last week the public comment period closed on the interagency proposed rule to revamp the community reinvestment act. The OBL submitted comments last week on the proposed rule saying that while we support the effort in principle, there were multiple flaws in the proposed rule that ultimately worked against the agencies' stated goals. In a 43-page letter to the agencies, the association said there is broad agreement that the CRA regulatory framework must be updated to reflect technology's transformation of the delivery of financial products and services, but that several elements of the proposal are contrary to the objectives of regulatory modernization. While the public comment period just ended the OBL believes a final rule could be proposed in early 2023 with a one year implementation period.

Stablecoin Regulation: With the recent volatility in the cryptocurrency markets there has been increased spotlight on creating a unified regulatory framework for stablecoins. Both banking reg agencies and Congress are working on addressing the digital asset space. A bipartisan bill was introduced in early June which would impose bank like regulations on stablecoin issuers. However, a provision in the bill would allow stable coin issuers with a state charter to be entitled to an account at the Federal Reserve. The OBL opposes giving fintechs this unfair advantage and are working on legislation that would level the playing field between banks and stable coin issuers while also requiring bank like oversight, regulation, and capitalization standards.

Central Bank Digital Currency: Earlier this year the Federal Reserve put out a request for information (RFI) on the costs and benefits of the creation of a central bank digital currency (CBDC). A CBDC would be a direct competitor to bank deposits. In the RFI the Fed discussed the option of allowing consumers to hold funds directly at the Fed and receive interest on those deposits held outside of a financial institution. The OBL is opposed to the creation of a CBDC and continues to impress on the Fed they do not have the statutory authority to establish a CBDC.

SEC Climate Disclosures: The Securities and Exchange Commission has a proposed rule that would require publicly traded companies to disclose much more info on their climate risk. The OBL criticized the rule and urged the agency to remove banks from the proposed rule as bank regulator risk oversight should preempt the SEC. Additionally the OBL argued the rule would have a far heavier burden on banks, because it could mean the agency requiring the collection of climate data for all the companies a bank invests in or lend to.

Bank Merger Reform: The FDIC and OCC have begun the process of revising the bank merger process. While no proposed rule has been released both Acting Comptroller Hsu and FDIC Chair Gruenberg have made public statements of their intent to put the bank merger process under the microscope. Recently Ohio Senator and Chairman of the Senate Banking Committee Sherrod Brown wrote to the Federal Reserve urging them to join the FDIC and OCC in rewriting the rules for bank mergers. Now that Michael Barr has been confirmed as the Fed's Vice Chairman of Supervision the OBL believes the Fed will join the effort.

UDAAP Expansion: CFPB Director Chopra has been very vocal about his intent to expand the reach of UDAAP. In March the CFPB announced a new policy to apply UDAAP to all financial products not just credit produces. This policy change is now being applied payments, deposit and checking accounts, prepaid cards, remittances and debt collection, among others. The OBL has learned of banks across the country being cited for UDAAP violations for overdraft fees and other standard account fees.

Beneficial Ownership Reform: The Corporate Transparency Act sign into law in early 2021. The legislation will create a national beneficial ownership registry and allow banks to access the database. FinCEN has been tasked with standing up the registry and has thus far dragged their feet. They have released a series of request for information to better understand the needs of banks and business owners in complying with the customer due diligence process. The OBL has been pushing FinCEN to grant unlimited access to banks to reduce the compliance burden of beneficial ownership compliance.