(Nov. 24, 2021) Leadership at the Federal Reserve would be solidified at least through 2026 if President Joe Biden’s (D) nominations for chair and vice chair of the board, made Monday, are confirmed by the Senate.
Nominated for a four-year term as chair, and a new four-year term for vice chair, Biden tapped Jerome H. (“Jay”) Powell and Lael Brainard to take the two top spots. Biden referred to “decisive action” taken by the pair in helping to steer the nation through the financial impact of the coronavirus crisis and put the economy on the path to recovery.
The president is apparently not done making appointments: the White House indicated that he intends to nominate candidates for three open slots on the Fed Board beginning in December, including that of vice chair of supervision for the agency.
The supervision vice chair appointment has been empty since last month, when the term of Randal Quarles in that job ran out after four years. Quarles has since announced his intention to the leave the Fed Board by the end of next month.
Meanwhile, the term of the current Fed Vice Chairman Richard Clarida (in both that position and as a member of the board) expires in February. Monday’s statement from the White House indicated nothing about keeping Clarida on the board. That position will be one of the three Biden will have to fill, the other two being Quarles’ and a board slot that is now vacant.
Biden said the focus of both Powell and Brainard will be on keeping inflation low, prices stable and “delivering full employment will make our economy stronger than ever before.” He asserted that both share his “deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.”
“Fundamentally, if we want to continue to build on the economic success of this year we need stability and independence at the Federal Reserve – and I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs,” he said.
Powell was confirmed by the Senate for a four-year term as chair of the seven-member board in 2018 after being nominated by then-President Donald Trump (R). His term in that role ends officially in February; his term as a Fed Board member runs to January 2028.
Brainard has served on the Fed Board since June 2014 after being nominated by then-President Barack Obama (D); her terms runs until January 2026. While at the Fed, she has been involved in several key issues related to financial institution regulation. Those include: being the Fed’s point person on reform of rules implementing anti-redlining laws (the Community Reinvestment Act (CRA)) and leading the Fed’s efforts in developing a 24-hour, seven-days-a-week payments system (known as FedNow), expected to debut in 2023.
If confirmed, Powell and Brainard would serve terms as chair and vice chair that end in 2026.
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(Nov. 24, 2021) The state system is seeking to provide its views of the proposed NCUA 2022 budget at the agency’s public briefing in two weeks, particularly the proposed increased in the overhead transfer rate (OTR) – for the third straight year — in the spending plan.
If approved, NASCUS President and CEO Lucy Ito will provide the state system’s perspective at the briefing, scheduled for Dec. 8 at 2 p.m. (and to be live-streamed via the Internet).
The overhead transfer rate (OTR) provides a portion of the funding for NCUA’s “operating budget” of $326 million (which makes up 94.4% of the overall agency budget). For 2022, the OTR will be set at 63.4%, according to the budget papers posted by NCUA. The transfer means that nearly two-thirds of the 2022 operating budget ($206.7 million) will be paid out of the share insurance fund. The remainder of the operating budget comes from “operating fees” paid by federal credit unions.
The OTR represents money that is transferred from NCUSIF to the operating budget of the agency to cover “insurance-related” expenses of the agency. The remainder of the operating budget is covered by the operating fee paid by federal credit unions.
NASCUS President and CEO Lucy Ito pointed out that the proposed 2022 OTR will be the third straight year that an increased transfer rate has been proposed by the agency (at 61.3% in 2020, 62.3% in 2021, and the proposed 63.4% for 2022). She also noted that the number of federally insured, state-chartered credit unions has been declining. At year-end 2019, there were (according to NCUA quarterly call report data) 1,953 FISCUs. By the end of the next year (2020), the number had fallen to 1,914. At mid-year 2021, total FISCUs were 1,886.
Federal credit union (FCU) numbers are also in decline, she noted – but there are still many more of those charters than FISCUs: 3,383 at year-end 2019, 3,185 at year-end 2020, and 3,143 at mid-year 2021.
LINK:
NCUA Posts 2022-2023 Proposed Budget, Sets Dec. 8 Public Briefing
(Nov. 24, 2021) A final rule requiring banks to notify their federal regulators of certain cyber incidents with potentially systemic effects was approved jointly late last week; it takes effect April 1, with compliance required by May 1. NCUA has not yet adopted a similar rule for credit unions.
Adopted by the Federal Reserve, FDIC, and OCC, the final rule requires a banking organization to notify its primary federal regulator of any “computer-security incident” that rises to the level of a “notification incident” as soon as possible and no later than 36 hours after the banking organization determines that a cyber incident has occurred, according to a notice for the Federal Register.
The final rule defines a “notification incident” as a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, a banking organization’s:
- ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business;
- business line (or lines), including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value; or
- operations, including associated services, functions and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.
The final rule also requires a bank service provider to notify each affected banking organization customer as soon as possible when the bank service provider determines that it has experienced a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours, the notice states.
LINK:
Agencies approve final rule requiring computer-security incident notification
(Nov. 24, 2021) Covering everything from the 2015 rule through last year’s revisions, a voluntary assessment of the CFPB’s Home Mortgage Disclosure Act (HMDA) rule is underway, according to the Federal Registernotice published this week by the bureau.
Public comment is being taken on the effort until Jan. 21, according to the notice.
Under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the bureau is required to assess any significant rule or order and report on it within five years of its effective date. Public comment on recommendations must also be invited for modifying, expanding, or eliminating the rule or order before publishing a report on the assessment.
CFPB said the assessment is voluntary since the bureau determined that the HMDA rule does not meet the definition of a “significant” rule for purposes of the Dodd-Frank Act, but the bureau will conduct the review in accordance with the statute’s provisions for required assessments.
That said, it noted that this assessment will address the 2015 HMDA final rule and the subsequent HMDA rules issued in 2017, 2018, 2019, and 2020. Given the difficulty in isolating the different effects of the 2015 rule and subsequent rules, the bureau said it has decided that considering all of them together “will facilitate a more meaningful assessment” of the rule.
To assess the effectiveness of the HMDA rule, CFPB said it intends to evaluate: Institutional coverage and transactional coverage; data points; benefits of the new data and disclosure requirements; and operational and compliance costs. The bureau said it is incorporating into the assessment all rules that implicate calendar-year HMDA data beginning with data collected in 2018 through data collected in 2021.
LINK:
Federal Register notice: Request for Information Regarding the HMDA Rule Assessment
(Nov. 24, 2021) Fair lending and consumer compliance are on the agenda for a Dec. 1 webinar hosted by NCUA, the agency said this week. Registration for the 3 p.m. ET event, to run about an hour, is now open. Topics include 2022 consumer compliance exam scope activities, fair lending updates, 2021 consumer compliance exam scope activities, and regulatory updates, including the rule on capitalizing unpaid interest and the 2021 COVID-19 temporary mortgage servicing rule … Speaking of educational sessions: Don’t forget the Dec. 9 (at 2 p.m. ET) NASCUS 101 — a free, short webinar where participants learn from the NASCUS team how to make the most of an association membership. Among the topics addressed: What NASCUS is, how NASCUS contributes to the entire credit union industry, how to engage in the regulatory and legislative processes, collaboration with peers, committee and working group involvement, customized communications and more. The webinar is open to all members and prospective members. While it is free to participate, registration is required … Federal banking agencies Tuesday released summaries of their plans to provide “greater clarity” through next year on whether certain crypto-asset-related activities conducted by banks are legally permissible and “related expectations for safety and soundness, consumer protection, and compliance with existing law and regulations.” According to the agencies, the emerging crypto-asset sector “presents potential opportunities and risks to banking organizations, their customers, and the overall financial system” … Here’s to a happy and safe Thanksgiving holiday for all!
LINKS:
Registration: NCUA 2021 Consumer compliance and fair lending regulatory update
Register here for NASCUS 101, Dec. 9, 2 p.m. ET.
Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps (PDF)
(Nov. 24, 2021) Known or suspected environmental crime is an important part of a financial institution’s compliance with the Bank Secrecy Act (BSA), according to a notice issued late last week by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The FinCEN notice highlighted five specific types of environmental crime: wildlife trafficking, illegal logging, illegal fishing, illegal mining, and waste and hazardous substances trafficking. Instructions for reporting such activity on a suspicious activity report (SAR) are provided in the FinCEN notice.
An “upward trend” in environmental crimes and associated illicit financial activity is occurring, the notice indicated. The financial crime unit said it was highlighting the trend because of:
- its strong association with corruption and transnational criminal organizations, two priorities for the agency in its efforts to combat national anti-money laundering and counter financing of terrorism (AML/CFT, or anti-money laundering/countering the financing of terrorism);
- a need to enhance reporting and analysis of related illicit financial flows; and
- environmental crimes’ contribution to the climate crisis, including threatening ecosystems, decreasing biodiversity, and increasing carbon dioxide in the atmosphere.
The agency said credit unions and banks may consider using the authority provided under the BSA’s section 314(b), which gives a safe harbor from liability for certain information sharing undertaken voluntarily to better identify and report activities that may involve money laundering or terrorist activities. A footnote in the notice states this safe harbor “may apply in certain situations to the sharing of cyber-related information, such as IP addresses.”
LINK:
FinCEN Calls Attention to Environmental Crimes and Related Financial Activity