FEDERAL GOVERNMENT RELATIONS
Action Alert: Urge Lawmakers to Oppose New IRS Reporting Rules
The Biden Administration is proposing a sweeping expansion of tax information reporting aimed at raising revenue to help offset the cost of additional spending programs in the American Families Plan. While the initial draft of the Biden administration’s $3.5 trillion spending plan currently does not include the IRS reporting proposal, the language could be added over the coming weeks as the current package is debated. We must continue our grassroots efforts to ensure that this provision stays out of future drafts of the bill.
Contact your lawmakers today to express your opposition to any new IRS reporting that leads to increased compliance costs, damages your customer relationships and threatens customer privacy. In addition to the current action alert seeking bank employee participation, we have created an action alert with messaging specifically designed for bank customer engagement. Please consider sharing this unique action alert link so they may urge Congress protect their financial privacy!
Federal Court Issues Administrative Stay of Vaccine Mandate
A federal appellate court on Saturday issued an administrative stay of enforcement of the emergency temporary standard that will require all employers with 100 or more employees to be fully vaccinated or test weekly for COVID-19. The stay – which appears to apply nationwide – was issued in response to a legal challenge to the ETS filed by several governors and private entities.
Under the standard – which was developed by the Occupational Safety and Health Administration at the direction of President Biden – employees of covered firms would have until Jan. 4 to receive the vaccine or be required to produce a negative test on “at least a weekly basis.”
Although the court’s stay is administrative in nature, to allow for the parties to brief the challengers’ emergency motion, the court stated that “the petitions give cause to believe there are grave statutory and constitutional issues with the [vaccine] Mandate …”
Challenges to the standard have been brought in at least five federal appellate courts. A random draw will be held to determine which appellate court will hear the case. In light of the possibility that the ETS may be permanently enjoined, banks may wish to consider carefully the resources and effort they expend at this time to develop a program in anticipation of compliance with the ETS.
Federal Regulators End Temporary Mortgage Servicing Flexibility
The federal banking regulators on Wednesday announced the end of the mortgage servicing supervisory and enforcement flexibility issued in response to the COVID-19 pandemic. In a joint statement, the regulators indicated they believe the temporary flexibilities authorized in April 2020 are no longer necessary, as servicers have now had “sufficient time” to adjust operations and work with consumers affected by the pandemic. They added that they will resume using their enforcement authority to address noncompliance for violations of Regulation X mortgage servicing rules starting after the date of the joint statement.
The regulators added that when considering any supervisory and enforcement actions, they will continue take into account specific pandemic-related challenges facing servicers and the time it takes to “make operational adjustments” in response to the end of the enforcement flexibility.
In conjunction with the joint statement, the Consumer Financial Protection Bureau released a report summarizing its efforts to assist borrowers during the COVID-19 pandemic.
OCC's Hsu: Bank Board Guidance on Climate Risk Coming Soon
In remarks Monday at the OCC, Acting Comptroller Michael Hsu indicated that the agency plans to address climate change risk regulation with high-level framework guidance and five “range of practices” questions for large-bank boards by the end of 2021.
The questions are intended to spur conversations at the board level with management and to inform more detailed guidance that would likely be developed in 2022. Examinations based upon the guidance will follow the more detailed guidance in 2022, and a focus on climate risk and midsize and smaller banks will follow after that, he said.
Hsu committed to taking a deliberate, phased and data-driven approach to understanding the financial risks and opportunities posed by climate change and the transition to a lower-carbon economy. He also noted that each bank is unique with different customers and business lines, and that it is important to ensure that any consideration of climate risk as a supervisory issue is appropriate and tailored, based on the size, complexity and location of the institution.
Quarles to Leave Fed by Year's End
Federal Reserve Governor Randal Quarles said Monday that he plans to resign from the central bank board at the end of December. Quarles has been a member of the board since 2017 and served as the board's first vice chairman for supervision, with a four-year term that ended last month. He also chairs the Financial Stability Board, and his three-year term there ends on Dec. 2.
Fed Survey: Loan Easing Trend Slows as Recovery Pace Cools in Q3
While banks continued to remain in a posture of easing standards on commercial, mortgage and personal loan products, the easing trend slowed in the third quarter from the prior two quarters, according to the Federal Reserve’s senior loan officer opinion survey released Monday.
- C&I. Fewer banks eased standards for commercial and industrial loans in the third quarter, with 18% on net easing for large and middle-market firms and 11% easing for small firms. Banks easing standards and terms were most likely to cite more aggressive competition as the reason. Banks offered mixed reports on demand, with 8% on net reporting stronger demand from large and midsize firms and no change on net reported in small firms’ demand. Among banks seeing stronger demand, the most important factors were client M&A financing needs. Banks reporting weaker demand cited growth in customers’ internally generated funds.
- CRE. The commercial real estate market cooled somewhat in the third quarter, with just 3% on net reporting stronger demand for construction and land development loans (down from 21% in Q2) and 21% on net reporting stronger multifamily loan demand (down from 37% in Q2). Nearly three-quarters of banks kept standards unchanged for construction and land development loans for multifamily CRE loans.
- Mortgages. Almost all banks kept standards unchanged for conforming and government mortgage loans in the third quarter. However, with housing prices remaining elevated in Q3, 28% of banks eased standards for Qualified Mortgage-designated jumbo loans, a quarter eased standards on non-QM jumbos and one in five eased on non-jumbo, non-conforming QMs. Demand for jumbo loans cooled.
- Personal loans. The trend in easing standards for consumer credit continued but tapered slightly amid easing demand, with 31% of banks on net easing standards on credit card loans, 9% on net easing standards on auto loans and 16% on net reporting eased standards on other consumer loan types. On net, 16% of banks saw increased demand for credit cards and 25% saw stronger demand for auto credit.
Regulators Continue Raising Digital Asset Concerns
U.S. regulators have continued raising concerns about digital assets as policymakers work to develop a regulatory framework. In a public statement, SEC Commissioner Caroline Crenshaw spotlighted risks posed by decentralized finance and smart contracts, noting that few people can understand the code on which these instruments are based, and even experts can miss flaws or hazards. Separately, this week’s Federal Reserve Financial Stability Report rated stablecoins and cryptocurrency as the fifth most-cited potential financial shock over the next 12-18 months, ahead of climate, political uncertainty, and cyberattacks.
Fed’s Bowman Raises Concerns with Nonbank Mortgage Lending
Federal Reserve Governor Michelle Bowman expressed concern with differences in prudential oversight of banks and nonbanks in the mortgage market in remarks on Monday. Speaking in Washington, Bowman said the mortgage finance system must have a place for both banks and nonbanks to serve the varying needs of different customers. But like activities should be treated in a like manner, she said, reiterating concerns with financial stability risks they could pose.