FEDERAL GOVERNMENT RELATIONS
OCC Publishes Interest Rate Risk Statistics Report
The Office of the Comptroller of the Currency on Monday published its semiannual report on interest rate risk data gathered during examinations of OCC-supervised midsize and community banks and federal savings associations. The statistics are for informational purposes only, and do not represent OCC-suggested limits or exposures, the agency noted.
The report provides statistics on projected changes in 12-month net interest income in parallel interest rate shock scenarios ranging from -100 basis points to +400 basis points; projected changes in economic value of equity in parallel interest rate shock scenarios ranging from -100 basis points to +400 basis points; banks’ policy limits for changes in NII and EVE in parallel interest rate shock scenarios ranging from -100 basis points to +400 basis points; and non-maturity deposit repricing rates and average lives for different account types.
FDIC Provides Guidance on Multiple NSF Fees for Re-Presented Items
In its latest issue of Consumer Compliance Supervisory Highlights, the Federal Deposit Insurance Corp. addressed the charging of multiple non-sufficient funds fees for transactions presented multiple times against insufficient funds in the customer’s account. FDIC examiners have scrutinized this issue in recent exams, with some exams remaining open pending resolution of the issue.
In the Supervisory Highlights, the FDIC discussed potential consumer harm from this practice in terms of both deception and unfairness under the Federal Trade Commission Act Section 5’s prohibition on unfair or deceptive acts or practices. The FDIC stated that the “failure to disclose material information to customers about re-presentment practices and fees” – i.e., unclear definitions of “per item or “per transaction” – may be deceptive.
Additionally, the FDIC stated that the failure to disclose material information to customers “may also be unfair if there is the likelihood of substantial injury for customers, if the injury is not reasonably avoidable, and if there is no countervailing benefit to customers or competition. For example, there is risk of unfairness if multiple fees are assessed for the same transaction in a short period of time without sufficient notice or opportunity for consumers to bring their account to a positive balance.”
The FDIC listed a range of “risk-mitigating activities” that banks have taken to “reduce potential risk of consumer harm and avoid potential [UDAP] violations.” These include eliminating NSF fees, declining to charge more than one NSF fee for the same transaction, disclosing how NSF fees will be imposed, providing the customer with sufficient notice of the first NSF fee so that the customer can bring the account balance positive before the transaction is represented, ensuring the manner in which NSF fees are charged is “communicated clearly and consistently,” and “[w]orking with service providers to retain comprehensive records so that re-presented items can be identified.”
Read the Supervisory Highlights
Study: Increasingly Sophisticated Cyberattacks Target New Account Creations, Apps
Cyberattack rates across financial services increased 20% in the second half of 2021 from the same period a year earlier and increased 41% from the first half of 2021, according to a recent report from LexisNexis Risk Solutions. High-velocity automated cyberattacks on financial service companies increased 10% to 890 million from the year prior. Cyberattacks targeting new account creation increased 73% year-over-year as fraudsters targeted fast and easy onboarding for digital banking, the report found. Meanwhile, account login attacks increased 48% and were up more than 200% on mobile apps. Financial services payment attacks were up 25% year-over-year, with mobile app attacks up more than 400%.
Attacks on the financial sector are also becoming more complex, the report found, with fraudsters often initiating attacks by obtaining new cellphone contracts or taking over the accounts of existing wireless customers to use later in bank account takeover attempts or new account fraud. New account application fraud made up 44% of the attacks against financial service companies, and 56% of attacks were account takeover fraud.
Hsu: OCC Weighing ‘Conditions’ for Large Bank Mergers to Ensure Resolvability
Speaking at an industry event last Friday, Acting Comptroller Michael Hsu warned that “there is a gap with regards to large regional banks” when it comes to resolvability, and signaled his desire for additional reforms to ensure financial stability in the event of a large regional bank failure.
In particular, Hsu advocated for adopting a “single-point-of-entry” resolution strategy for these firms – the same strategy to which global systemically important banks are currently subject under their resolution planning framework. Under this approach, “only the parent holding company is supposed to file for bankruptcy or be taken into receivership; all of the material subsidiaries are expected to continue to operate and function, thus avoiding the chaos of multiple proceedings,” Hsu explained.
Additional reforms include requiring large regionals to hold “sufficient bail-in-able long-term debt at the parent, and…ensuring the separability of major business lines and/or portfolios.” Hsu acknowledged that such reforms would take time and would require work by the Federal Reserve and Federal Deposit Insurance Corp.; however, in the near-term, he said the Office of the Comptroller of the Currency is considering “condition[ing] approval of a large bank merger on actions and credible commitments to achieving [single-point-of-entry], [total loss absorbing capacity], and separability.”
House Bill Would Extend CFPB Supervisory Authority to Nonbank Small Biz Lenders
As the Consumer Financial Protection Bureau looks to implement Section 1071 of the Dodd-Frank Act – which calls for the collection of small business lending data – Rep. Nydia Velazquez (D-N.Y.) last week introduced H.R. 7351, a bill that would amend the Consumer Protection Act to give the CFPB supervisory authority over nonbanks making small business loans.
Currently, the bureau has the authority to enforce consumer fair lending laws against nonbanks, with the Federal Trade Commission having secondary enforcement authority; however, these agencies do not have supervisory authority over nonbank small business lenders.