FEDERAL GOVERNMENT RELATIONS
Fed cuts rates by 50 basis points
The Federal Open Market Committee voted to cut target interest rates by 50 basis points due to improved confidence that inflation is moving sustainably toward its 2% goal. The rate cut – the first since 2020 – lowers the federal funds rate to a range of 4.75-5%. Federal Reserve Governor Michelle Bowman was the sole dissenting vote, preferring to lower rates by 25 basis points. In its latest economic projections, the Federal Reserve estimated lower gross domestic product growth, higher unemployment and lower inflation than it projected in June. It also projected another 50 basis points in cuts by the end of the year and a full percentage point in cuts next year.
OCC approves separate rule, guidance on bank mergers
The Office of the Comptroller of the Currency approved a final rule updating its regulations for business combinations involving national banks and federal savings associations and a policy statement clarifying its review of applications under the Bank Merger Act. Effective Jan. 1, 2025, the OCC’s final rule includes regulatory amendments that will:
- Remove expedited review procedures that allow certain filings to be deemed approved as of the 15th day after the close of the comment period.
- Remove a section that specifies situations in which an applicant may use the OCC’s streamlined business combination application rather than the full interagency BMA application.
Designed to provide guidance to stakeholders on the OCC’s review of applications, the agency’s finalized policy statement discusses:
- General principles for the OCC’s review of applications under the BMA, such as indicators that applicants are more likely to be approved expeditiously.
- The OCC’s consideration of the BMA’s statutory factors on financial stability, managerial and financial resources and future prospects, and convenience and needs.
- The OCC’s decision process for extending the public comment period or holding a public meeting.
FDIC finalizes rule on custodial deposits
The Federal Deposit Insurance Corp. board of directors issued a proposed rule that would require increased recordkeeping responsibility for banks that hold custodial deposit accounts with transactional features. The FDIC defines banks that hold custodial deposits as those in which:
- The account is established for the benefit of beneficial owners.
- The account holds commingled deposits of multiple beneficial owners.
- A beneficial owner may authorize or direct a transfer through the account holder from the account to a party other than the account holder or beneficial owner.
The proposal responds to the bankruptcy of the nonbank deposit broker Synapse Financial Technologies. In a statement, FDIC Chairman Martin Gruenberg said the proposal will help ensure banks know the actual owner of deposits placed by third parties and can provide funds to depositors even if the third party fails.
FDIC proposes new recordkeeping requirements for bank-fintech partnerships
During a hearing Thursday on financial scams targeting consumers, Senate Banking Committee members offered different approaches for addressing the problem. Democrats argued that banks and other financial institutions should take responsibility for scams targeting their customers, while Republicans pushed for consumer education.
Committee Chairman Sherrod Brown, D-Ohio, said technology companies need to do more to prevent fraud through their social media platforms, and that payment platforms should reimburse customers who have been scammed.
FDIC may seek additional information for bank acquisitions by credit unions
The Federal Deposit Insurance Corp. said that credit unions may need to provide additional information when applying to acquire a bank as they are not subject to the Community Reinvestment Act.
Banking agencies extend comment period for bank-fintech information request
The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency extended the public comment period for their request for information on bank partnerships with financial technology companies to Oct. 30.