FEDERAL GOVERNMENT RELATIONS
Biden Order Calls for Movement on Data Access Rule, Review of M&A Rules
President Biden last Friday issued a wide-ranging executive order on competition issues across the U.S. economy. Among provisions related to the financial services industry, the order calls on the Consumer Financial Protection Bureau to complete its implementation of Section 1033 of the Dodd-Frank Act and to enforce the prohibition on unfair, deceptive or abusive acts and practices consistently with Section 1031 of Dodd-Frank.
The order also calls for the Department of Justice and federal banking regulators to review current policies on bank mergers and for the Department of the Treasury to report on the effects of large tech companies’ and other nonbanks’ entry into financial services. The CFPB last fall issued an advance notice of proposed rulemaking on Section 1033, which addresses consumers’ rights to access and control information about their accounts.
CFE Fund Announces Milestone of 100+ Certified ‘Bank On’ Accounts
The Cities for Financial Empowerment Fund announced on Monday that the number of Bank On-certified deposit accounts has surpassed 100. Newly certified accounts from BMO Harris Bank, BOM Bank and Wintrust Community Banks were among those identified by the CFE Fund as helping to reach the milestone.
There are now 108 certified accounts from institutions representing 50% of U.S. deposit market share and 40% of U.S. bank branches, the CFE Fund indicated. Today, there are more than 80 banks offering the accounts—with substantially more participation from community banks—and many more are in the certification process. Twenty core technology providers—including Fiserv, FIS, Jack Henry & Associates and Finastra—have committed to simplify the process for their bank clients to create and offer a Bank On-certified account, facilitating community banks’ participation.
Bank On accounts are designed to extend bank access to the roughly 5% of U.S. households that remain unbanked. Key features include low costs, no overdraft fees, robust transaction capabilities via a debit or prepaid card and free online bill pay.
Agencies Propose Guidance on Third-Party Relationships
Federal banking regulators proposed interagency guidance designed to help banks manage risks associated with third-party relationships, including those with fintech entities.
The proposed guidance:
- Offers a framework of sound risk management principles.
- Promotes compliance with all applicable laws and regulations.
- Accounts for the level of risk, complexity and size of the banking organization and the nature of the third-party relationship.
Open for a 60-day comment period, the proposal would replace each agency’s existing guidance on this topic and would be directed to all institutions supervised by the agencies.
Fed Changing Coin-Allocation System
The Federal Reserve indicated it is refining its coin-allocation methodology to use individual endpoint order data to calculate unique weekly coin order limits.
Under the new system taking effect with orders placed today, July 16, for pickup on Monday, July 19:
- Allocation levels will continue to be based on recent order volume, U.S. Mint coin production levels and Reserve Bank deposit levels.
- Each coin-ordering endpoint will be assigned a unique order limit by denomination, based on its average weekly ordering activity in 2021 prior to the May 3 allocation implementation.
- Current endpoint groups (S, M, L, XL, XXL) will be eliminated.
- All endpoints will be able to view their unique limits by denomination within the FedLine Cash application when placing coin orders.
Questions can be directed to local FedCash Services customer support representatives or Federal Reserve account executives, with more information on the Fed’s Contact page.
The U.S. Coin Task Force continues to offer resources through the #GetCoinMoving campaign encouraging consumers to help alleviate coin circulation challenges.
CFTC Panel Approves ‘SOFR First’ Rate Transition Plan
As part of regulators’ efforts to facilitate the ongoing transition away from Libor, the Commodity Futures Trading Commission’s Market Risk Advisory Committee has recommended “SOFR First” as a market best practice. The full CFTC must now vote on the recommendation.
SOFR First is a four-phase initiative for switching trading conventions from Libor to the Secured Overnight Financing Rate, the Alternative Reference Rates Committee’s preferred Libor replacement, for U.S. dollar-denominated linear interest rate swaps, cross currency swaps, non-linear derivatives and exchange traded derivatives. Phase one would occur on July 26, when interdealer brokers would replace their trading of Libor linear swaps with trading of SOFR linear swaps. Libor linear swap screens would remain available for informational purposes—but not trading purposes—until Oct. 22, 2021, after which they would be turned off altogether.
With certain tenors of Libor set to stop publishing as soon as the end of 2021, regulators have heightened expectations for bankers to cease issuing instruments that reference Libor but that mature after Libor ceases publication, as well as to ramp up efforts to introduce fallback provisions in Libor contracts.
House Republicans Urge OCC to Address ‘True Lender’ Repeal
House Financial Services Committee Republicans asked the Office of the Comptroller of the Currency how it plans to respond to a recently enacted resolution repealing the agency’s “true lender” rule.
In a joint letter to Acting Comptroller Michael Hsu, the lawmakers indicated that preventing the rule from taking effect will make new and innovative financial products more expensive and credit less available. The letter also seeks feedback on the agency’s efforts to enable innovation and respond to cybersecurity threats.
The OCC rule created a standard to determine when a bank is the “true lender” when partnering with a third party. Under the rule, banks were deemed true lenders if they funded the loan or were named as the lender in the loan agreement on the origination date.
The resolution, which President Joe Biden signed June 30 following congressional approval, repeals the rule under the Congressional Review Act, which allows lawmakers to invalidate federal rules and limits agencies’ ability to issue a similar rule in the future.
Child Tax Credit Payments Start
The IRS yesterday began distributing Advance Child Tax Credit payments authorized by the American Rescue Plan.
Payments: Families will receive payment by direct deposit in the bank account currently on file with the IRS. Those not enrolled for direct deposit will receive a check.
Resources: The IRS’s Eligibility Assistant helps families determine eligibility for the payments, and its Update Portal enables recipients to update their bank account information to receive the monthly payment