Regulatory Developments
OCC Solicits Research on Implications of Financial Technology for Banking
On July 25, the OCC is seeking academic and policy-focused research on the impact that fintech and non-bank entities have on the banking industry and markets for lending, deposit-taking and payment services through August 21, 2022. The OCC will then invite authors of selected papers to present to OCC staff and guests at the OCC Headquarters in Washington, D.C., to be held from November 7-8, 2022. These presentations are intended to serve as a platform for academic, regulatory and other industry experts to discuss research and expound on how the banking system, with specific focus on community banks, will leverage the technology associated with fintech and, in turn, respond to the influx of new banking services providers. The Call for Papers lays out the scholarship requested; interested parties are invited to submit papers to EconFINTECHSymposium@occ.treas.gov.
CFTC Extends Public Comment Period on Request for Information on Climate-Related Financial Risk
On July 18, the CFTC extended the deadline for the public comment period on an RFI on climate-related financial risk from August 7 to October 7. The RFI seeks public comment to better inform the CFTC’s understanding and oversight of climate-related financial risk, which refers to physical risks characterized by harm caused by acute, climate-related events and transition risks characterized by stresses to financial institutions or sectors resulting from shifts in policy, regulations, customer and business preferences, etc. Climate-related financial risk may directly or indirectly impact CFTC-registered entities, registrants and other market participants, as well as the derivatives markets and underlying commodities markets themselves, including causing heightened market volatility, disruptions of historical price correlations and challenges to existing risk management assumptions. The RFI also seeks responses on questions specific to data, scenario analysis and stress testing, risk management, disclosure, product innovation, voluntary carbon markets, digital assets, greenwashing, financially vulnerable communities, and public-private partnerships and engagement.
“It’s critical that the Commission proactively understand how climate-related financial risk may affect the commodities and derivatives markets as well as our registered entities, registrants, and other market participants as they increasingly rely on the derivatives markets to manage their climate-change induced physical and transition risk.”
– CFTC Chairman Rostin Behnam
CFPB Issues New Debt Collection FAQs
On July 27, the CFPB published four new topics to its Debt Collection Rule FAQs: (1) Prohibitions on Third-Party Communications; (2) Electronic Communication; (3) Electronic Communication: Opt-out Notice; and (4) Unusual or Inconvenient Times or Places. Among the new FAQ responses, the CFPB confirms that nothing in the Debt Collection Rule requires a debt collector to communicate with consumers electronically, that consumers may limit debt collector communications through specific methods or mediums, and that all electronic communications or attempted electronic communications with a consumer in connection with a collection of a debt must contain a clear and conspicuous opt-out notice with a simple method (e.g., hyperlink, texting “STOP” or similar language) by which the consumer can opt out of further electronic communications by the debt collector at the specific electronic medium to which the communication was sent.
Notice of Proposed Rulemaking on Assessments, Amendments to Incorporate Troubled Debt Restructuring Accounting Standards Update
On July 20, the FDIC issued a notice of proposed rulemaking (the Proposal) in the Federal Register to incorporate updated accounting standards in the risk-based deposit insurance assessment system. The proposed rulemaking applies to all large and highly complex insured depository institutions. The proposal would amend the assessment regulations to expressly include the new accounting term, “modifications to borrowers experiencing financial difficulty (the Term),” recently introduced by the Financial Accounting Standards Board (FASB), to replace troubled debt restructurings (TDRs) in the underperforming assets ratio and higher-risk assets ratio in the scorecards for large and highly complex banks. In addition, the FDIC Board and other members of the Federal Financial Institutions Examination Council are planning to revise Call Report forms and instructions to include the Term as it will be defined in the Glossary of the Call Report instructions.
The Proposal would not affect the deposit insurance assessment system for FDIC-insured and/or FDIC-supervised institutions with less than $10 billion in total consolidated assets.
FDIC Updates Guidance Regarding Termination of Cease-and-Desist and Consent Orders
On July 25, the FDIC revised guidance regarding termination of consent orders and cease-and-desist orders under Section 8(b) of the Federal Deposit Insurance (FDI) Act. Under the FDI Act, the FDIC has the power to issue cease and desist orders when an insured depository institution is conducting business in an unsafe or unsound manner, or is violating a law, regulation, or agreement with the FDIC. Under the new guidance in the Enforcement Actions Manual, cease-and-desist orders can be terminated when (1) the institution has come into full compliance with the order and has corrected the violations that led to the order; (2) the provisions the institution is not in compliance with have ceased to be relevant to the circumstances of the institution; or (3) new or revised formal actions have been taken against the institution by the FDIC. The Enforcement Actions Manual guides the FDIC’s staff in its interactions with all FDIC-supervised financial institutions.
Litigation & Enforcement
SEC Alleges “Crypto Asset Securities” Insider Trading; Case Has Significant Implications for the Digital Asset Industry
On July 21, the SEC charged three individuals with insider trading of digital assets via a scheme to trade ahead of multiple announcements regarding crypto assets being made available on a United States-based digital asset exchange at which one individual was a former product manager. In the complaint, the SEC identifies nine “crypto asset securities” (the first time the agency has used this term) that the agency alleges are securities. The SEC also alleges that the individuals orchestrated the scheme more broadly on at least 25 digital assets — 16 of which are not identified — gaining illicit profits of more than $1.1 million.
Read the client alert to learn more about the case and its implications.
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