Product Updates for April 2020
The Product Updates for April 2020 from BankPolicies.com feature the following new and revised policy template products:
This new product was developed in response to the FDIC Press Release entitled “FDiTech Releases New Guide to Help FinTechs Connect with Banks” dated 02/24/20 that announced a new guide to help financial technology companies and others partner with banks.
The new guide “Conducting Business with Banks: A Guide for Third Parties” is designed to help third parties understand the environment in which banks operate and navigate the requirements unique to banking. The guide is an initial effort to address concerns heard from banks and technology companies across the country related to challenges associated with on-boarding at institutions. FDiTech is working to develop additional tools and resources to increase opportunities for partnerships and eliminate unnecessary burdens and costs associated with third party risk management. In the meantime, the guide should serve as a helpful guide to both banks and third parties.
This new product was developed in response to the OCC Bulletin 2020-9 entitled “Protecting Tenants at Foreclosure Act: Revised Comptroller’s Handbook and Rescissions” dated 03/02/20 that announced the revised “Protecting Tenants at Foreclosure Act” booklet of the Comptroller’s Handbook. This booklet provides information and procedures in connection with the foreclosure activities and related consumer protections covered under the Protecting Tenants at Foreclosure Act of 2009 (PTFA).
With the issuance of this revised booklet, the following documents are rescinded:
OCC Bulletin 2011-15, “Protecting Tenants at Foreclosure Act of 2009: Revised Examination Procedures”
“Protecting Tenants at Foreclosure Act of 2009” booklet of the Comptroller’s Handbook issued in May 2011
The update to these products is in response to the following:
Joint Release entitled “Regulatory Capital Rule: Eligible Retained Income” dated 03/19/20 that issued an interim final rule that revises the definition of eligible retained income for all depository institutions, bank holding companies, and savings and loan holding companies subject to the agencies’ capital rule, which became effective upon publication in the Federal Register.
Joint Release entitled “Agencies Announce Changes to Community Bank Leverage Ratio” dated 04/06/20 that announced the issuance of two interim final rules to provide temporary relief to community banking organizations. The agencies are acting to implement Section 4012 of the Coronavirus Aid, Relief, and Economic Security Act, which requires the agencies to temporarily lower the community bank leverage ratio to 8 percent.
The update to these products is in response to the following:
SBA’s publication in the Federal Register entitled “Implementation of the Small Business 7(a) Lending Oversight Reform Act of 2018” dated 03/16/20 that amends its business loan program regulations to implement the Small Business 7(a) Lending Oversight Reform Act of 2018 (‘‘Act’’) and make other amendments that will strengthen SBA’s lender oversight and ensure the integrity of the business loan programs. The key amendments in this rule codify SBA’s informal enforcement actions, new civil monetary penalties and certain appeal rights for 7(a) Lenders, clarify certain enforcement actions for Microloan Intermediaries, and adopt statutory changes to the credit elsewhere test. The rule also makes other technical amendments, updates, and conforming changes including clarifying oversight and enforcement related definitions. This rule is effective April 15, 2020.
Federal Reserve’s SR-20-10, FDIC’s FIL-33-2020, and OCC’s Bulletin 2020-31 dated 04/02/20 that advises financial institutions of multiple forms of relief available in the Coronavirus Aid, Relief, and Economic Security (CARES) Act to small businesses through programs administered by the Small Business Administration (SBA), with the backing of the U.S. Department of the Treasury (Treasury). The FDIC and OCC encourage financial institutions to consider using these programs in a prudent manner as they actively work with small business borrowers with less financial flexibility to weather near-term operational challenges due to the Coronavirus Disease 2019 (referred to as COVID-19).
As a reminder, the complete contents of the Small Business Administration Loan Policy Template are included as topic 19 within the Commercial Loan Policy Template.
The update to this product is in response to the CFPB’s Compliance Bulletin 2020-01 entitled “Responsible Business Conduct: Self-Assessing, Self-Reporting, Remediating, and Cooperating” dated March 6, 2020 that clarifies its approach to responsible conduct and to reiterate the importance of such conduct. The new bulletin amends and reissues CFPB Bulletin 2013-06 entitled “Responsible Business Conduct: Self-Policing, Self-Reporting, Remediation, and Cooperation” dated 06/25/13.
The update to this product is in response to the Joint Press Release entitled “Adjusting the Calculations for Credit Concentration” dated 03/30/20 that announced that the federal regulatory agencies are jointly adjusting their calculation for credit concentration ratios used in the supervisory process. The adjustment is in response to changes in the capital information available after the implementation of the Community Bank Leverage Ratio (CBLR) rule. Effective March 31, 2020, for supervisory purposes, examiners will calculate credit concentration ratios using tier 1 capital plus the appropriate allowance for loan and lease losses or the allowance for credit losses attributed to loans and leases (as applicable) for the denominator.
The update to this product is in response to the Joint Press Release entitled “Agencies Announce Two Actions to Support Lending to Households and Businesses” dated March 27, 2020 that issued an interim final rule that allows banking organizations to mitigate the effects of the “current expected credit loss,” or CECL, accounting standard in their regulatory capital. Banking organizations that are required under U.S. accounting standards to adopt CECL this year can mitigate the estimated cumulative regulatory capital effects for up to two years. This is in addition to the three-year transition period already in place. Alternatively, banking organizations can follow the capital transition rule issued by the banking agencies in February 2019.
The update to this product is in response to the CFPB’s release entitled “CFPB Issues Credit Reporting Guidance During COVID-19 Pandemic” dated 04/01/20 that released a policy statement outlining the responsibility of credit reporting companies and furnishers during the COVID-19 pandemic. In response to the pandemic, many lenders are being flexible when it comes to consumers making payments. The CFPB’s statement underscores that consumers benefit if lenders report accurate information about these arrangements to credit bureaus so that the credit reports of consumers are accurate.
The update to these products is in response to OCC Bulletin 2020-10 entitled “Third-Party Relationships: Frequently Asked Questions to Supplement OCC Bulletin 2013-29” dated 03/05/20 that clarifies the OCC’s existing guidance and reflect evolving industry trends.
This new bulletin rescinds OCC Bulletin 2017-21, “Third-Party Relationships: Frequently Asked Questions to Supplement OCC Bulletin 2013-29,” issued on June 7, 2017. The FAQs from OCC Bulletin 2017-21 have been incorporated unchanged, except for question No. 24, which was updated to reflect current AICPA Service Organization Control report information. The FAQ numbers from OCC Bulletin 2017-21 are noted in parentheses.
As a reminder, the complete contents of the Managed Security Service Providers Policy Template are included as topic 14 within the Vendor Management Program Policy Template.
The update to this product is in response to OCC Bulletin 2020-14 entitled “Deposit-Related Credit: Revised Comptroller’s Handbook” dated 03/12/20 that announced a fully revised “Deposit-Related Credit” booklet of the Comptroller’s Handbook. The revised booklet replaces the booklet of the same title and rescinds OCC Bulletin 2018-28, “Deposit-Related Credit: Updated Comptroller’s Handbook Booklet,” which transmitted version 2.1 of the booklet in September 2018.
In addition, the update to this product is in response to the Federal Reserve Press Release entitled “Federal Reserve Board Announces Implementation Delay for Changes to its Payment System Risk Regarding Intraday Credit” dated 03/24/20 that announced a six-month delay in the planned implementation of policy changes to procedures governing the provision of intraday credit to U.S. branches and agencies of foreign banking organizations (FBOs).
On April 1, 2019, the Federal Reserve Board approved amendments to Part II of the PSR policy, which establishes the maximum levels of daylight overdrafts that depository institutions may incur in their Federal Reserve accounts. The changes were initially scheduled to become effective on April 1, 2020. In light of the challenges posed by the coronavirus, the Federal Reserve Board is delaying implementation until October 1, 2020. This additional time will allow FBOs and the Federal Reserve Banks to focus on heightened priorities rather than establishing new arrangements for accessing intraday credit.
The update to this product is in response to the Federal Reserve’s Final Rule issued on 03/24/20 that adopted final amendments to its Regulation A to reflect the Federal Reserve Board’s approval of an increase in the rate for primary credit at each Federal Reserve Bank. The secondary credit rate at each Reserve Bank automatically increased by formula as a result of the Federal Reserve Board’s primary credit rate action.
The update to this product is in response to the Federal Reserve’s Final Rule issued on 03/24/20 that revises the rate of interest paid on balances maintained to satisfy reserve balance requirements (“IORR”) and the rate of interest paid on excess balances (“IOER”) maintained at Federal Reserve Banks by or on behalf of eligible institutions. The final amendments specify that IORR is 0.10 percent and IOER is 0.10 percent, a 1.00 percentage point increase from their prior levels.
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