Insights / Financial Services Law Advisor
Banking and Consumer Regulatory Digest
March 1 - 15, 2024
Editor's Note
The following newsletter provides a roundup summarizing enforcement actions, guidance, rulemakings, and other public statements taken by a federal and/or state financial services regulatory agency, specifically focusing on: (1) the source of the development (regulator, legislative body, etc.), (2) the subject matter (consumer lending, money transmission, capital markets, etc.), and (3) the general issue covered.
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Regulatory Developments
- Conference of State Bank Supervisors. Money Transmission Modernization Act. On March 14, 2024, CSBS provided an update on the adoption of the 2021 Money Transmission Modernization Act (MTMA). The MTMA is a single set of nationwide standards and requirements to modernize the supervision and regulation of money transmitters. Nineteen states have adopted the law in full or in part and seventeen have introduced legislation in 2024.
- House Financial Services Committee. Basel III Endgame Proposal. On March 6, 2024, all HFSC Republicans sent a letter to FRB Chair Jerome Powell, Acting Comptroller of the Currency Michael Hsu, and FDIC Chair Martin Gruenberg, demanding the withdrawal of the Basel III Endgame Proposal, writing, "As issued, the proposal lacks justification, lacks rigorous quantitative analysis, and is procedurally flawed."
- Nationwide Multistate Licensing System. Policy Guidebook Changes. On March 15, 2024, NMLS released an updated version of the NMLS Policy Guidebook. The update makes changes to the Mortgage Call Report section of the Guidebook.
Rulemaking Updates
- Bank for International Settlements. Measures to Address Window-Dressing in the G-SIB Framework. On March 7, 2024, BIS published a consultation on potential measures to address window-dressing behavior in the context of the framework for global systemically important banks (G-SIBs). Potential revisions would require banks to report and disclose the indicators used to calculate G-SIB scores based on average values over the reporting year, rather than year-end values. Comments on the consultation will be accepted until June 7, 2024.
- Federal Reserve Board. Updated Risk Management Requirements. On March 8, 2024, FRB announced a final rule that updates risk management requirements for certain systemically important financial market utilities (FMUs). The final updates provide additional clarity and specificity to existing requirements in four key areas of operational risk management: incident management and notification; business continuity management and planning; third-party risk management; and review and testing of operational risk management measures. FRB Memo noted new challenges to operational risk management include a global pandemic and severe weather events as well as cyberattacks on the supply chain and ransomware attacks.
Research & Analysis
- Federal Deposit Insurance Company. Quarterly Banking Profile. On March 7, 2024, FDIC Chairman Martin Gruenberg announced the release of full-year and Q4 2023 performance results for FDIC-insured institutions. In commentary accompanying the data, Gruenberg said that "ongoing economic and geopolitical uncertainty, continuing inflationary pressures, volatility in market interest rates, and emerging risks in some bank commercial real estate portfolios pose significant downside risks to the banking industry. These issues, together with funding and earnings pressures, will be matters of close supervisory attention by the FDIC in 2024."
Other News of Note
- Consumer Financial Protection Bureau. Financial Data Exchange. On March 13, 2024, CFPB Director Rohit Chopra spoke at the Financial Data Exchange Global Summit. Chopra discussed standard-setting in financial services and CFPB's proposal to recognize standard-setting organizations. He concluded by saying, "existing standard-setters should not take their place in this market for granted…CFPB's strong preference remains for market-driven standards, but we will not be able to rely on such standards if they are structured to allow incumbents to maintain their market power to the detriment of open banking in the United States."
- Federal Reserve Board. Reflections on Bank Regulation. On March 7, 2024, FRB Governor Michelle W. Bowman offered her "Reflections on the Economy and Bank Regulation" to an industry trade association. Bowman focused on recent developments pertaining to bank M&A, liquidity regulation, and trends in bank supervision. She voiced her concerns about regulatory reforms involving liquidity requirements and about the opaque nature of supervisory expectations.
- Office of the Comptroller of the Currency. Operational Resiliency. On March 12, 2024, Acting Comptroller of the Currency Michael Hsu spoke about operational resiliency at a conference in Washington, D.C. Hsu highlighted the growing risks of disruptions that may impede the provision of financial services or adversely impact systems. He also discussed considerations to strengthen operational resiliency requirements for large banks with critical operations, including third-party service providers.
Jonathan Cristol is a regulatory analyst with Davis Wright Tremaine LLP.