Banking and Consumer Regulatory Digest

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. Mortgage Market Information Sharing. On April 9, 2024, Federal Housing Finance Agency and CSBS entered into an MOU designed to facilitate information sharing with respect to nonbank mortgage companies. The MOU establishes information sharing protocols between state financial regulators and FHFA, which should improve coordination, risk management, and further protect both consumers and the nation's housing finance system.
• Federal Housing Financial Authority. Implementation of FHLBank System. On April 3, 2024, FHFA provided an update on its implementation of the recommendations of its 2023 "Focusing on the Future" report. Key priorities for 2024 include: clarifying the FHLBank System's mission; aligning eligibility requirements for different types of FHLBank members; and streamlining requirements related to the Affordable Housing Program.

Rulemaking Updates

• Department of the Treasury. Regulatory Update to Protect National Security. On April 11, 2024, Treasury proposed a new rule to enhance the ability of the interagency Committee on Foreign Investment in the United States (CFIUS) to monitor and enforce compliance. The proposed rule would both refine and enhance CFIUS's investigatory and enforcement authorities and provide increased timelines for compliance with certain CFIUS requests and enforcement actions.
• Office of the Comptroller of the Currency. Extended Comment Period. On April 10, 2024, OCC announced that the comment period on its February 14, 2024 proposal to update rules for business combinations would be extended from April 15, 2024, until June 15, 2024.

Research and Analysis

• Congressional Research Service. AI and Machine Learning in Financial Services. On April 3, 2024, CRS released a 27-page report titled "Artificial Intelligence and Machine Learning in Financial Services." The report covers AI/ML applications in finance as well as policy issues pertaining to the role of AI/ML in finance.
• Federal Deposit Insurance Company. Global Systemically Important Banks. On April 10, 2024, FDIC released a comprehensive, 59-page report on how FDIC would manage the orderly resolution of a large, complex financial company under Title II of the Dodd-Frank Act. FDIC Chairman Gruenberg discussed the importance of the report in a speech at the Peterson Institute for International Economics.

Other News of Note

• Commodity Futures Trading Commission. Integrating AI in Financial Markets. On April 10, 2024, CFTC Commissioner Kristin N. Johnson gave a speech on "The Potential, Promise, and Limitations of Integrating AI in Financial Markets." In her remarks, she referenced a survey of CFTC registrants' use of AI in CFTC-regulated markets, as well as possible areas of regulatory focus including: framing the risk of AI models; robust monitoring and testing of AI models; and oversight of AI models, among other possible areas of focus.
• Department of the Treasury. Cryptocurrencies and Sanctions Evasion. On April 9, 2024, Deputy Secretary of the Treasury Wally Adeyemo testified before the Senate's Committee on Banking, Housing, and Urban Affairs about the efforts of terrorist groups and other malign actors to use cryptocurrency to fund operations. Adeyemo proposed three reforms: a secondary sanctions tool targeted at foreign digital asset providers that facilitate illicit finance; modernizing and closing gaps in existing authorities; and addressing jurisdictional risk from offshore cryptocurrency platforms.
• Federal Deposit Insurance Company. Economic Inclusion Strategy.On April 4, 2024, FDIC Chairman Martin J. Gruenberg spoke to the National Community Reinvestment Coalition. Gruenberg, speaking on the occasion of the release of FDIC's new economic inclusion strategic plan, discussed FDIC's commitment to economic inclusion in the banking system.
• Financial Industry Regulatory Authority. Cybersecurity Update. On April 2, 2024, FINRA released a new podcast featuring two members of FINRA's Complex Investigations and Intelligence Team. The guests provided an update on the cyber threat landscape and discussed what firms should be thinking about and doing in response to recent trends.
• Financial Industry Regulatory Authority. Cybersecurity Alert.On April 4, 2024, FINRA issued a cybersecurity alert to warn member firms of an ongoing phishing campaign that involves fraudulent emails purporting to be from FINRA and using the domain "data-finra.org." Firms should delete all emails originating from this domain and beware of similar phishing emails from other domain names.
• Office of the Comptroller of the Currency. Fairness in Banking. On April 4, 2024, Acting Comptroller of the Currency Michael J. Hsu discussed the importance of fairness in banking in a Washington, DC speech. Hsu specifically focused on: overdraft protection program reforms; credit invisibles; minority depository institutions; and affordable housing. Additionally, he discussed the importance of ensuring fairness as it relates to artificial intelligence and fraud.
• Office of the Comptroller of the Currency. Economic Opportunity for New Americans. On April 10, 2024, Hsu discussed the value of financial literacy for new Americans. Hsu highlighted ways banks can draw new Americans into the financial system, from exploring innovative ways to support account openings to working with trusted community partners to help them thrive.

Jonathan Cristol is a regulatory analyst with Davis Wright Tremaine LLP.