Washington Report 360 | March 16, 2018 | KPMG | US

Washington Report 360 | March 16, 2018

Washington Report 360 | March 16, 2018

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Key Highlights

  • The U.S. Senate passed S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which would raise the SIFI threshold for applying enhanced prudential standards from $50 billion to $250 billion for domestic bank holding companies though banks with total assets between $100 billion to $250 billion would be subject to periodic supervisory stress testing by the Federal Reserve and the Federal Reserve may apply any enhanced prudential standard to these institutions to address financial stability or safety and soundness risks.
  • A U.S. federal appeals court vacated the Department of Labor’s fiduciary rule in its entirety raising the potential for review by the Supreme Court.
  • The SEC proposed amendments to disclosure requirements that would require certain open-end investment management companies to disclose information about the operation and effectiveness of their liquidity risk management program in their annual report.
  • The CFPB released the eighth in a series of Requests for Information, this time seeking comment on adopted regulations and new rulemaking authorities.
     

 

Financial services policy news

U.S. appeals courts decided two legal challenges to the Department of Labor’s fiduciary rule: the Tenth circuit upheld a district court summary judgment that the fiduciary rule was not arbitrary or capricious in its treatment of fixed indexed annuities; the Fifth circuit vacated the fiduciary rule in finding that the rule is inconsistent with ERISA's "investment advice fiduciary" provision and the department lacked statutory authority to promulgate the rule.

The Financial Stability Board (FSB) published the final version of its Supplementary Guidance to the FSB Principles and Standards on Sound Compensation Practices; the guidance provides a framework for how compensation practices can be used to reduce misconduct risk and address misconduct incidents.

The Board of the International Organization of Securities Commissions published a report on the growing vulnerability of aging investors to financial fraud and unsuitable investments; the report outlined several sound practices for regulators and financial services providers to enhance investor protections for seniors.

Recent actions related to virtual currencies include:

  • A BIS report analyzes the potential implications of central bank-issued digital currencies for payment systems, financial stability, and monetary policy.
  • The House Financial Services Committee Subcommittee on Capital Markets, Securities, and Investment held a hearing on cryptocurrencies and Initial Coin Offering (ICO) markets that discussed the related consumer protection laws and the current regulatory approach to these financial instruments.
  • The House Financial Services Committee Subcommittee on Terrorism and Illicit Finance held a hearing on the monetization and illicit use of stolen data that discussed "Dark Web" marketplaces and the use of cryptocurrencies in facilitating the monetization of stolen data.

The Wolfsberg Group, an association of thirteen global banks that aims to develop frameworks and guidance for the management of financial crime risks, recently published an updated Correspondent Banking Due Diligence Questionnaire and related guidance material, including frequently asked questions.

 

Financial services legislative and regulatory news

The U.S. Senate passed S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, and forwarded it to the House of Representatives for consideration. S.2155 would:

  • Exempt banks with assets valued at less than $10 billion from the Volcker Rule.
  • Raise the SIFI threshold for applying enhanced prudential standards to domestic bank holding companies from $50 billion to $250 billion (though the Federal Reserve would have discretion to apply enhanced prudential standards to banks with at least $100 billion in assets).
  • Raise the enhanced prudential standards threshold for foreign banking organizations to $100 billion in total consolidated assets.
  • Modify the stress testing requirements by raising the company-run threshold to $250 billion and subjecting banks with total assets between $100 billion and $250 billion to periodic supervisory testing by the Federal Reserve.

The House of Representatives passed H.R. 1116, the Taking Account of Institutions with Low Operation Risk (TAILOR) Act of 2017, which requires federal regulators to consider the risk profiles and business models of financial institutions in regulatory actions.

The SEC proposed amendments to disclosure requirements that would require certain open-end investment management companies to disclose information about the operation and effectiveness of their liquidity risk management program in their annual report.

The SEC proposed a new rule under Regulation NMS to conduct a transaction fee pilot program in NMS stocks that would subject stock exchange transaction fee pricing, including “maker-taker” fee-and-rebate pricing models, to new temporary pricing restrictions and require the exchanges to prepare and publicly post data.

The CFPB released the eighth in a series of Requests for Information, this time seeking comment on regulations adopted since its creation, including whether it should amend any of these rules or issue rules under new rulemaking authority. The CFPB is seeking input on potential changes to the regulations to better address tailoring, new technologies, consumer protections, and transparency. The 2015 HMDA rule and the 2017 Payday Lending rule are specifically excluded from the request.

The CFPB issued a final rule that provides technical amendments to its mortgage servicing regulations relating to periodic statement and coupon book requirements for certain consumers in bankruptcy.

The Federal Reserve issued additional responses to questions on the Comprehensive Capital and Analysis Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) programs, including the treatment of the new tax law's base erosion and anti-abuse tax provisions for the 2018 CCAR.

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