May 18, 2022
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Vendor * Spotlight
Prepare for 'tougher,' 'clearer' Community Reinvestment Act

Banks would face broader Community Reinvestment Act evaluations under a new interagency proposal, but the plan also provides needed clarity on how those assessments will be made.

"It’s a little bit tougher, but it may be easier to understand what the rules are," Ian Katz, managing director at Capital Alpha Partners, said in an interview.

The interagency plan, unveiled May 5, would expand both the reach and scope of assessments on whether financial institutions are providing enough banking services to low-and moderate-income, or LMI, communities under the 1977 law.

At the same time, it provides clearer details on government evaluations, according to industry analysts. It also brings CRA implementation into the present by proposing to assess mobile and online banking, branchless banking and hybrid models.

The comprehensive plan is a joint effort by the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corp.
Source: S&P Global Market Intelligence
Crypto Universe

A return to non-uniform currency
Cryptocurrencies might be pushing the United States back in the direction of a non-uniform currency system, Federal Reserve Bank of St. Louis President James Bullard said.
 
In a blog post based on a message in the reserve bank’s recent 2021 annual report, Bullard cited the pre-Civil War era, in which most of the U.S. money supply consisted of privately issued banknotes marked by constantly fluctuating values. Due to the exchange rate chaos, the nation responded by implementing a uniform currency, Bullard wrote.
 
The St. Louis Fed published the blog post amid ongoing volatility in the crypto markets, with declining values at stablecoins Tether and TerraUSD and trading platform Coinbase fueling a broader sell-off.

Treasury calls for stablecoin regulation
Treasury Secretary Janet Yellen reiterated her call for Congress to regulate stablecoins following a significant decline in TerraUSD, The Wall Street Journal reported.

The fourth-largest stablecoin and 10th-largest cryptocurrency by market value, according to CoinMarketCap, saw its price hit 69 cents despite it being designed to remain fixed at $1.

"I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability," Yellen said at a Senate Banking Committee hearing. "We really need a consistent federal framework."

The Treasury secretary said it would be "highly appropriate" for Congress to attempt to get legislation regulating stablecoins done this year.

Global group to coordinate crypto response
International regulators could form a joint body to coordinate global crypto regulations within the next year, according to the head of an association of market regulators.
 
International Organization of Securities Commissions Chair Ashley Alder said at a virtual conference that digital assets are now a top concern for regulators, alongside COVID-19 and climate change.
 
Meanwhile, the Basel Committee on Banking Supervision is finalizing its review of comments on establishing prudential regulations on bank cryptoasset exposures, committee Chair Pablo Hernández de Cos said. In a September comment letter, ICBA said regulators must cooperate internationally because cryptoassets are a global phenomenon.
 
The debate on regulating digital assets continues amid a volatile week in the crypto markets. Declining values at stablecoins Tether and TerraUSD and trading platform Coinbase have contributed to a broader sell-off in the crypto and wider financial markets.
 
Meanwhile, a new report found illicit activity is rising among decentralized finance platforms. The report from blockchain analytics firm Chainalysis found 97% of the $1.7 billion worth of cryptocurrency stolen in 2022 has come from DeFi protocols.

Crypto Enforcement beefed up 
The U.S. Securities and Exchange Commission almost doubled the size of its enforcement division's Crypto Assets and Cyber Unit. Twenty more positions were added to the unit, which now has a total of 50 posts responsible for protecting investors in crypto markets and from cyber-related threats, the regulator said in a press release.

Source: Various
Updating guidance as AI spreads

Artificial intelligence has the potential to support safety and soundness and consumer protections, compliance, and access to financial services, but it also poses risks, Deputy Comptroller for Operational Risk Policy Kevin Greenfield told Congress.
 
Testifying at a House Financial Services Committee AI task force hearing, Greenfield said key AI risks include explainability of decisioning, management of the data AI systems are based on, privacy and security, and third-party risk. As a result, the OCC continues to update its supervisory guidance, examination programs, and examiner skills.
 
ICBA last year urged regulators to be flexible in applying existing regulations to artificial intelligence and machine learning rather than advancing new regulations.
Source: OCC; ICBA
Agencies warn of threats to managed service providers

Cybersecurity authorities from the United States and other nations issued a joint advisory that urges managed service providers (MSPs) and customers to implement baseline measures and controls.
 
The advisory cites an increase in malicious cyber activity targeting MSPs and provides actions to reduce the risk of cyber intrusion, including best practices for information and communications technology to secure sensitive data.
Source: CISA
Agencies confirm updated flood insurance Q&As are guidance

Federal regulators issued revised questions and answers regarding federal flood insurance law and the agencies’ implementing regulations.
 
The new Q&As replace previously issued versions and reflect significant changes to federal flood insurance requirements in recent years. They cover topics including escrowing premiums, the purchase requirement’s detached-structure exemption, force-placement procedures, and private flood insurance.
 
The agencies previously issued a joint final rule to implement the provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 that require regulated institutions to accept certain private flood insurance policies, when previously they were only required to accept National Flood Insurance Program policies. That rule took effect in July 2019.
Source: ICBA
Most consumers have single banking relationship

U.S. adults’ usage of banking providers has held steady over the past 10 months, with more than half reporting a relationship with only one bank, according to Morning Consult.
 
The polling firm’s latest consumer banking and payments report found:
  • 27% of U.S. adults say they have a relationship with more than one bank.
  • Plans to switch banks have tapered off since the holidays, likely due to heightened financial anxiety.
  • Consumer bank visits for in-person service are consistently lower than ATM and digital wallet usage.
  • Unbanked adults are disproportionately female, young, and low-income.
Source: Morning Consult
Postal banking can’t deliver

While some policymakers continue pushing postal banking, recent history shows why the policy should remain in the discard pile, ICBA President and CEO Rebeca Romero Rainey writes in a new LinkedIn op-ed.
 
Romero Rainey writes that while recently reintroduced Senate legislation would add a bank branch to each of the nation’s post offices, a faltering U.S. Postal Service pilot program demonstrates the plan’s flaws.
 
 “If Congress pushes the post office into the banking industry, it will expose taxpayers to additional subsidies and financial rescues down the road while harming the USPS’s already-stressed primary function of mail delivery,” Romero Rainey writes. “This is another case of Washington putting good money after bad.”
 
A three-part series of ICBA issue briefs delivered to policymakers last year explores the postal banking policy’s flaws and offers alternatives for reaching the unbanked.
Source: ICBA
CSBS CEO, John Ryan dies

It is with great sadness that we announce that John W. Ryan, President and Chief Executive Officer of the Conference of State Bank Supervisors, died unexpectedly Monday in Washington, D.C.

“On behalf of the CSBS Board of Directors, executive team, staff and membership, we extend our deepest sympathies to John’s family and everyone who knew and worked with John over his more than 30-year career. John was an inspirational and humble leader who brought incredible dedication, intellect and passion to CSBS, the state regulatory system and financial services more broadly,” said Melanie Hall, Chair of the CSBS Board of Directors.

The CSBS Board of Directors has named James Cooper, EVP of Policy and Supervision, as the acting CEO of CSBS.
Source: CCBS
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Upon completion of this program, participants will be able to:
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  • List lessons learned from 2020 adopters
  • Describe the difference between methodologies and models

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