This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.
- Implications of US withdrawal from Iran nuclear deal for banking and financial sectors: President Trump announced on May 8 that the US will withdraw from the Joint Comprehensive Plan of Action, the multi-nation agreement to curb Iran's nuclear program in exchange for the suspension of international sanctions. The President signed a memorandum directing his Administration to immediately begin the process of re-imposing US sanctions targeting critical sectors of Iran's economy, including energy, petrochemical, shipping and financial services and banking. While the EU has indicated its determination to preserve the JCPOA, US sanctions on both US and non-US persons engaged in commercial activities with Iran that were suspended pursuant to the agreement are set to snap back. Sanctions to be re-imposed after a 90-day wind-down period ending August 6, 2018, cover trade with Iran in gold or precious metals; significant transactions related to the purchase or sale of Iranian rials; and the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt. Sanctions that kick in after a 180-day wind-down period ending November 4, 2018, cover transactions by foreign financial institutions with the Central Bank of Iran and other designated Iranian financial institutions; provision of specialized financial messaging services to the Central Bank of Iran and other Iranian financial institutions; and provision of underwriting services, insurance, or reinsurance. A White House fact sheet and a list of FAQs from the Treasury Department's Office of Foreign Assets Control provide more details. And more information on the implications of the U.S. exit from the JCPOA is available in our summary and analysis.
- AML reform on the horizon? Amid a growing consensus among industry stakeholders, regulators and lawmakers that Bank Secrecy Act and other anti-money-laundering rules are both a regulatory burden on banks and ineffective tools of law enforcement, regulatory, and possibly legislative, relief initiatives appear to be gathering steam. Comptroller of the Currency Joseph Otting told an American Bankers Association conference on April 25 that "we've evolved into where it's almost impossible to comply with" the current regulatory and enforcement regime. "It's kind of gotten to a 'gotcha' system," he said. OCC is developing, with input from the Federal Reserve and the FDIC, recommendations for Treasury's FinCEN to give banks more compliance flexibility and make changes in the examination process. Pending regulatory reform, there are indications that bipartisan legislation to address the issue could take shape in the near future, though a specific bill has not yet been made public.
- Hoenig steps down as FDIC vice chair, McWilliams slated to become chair (eventually): Thomas Hoenig announced on April 27 that April 30 would be his last day as vice chair and member of the board of directors of the FDIC after serving a full six-year term. The expected departure will allow for Jelena McWilliams, President Trump's nominee to be the next FDIC chair, to join the five-member board. Hoenig joined the FDIC in 2012 as a Republican-supported nominee and the statute governing FDIC management mandates that not more than three of the members of the board may be members of the same political party. McWilliams is expected to replace current Chair Martin Gruenberg, a Democratic nominee, in the top job, but her nomination, cleared by the Senate Banking Committee in February, is still pending in the full Senate. With Hoenig's departure, there are now only three members on the board: Gruenberg, Comptroller of the Currency Joseph Otting and acting CFPB Director Mick Mulvaney.
- Ryan kindles hope of House vote on Senate's banking bill: House Speaker Paul Ryan said at a May 7 press conference that the House will consider the Senate-passed bank deregulation bill, while he expects the Senate to take up pieces of financial services legislation passed by the House. Ryan said Financial Services Committee Chair Jeb Hensarling – who had been holding out for amending the Senate's more modest Dodd-Frank rollback with additional regulatory reform provisions passed by the House – is now working with Senate counterparts on a plan for the House to move the Senate's legislation while the Senate takes up a package of additional measures from the House. However, while the Senate bill enjoys some bipartisan support, there has not been much Democratic buy-in for many of Hensarling's proposals.
- House votes to send BCFP (CFPB) auto lending guidance to the president: In a mostly party-line vote, the House of Representatives on May 8 nullified a 2013 guidance issued by the Bureau of Consumer Financial Protection (formerly known as the CFPB) intended to prevent discrimination in car loans. The Senate has already passed the measure, so it is headed to the desk of President Trump who has said he will sign it into law. The consumer rule was voided by means of the Congressional Review Act, a 1996 law that gives Congress the power to expunge rules created by government agencies. While the CRA has been used to target newly adopted rules, the action on the lending guidance represents the first time Congress has nullified a regulation adopted years prior.
- When will there be a permanent CFPB director? As the bureau continues its ambitious and controversial structural reorganization and mission reorientation – for example, on May 9 the bureau announced it was folding its student loan unit into its financial literacy education unit – White House OMB Director Mick Mulvaney is still leading the agency on an acting basis, and that could remain the status quo for a while longer. While published reports indicate that President Trump is expected to name J. Mark McWatters, who currently chairs the National Credit Union Administration, as his CFPB nominee, that announcement may not take place until late June. Under the Federal Vacancies Reform Act, Mulvaney has a six-month limit on his tenure, which expires in late June. But once a permanent successor is nominated, the acting appointee can stay in office as long as the nomination is pending. Given the slow pace of Senate nomination approvals, that process could drag out until the end of the year. Some observers have noted that Senate Democrats, who strongly oppose Mulvaney's agenda, might be more amenable to the more pragmatic McWatters, though the possibility of the Senate flipping to Democratic control after November could further complicate the calculations on both sides.
- OCC issues "Recovery Planning" book: The Office of the Comptroller of the Currency on April 26 issued the "Recovery Planning" booklet of the Comptroller's Handbook for use by OCC examiners to assess the adequacy of covered banks' recovery planning processes. The 42-page booklet, part of the "Safety and Soundness" category of the Comptroller's Handbook, explains the purpose of effective recovery planning. The guidelines apply only to covered banks – those with total consolidated assets over $50 billion, as well as some smaller banks, including those that were previously covered – and have phased-in compliance periods culminating in July 2018. OCC examinations complement Fed and FDIC supervision of resolution plans.
- Fed nominees' Senate hearing: The Senate Banking Committee will hold a hearing on Tuesday, May 15 on the nominations of Richard Clardia and Michelle Bowman to be members of the Federal Reserve's Board of Governors. Clarida has also been nominated to serve as vice chair.