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Examiner

The Examiner

“In the spring, I have counted 136 different kinds of weather inside of 24 hours.”
Mark Twain

CSBS Supports Congressional Oversight on Data Breaches

Congress has an important role to perform in ensuring that consumer data is protected in financial transactions, CSBS said earlier this week in a letter to Congress. 

“We are pleased that Chairmen Cummings and Krishnamoorthi are holding congressional hearings on data breach protections and demonstrating their leadership in forcing action to protect consumers," said John Ryan, CSBS president and CEO. "State regulators already have taken up this challenge and look forward to supporting the chairmen and other Members of Congress in ensuring a safe and sound financial system for the United States.”

In a formal statement to the House Oversight Subcommittee on Economic and Consumer Policy, Ryan noted that in June 2018 eight state financial regulators entered into a consent order with Equifax, who mishandled the personal data of almost 150 million consumers. States represented: Alabama, California, Georgia, Maine, Massachusetts, New York, North Carolina and Texas. 

The consent order arose from a joint examination these regulators performed of the company, and it addresses serious deficiencies in the company’s cybersecurity program.

In the order that applies to Equifax operations nationwide, Equifax agreed to dramatically improve how it protects personally identifiable information. The company is undertaking a plan to restructure risk management processes, strengthen internal controls, and enhance oversight by the Board of Directors.

Compliance with the consent order is subject to the regulators’ approval, and regulators have the right to bring further action.

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FDIC Chairman McWilliams to Give Community Bank Research Conference Keynote

Jelena McWilliams, FDIC chairman, is scheduled to deliver a keynote address during the seventh annual Community Banking in the 21st Century research and policy conference. The conference will be held Oct. 1-2, 2019, at the Federal Reserve Bank of St. Louis. It is co-sponsored by the CSBS, the Federal Reserve and the FDIC.

Read more on the Community Bank Research Conference website.

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FFIEC Provides Guidance on Areas Affected by Midwestern Floods

Federal and State Financial Regulatory Agencies Issue Interagency Statement
on Supervisory Practices Regarding Financial Institutions Affected by Flooding in the Midwest


Federal and state regulators recognize the serious impact of flooding in the Midwest on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision.  The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

A complete list of the affected disaster areas can be found here.

Lending: Financial institutions should work constructively with borrowers in communities affected by flooding in the Midwest.  Prudent efforts to adjust or alter terms on existing loans in affected areas should not be subject to examiner criticism.  Modifications of existing loans should be evaluated individually to determine whether they represent troubled debt restructurings.  This evaluation should be based on the facts and circumstances of each borrower and loan, which requires judgment, as not all modifications will result in a troubled debt restructurings. In supervising institutions affected by flooding in the Midwest, the agencies will consider the unusual circumstances these institutions face.  The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.  

Temporary Facilities: The agencies understand that many financial institutions face staffing, power, telecommunications, and other challenges in re-opening facilities after the flooding in the Midwest.  In cases in which operational challenges persist, the primary federal and/or state regulator will expedite, as appropriate, any request to operate temporary facilities to provide more convenient availability of services to those affected by flooding in the Midwest.  In most cases, a telephone notice to the primary federal and/or state regulator will suffice initially to start the approval process, with necessary written notification being submitted shortly thereafter.

Publishing Requirements: The agencies understand that the damage caused by flooding in the Midwest may affect compliance with publishing and other requirements for branch closings, relocations, and temporary facilities under various laws and regulations.  Institutions experiencing disaster-related difficulties in complying with any publishing or other requirements should contact their primary federal and/or state regulator.

Regulatory Reporting Requirements: Institutions affected by flooding in the Midwest that expect to encounter difficulty meeting the agencies’ reporting requirements should contact their primary federal and/or state regulator to discuss their situation.  The agencies do not expect to assess penalties or take other supervisory action against institutions that take reasonable and prudent steps to comply with the agencies’ regulatory reporting requirements if those institutions are unable to fully satisfy those requirements because of the effects of flooding in the Midwest.  

The agencies’ staffs stand ready to work with affected institutions that may be experiencing problems fulfilling their reporting responsibilities, taking into account each institution’s particular circumstances, including the status of its reporting and recordkeeping systems and the condition of its underlying financial records.

Community Reinvestment Act (CRA): Financial institutions may receive CRA consideration for community development loans, investments, or services that revitalize or stabilize federally designated disaster areas in their assessment areas or in the states or regions that include their assessment areas.  For additional information, institutions should review the Interagency Questions and Answers Regarding Community Reinvestment here.

Investments: The agencies realize local government projects may be negatively affected by flooding in the Midwest.  Institutions should monitor municipal securities and loans affected by flooding in the Midwest.  Appropriate monitoring and prudent efforts to stabilize such investments are encouraged.

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Community Bank Research Highlight: Compliance Costs

Every year, CSBS conducts a nationwide survey of community banks. Here's one highlight of what we learned.

After years of rising compliance costs for community banks, 2018 reversed the trend. There are several possible reasons why, including some possible actions by state and federal regulators.


In the Media 

House Committee Moves on Marijuana Banking. This week, the House Financial Services Committee approved legislation that creates a legal safe harbor for financial institutions that provide banking services to marijuana-related businesses in states that permit these businesses. Per The Hill: “The bill is expected to pass the House but could face an uphill climb in the GOP-controlled Senate.”  

White House Weighs in on Housing Finance Reform. The Administration issued a memo that directs Treasury Secretary Mnuchin to work with other federal agencies to come up with a plan that formally ends the conservatorships of Fannie Mae and Freddie Mac. You can read the memo here. Resolving the structures and status of the GSEs is the last major piece of business remaining from the financial crisis a decade ago, when the Treasury Department took over the entities – severely damaged by the mortgage meltdown -- and kept them operating within certain rules and funding.

HUD Sues Facebook. This week, the department sued Facebook for data mining and targeting housing-related ads that unlawfully discriminate based on “race, color, national origin, religion, family status, sex and disability.” Per The Washington Post: “The case is likely to have ripple effects throughout the tech industry, which considers targeted advertising to be standard practice and has historically enjoyed immunity from prosecution when third parties commit abuses on their platforms.” You can read HUD’s announcement here.  

Others Looking at Big Tech, too. Per Politico Pro: “Financial Stability Board Chairman Randal Quarles today said the international organization is keeping an eye out for any systemic effects that might arise from having large technology companies like Facebook and Apple offer services traditionally provided the financial sector.” You can read Quarles’ speech here

FHA Tightening Up. Per Politico Pro: “The FHA this month started flagging more mortgages to borrowers with low credit scores for stricter, manual underwriting, in a move that could make it harder for some homebuyers to get a loan.” Per an FHA letter to lenders, the agency is targeting for increased scrutiny loan applications with lower credit scores and more risk layering, including higher debt-to-income ratios. You can read the FHA announcement here.  

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