Bank & Thrift Regulation & Enforcement

On May 22, 2018, the House of Representatives passed the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) (the “Consumer Protection Act”), which had been previously passed by the Senate. The Consumer Protection Act will now be sent to President Trump who is expected to sign it into law in the coming weeks.

The Consumer Protection Act becomes the first legislatively enacted regulatory relief bill since the recession, and rolls back various Dodd-Frank Act provisions.  Below we provide a brief summary of some of the Consumer Protection Act’s major provisions.

Capital Simplification for Qualifying Community Banks. The federal banking agencies would be directed to initiate the rulemaking process to develop a “Community Bank Leverage Ratio” of not less than 8 percent and not more than 10 percent for community banks and their holding companies with total consolidated assets of $10 billion or less. Any qualifying community bank or holding company that exceeds the Community Bank Leverage Ratio will be considered well-capitalized.  Qualifying banks that meet this ratio would not even have to calculate the various other capital ratios currently employed by the federal banking regulators (e.g., Total Risk-Based Capital Ratio, Common Equity Tier-1 Capital Ratio, or Tier-1 Risk-Based Capital Ratio). Continue Reading Update: Regulatory Relief Passed by Congress

On May 11, 2018, the beneficial ownership rule became fully effective.  While the rule was finalized on July 16, 2016, compliance was not mandatory until May 11, 2018.  The delay in implementation was to permit covered financial institutions to ready their BSA/AML compliance programs.

In accordance with the rule, a covered financial institution must verify, at the time a new account (loans, deposits, etc.) is opened, the beneficial owners opening the account on behalf of a legal entity customer.  If there are multiple layers of legal entities, the covered financial institution is required to look through each layer to identify the beneficial owners.

A “beneficial owner” is defined as any natural person who (i) owns 25 percent or more of a legal entity and (ii) controls the legal entity.  The covered financial institution must identify at least one beneficial owner who owns 25 percent or more of the legal entity, but is limited to naming a total of four natural persons.  There is no such limitation for beneficial owners that may control the legal entity customer.

Click here to read the public announcement issued by the Financial Crimes Enforcement Network (FinCEN) on the beneficial ownership rule.

In a recent interview, Comptroller of the Currency Joseph Otting, announced the OCC’s plan to “clarify” its support of bank-offered deposit advance products. “Deposit advance products” are typically defined as small-dollar, short-term loans or lines of credit that are to be repaid from the proceeds of the consumer’s next direct deposit.  The WSJ reports that the OCC’s planned announcement will focus on 45-to-90 day loans.

Continue Reading Pay Day Lending: Here Come the Banks!

According to the Federal Deposit Insurance Corporation (“FDIC”), from 2000 to 2008 there were 1,042 de novo community banks newly chartered in the United States.  From 2011-2017, the FDIC received only 30 de novo applications for deposit insurance.  Of those 30 applications received, six have been approved, 10 withdrawn and 14 remain outstanding.  At year end 2017, the number of U.S. banks fell below 5,700 – a number the industry hasn’t seen since the 19th century.  Recently, the FDIC indicated that it has warmed to the idea of accepting de novo bank applications. Now may be the time for interested investors to assess the possibility of entering the community bank industry.

Continue Reading Phoenix Rising: De Novo Bank Formation?

Please join us for a complimentary half-day conference presented by the Financial Institutions Group of Vedder Price.

When & Where

Wednesday, May 9, 2018
7:45 a.m.–Noon (CT)

Chicago Club
81 East Van Buren Street
Chicago, IL 60605

Keynote Speaker:

Alberto J. Paracchini
President and Chief Executive Officer
Byline Bank

Topics

Mergers & Acquisitions and Capital Markets Update

  • William Burgess, Principal, Sandler O’Neill + Partners, L.P.
  • Allen G. Laufenberg, Managing Director, Keefe, Bruyette & Woods, a Stifel Company

Executive Compensation, Litigation, Fintech and Regulatory Update

  • Vedder Price Financial Institutions Group

A full agenda will be announced in the coming weeks.

CLE Credit

Vedder Price is an accredited CLE provider in California, Illinois, and New York; and, when possible, a sponsor in Virginia.

To register, please click here.