Friday, December 14, 2018

FDIC initiatives seek to improve deposit insurance application process

By Andrew A. Turner, J.D.

The Federal Deposit Insurance Corporation is looking for information on how it can improve the deposit insurance application process and on factors that discourage potential applicants from beginning or finishing applications. Specific aspects under review include improvements that might benefit community banks and improvements in technology. The agency also has created a process that will allow potential applicants to request a review of a draft deposit insurance proposal.
As part of its efforts to increase transparency, efficiency, and accountability, the Federal Deposit Insurance Corporation has announced multiple initiatives and resources related to the deposit insurance application process for organizers of de novo banks. The changes are intended to promote a more transparent, streamlined, and accountable process for all applications submitted to the agency. FDIC Chairman Jelena McWilliams stated that a pipeline of new banks “is critical to the long-term health of the industry and communities across the country. The application process should not be overly burdensome and should not deter prospective banks from applying.”
The FDIC requested comments on all aspects of the deposit insurance application process, including ways in which the FDIC could or should support the continuing evolution of emerging technology and Fintech companies; aspects of the application process that may discourage potential applications; possible changes to the application process for traditional community bank proposals; and other suggestions for improving the effectiveness, efficiency, or transparency of the application process. Comments on the Notice and Request for Information are due by Feb. 11, 2019.
The FDIC has also created a new, designated mailbox as an additional means by which bankers, applicants, and other interested parties may pose questions regarding specific applications or the application process in general.
Updated publications. The FDIC has also updated two publications related to the deposit insurance application process. The publications, Applying for Deposit Insurance—A Handbook for Organizers of De Novo Institutions, which was developed to facilitate the process of establishing new banks and originally issued on Dec. 22, 2016, and Deposit Insurance Applications Procedures Manual, which was issued for public comment on July 10, 2017, provide comprehensive instruction to staff regarding the deposit insurance application process. Together, the documents address the informational needs of organizers and provide comprehensive instruction to FDIC staff.
Draft insurance review proposal. The FDIC announced that it is establishing a process to allow prospective organizers the option to request FDIC review of a draft deposit insurance proposal prior to filing an official application. The FDIC will review draft proposals to identify potential issues, provide preliminary feedback, and work with organizers on their submissions before submitting a formal application. The draft review process is intended to provide the FDIC and organizing groups the opportunity to better understand and work through possible challenges with a proposal through a collaborative process before a formal application is filed. The agency noted that feedback is limited to matters raised in the review of the submitted materials.
Review requests should be made in writing to the appropriate FDIC regional office and should be accompanied by a draft application filing. The FDIC expects to provide interim feedback to the organizers as soon as practicable, but no later than 30 days after receiving a draft proposal, and to communicate overall feedback within 60 days of receipt.
Timeframe guidelines. The FDIC has also updated and is republishing its timeframe guidelines for applications. The FDIC is republishing its timeframe guidelines for processing applications, notices, requests, and other filings submitted on behalf of existing and proposed institutions and other parties.
According to the FDIC, the timeframe guidelines apply to filings processed by Regional Offices under delegated authority. The timeframe guidelines do not apply to filings that:
  • raise legal or policy issues;
  • establish or change FDIC policy;
  • could attract unusual attention or publicity; or
  • involve an issue of first impression.
For more information about federal deposit insurance issues, subscribe to the Banking and Finance Law Daily.

Thursday, December 13, 2018

Justice Department tells Supreme Court CFPB organization is unconstitutional

A Justice Department brief filed in response to the petition for certiorari in a case addressing the constitutionality of the Consumer Financial Protection Bureau concedes that the Justice Department and the Bureau still have different points of view on the issue. The CFPB, to date, maintains that its organization under the Dodd-Frank Act is constitutionally valid, the Justice Department says. However, according to the Justice Department brief, the Bureau’s organization is unconstitutional because an independent agency led by a single director who can be removed by the president only for cause infringes on the president’s power to ensure that federal laws are faithfully executed. The petition for certiorari is State National Bank of Big Spring v. Mnuchin (No. 18-307).

State National Bank of Big Spring was an early challenger to the CFPB’s organization, filing suit in 2012. By early 2018, the issues in the bank’s suit had been narrowed to the constitutionality question. When the U.S. Court of Appeals for the District of Columbia Circuit, in an en banc opinion in PHH Corp. v. CFPB, resolved that question in favor of the CFPB, the parties to the bank’s suit agreed the U.S. district judge hearing the suit could not reach a contrary opinion and agreed to an order of dismissal.

The bank’s subsequent appeal to the D.C. circuit appellate court was rejected, setting the stage for the bank’s Supreme Court petition.

Effect of PHH Corp. The D.C. Circuit three-judge panel that initially decided PHH Corp. v. CFPB determined that the single-director organization was unconstitutional. However, rather than completely striking down the Bureau as the company asked, the panel decided to sever the Dodd-Frank Act section that provided the director could be discharged only for cause. The constitutionality problem would be solved by treating the Bureau as an executive branch agency whose director could be discharged at the president’s discretion.

However, the full circuit overturned that result. According to the en banc majority opinion, the Dodd-Frank Act did not violate constitutional separation of powers principles.

The PHH Corp. decision was not appealed to the Supreme Court.

Justice Department argument. The Justice Department prefers the result reached in PHH Corp. v. Corp. by the three-judge panel and the opinion written by Judge, and now Associate Justice, Kavanaugh. This approach, essentially a middle ground between eliminating the Bureau and continuing it as it currently is constituted, would allow the CFPB to function under the president’s control.

According to the brief, the separation of powers issue is important and deserves Supreme Court review, but in a different case. One problem is that Justice Kavanaugh probably would not participate in the decision due to his earlier involvement as an appellate court judge. Having the full court participate would be preferable, the Justice Department says.

Additionally, the nature of the challengers raises a jurisdictional problem. Two petitioners are associations that are not regulated by the CFPB. The bank, due to its size, is supervised by the Office of the Comptroller of the Currency, not the Bureau, and the Bureau apparently has never tried to assert any supervisory authority over the bank. The petitioners’ standing to sue "is sufficiently questionable to present a significant vehicle problem," the brief says.

 The Justice Department maintains that the Dodd-Frank Act, as written, violates the Constitution, and the brief relies heavily on the points made by Justice Kavanaugh in his appellate court opinion—the for-cause removal clause restricts the president’s powers; the single-director organization lacks the advantages of a multi-member commission that would justify the removal restriction; the single-director organization is "a relatively novel innovation"; and there would be no limit on other, future single-director agencies that could infringe further on presidential removal authority.

Severing the for-cause restriction would resolve the problem while doing the least violence to the Dodd-Frank Act, the Justice Department continues. The Act includes a severability clause, and there is no indication that Congress would have wanted the Bureau to disappear without the removal restriction.

Representation complication. The brief also directs the Court’s attention to the question of who would present the argument in favor of the CFPB’s constitutionality. The Justice Department disagrees with the result of the PHH Corp. suit and thus will not argue in favor of constitutionality. In such a case, the Supreme Court could appoint an amicus curiae; however, there is another available route. Under the Dodd-Frank Act, the CFPB can—with Justice Department consent—represent itself before the Court.

As a result, the Justice Department is recommending that if the Court grants certiorari, it should delay appointing an amicus curiae until newly approved CFPB Director Kathy Kraninger has an opportunity to decide whether the Bureaus intends to defend the D.C. Circuit judgment and the Acting Solicitor General can decide whether to permit the Bureau to do so.
This story previously appeared in the Banking and Finance Law Daily.

Monday, December 10, 2018

Senate confirms Kraninger nomination by one-vote margin; reactions follow political lines

By Richard A. Roth, J.D. and Jacob Bielanski

The nomination of Kathy Kraninger to be Director of the Consumer Financial Protection Bureau was confirmed by the Senate by a vote of 50-to-49 on Dec. 6, 2018. Kraninger will be the second Senate-confirmed CFPB Director, following Richard Cordray. Mick Mulvaney has been serving as Acting Director since Cordray’s resignation.

As the narrow margin for confirmation implies, Kraninger’s nomination was very controversial, with public interest and industry advocacy groups lining up to oppose each other. For example, the Center for Responsible Lending charged that she would “continue [Acting Director] Mulvaney’s destructive course. Kraninger has no track record at all of consumer protection, or of standing up for vulnerable people.” During debate, Sen. Sherrod Brown (D-Ohio) complained that “Her one and only qualification is that she will be a rubber stamp for special interests. That is unconscionable.”

Kraninger’s tenure as Program Associate Director at the Office of Management and Budget came in for severe criticism, with Democrats attempting to link her to the separation of families at the U.S. southern border and with what they asserted were inadequate hurricane responses. (Acting CFPB Director Mulvaney also is Director of the OMB.)

Post-vote comments. Following the contentious confirmation of the new Bureau Director, reactions were divided, mostly among political lines. American Bankers Association President and CEO Rob Nichols said that Kraninger “believes in promoting competition and appropriately tailoring regulations by taking into account both costs and benefits.”

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said that “As Congress continues its efforts to reform the Bureau into a law enforcement agency that truly protects consumers and is accountable to the people, I am confident that with her experience and knowledge of budget management, Kathy will excel as Director of the Bureau.”

Other comments were less positive. Bartlett Naylor of Public Citizen said “Watch your wallets, protect your purses and batten down your bank accounts. With the confirmation of Kathleen Kraninger, Trump and Senate Republicans are putting Americans at the mercy of predatory lenders and abusive financial firms. Kraninger has absolutely no training or experience relevant to consumer protection.”

“Mick Mulvaney’s disastrous tenure as Acting-Director of the Consumer Bureau had a devastating impact on the financial security and economic stability of millions of Americans,” Rep. Nancy Pelosi (D-Calif) said in a statement following the confirmation. “Director Kraninger must abandon the Administration’s shameful campaign to destroy this vital consumer watchdog.”

“In the year that Mulvaney headed the [CFPB], he made it responsive to consumers rather than to the bureaucrats and busybodies who thought they knew best and wanted to dictate consumers’ financial choices,” Competitive Enterprise Institute Senior Fellow John Berlau said. “This was in sharp contrast to Mulvaney’s predecessor, Richard Cordray, under whose tenure the bureau arbitrarily and retroactively applied regulatory punishments against certain financial firms without due process.”

Center for Responsible Lending Senior Legislative Counsel Yana Miles countered this assessment, saying “Mulvaney’s tenure at the CFPB wasn’t public service—it was service to predatory lenders.”

Despite this, consumer advocacy groups seized the opportunity to criticize the new director for a past that appeared to lack consumer advocacy positions. Senator Cortez Masto (D-Nev) said Kraninger “fails to understand [CFPB]’s core functions,” while the National Association for Consumer Advocates (NACA) said Kraninger “does not fit the profile for the role.” Better Markets President and CEO Dennis Kelleher added that Kraninger has demonstrated a “disqualifying lack of experience or qualifications for leading the consumer protection bureau and an inexcusable lack of genuine commitment to protecting consumers.”

“Ms. Kraninger’s career has zero ties to consumer protection or financial services,” NACA executive director Ira Rheingold said. “Instead, her government background is plagued with links to controversial decisions that are an affront to human rights and justice.”

Both NACA and Americans for Financial Reform made references to the White House family separation program. Some critics claimed Kraninger had a “hidden” role in the program, which detained children of those arrested for illegally crossing the U.S. border separately from their parents or guardians, as part of her duties while serving as associate director for general government programs at the Office of Management and Budget.

Republicans, including Reps. Patrick McHenry (R-NC) and Blaine Luetkemeyer (R-Mo), largely focused on what Kraninger’s confirmation means for the future of the organization. Luetkemeyer, who is currently the chair of the House Subcommittee on Financial Institutions and Consumer Credit, noted that he looked forward to the new director prioritizing “transparency.” McHenry, a member of the House Financial Services Committee, sees expansion of family and small business access to the financial system. “With a full-time Director in place, the BCFP can focus on their important work protecting American consumers,” McHenry added.

Many comments took a muted approach. Some, like the Consumer Bankers Association (CBA), congratulated Kraninger, but used largely non-committal wording with regards to the CFPB future. “We look forward to working with Ms. Kraninger on common-sense regulations that protect consumers while also allowing our well-regulated banking system to serve families and small businesses,” CBA President and CEO Richard Hunt said. The Independent Community Bankers of America added their support and commitment to work with Kraninger.

House Democrats, meanwhile, avoided overt partisan attacks against Kraninger, specifically, but laid out expectations for Kraninger’s term. Similar to Pelosi, Ranking Member on the House Financial Services Committee, Rep. Maxine Water (D-Calif) called on the new director to “roll back” what she said were “anti-consumer” policies instituted by Mulvaney.

Meanwhile, the Consumer Federation of America (CFA) referenced the “turmoil” of the confirmation, but expressed hope for the new director. “Director Kraninger has an opportunity to prove her [skeptics] wrong by setting a bold consumer protection agenda,” CFA director of financial services Christopher Peterson said. “We hope she seizes this vital opportunity.”

For more information about the Consumer Financial Protection Bureau, subscribe to the Banking and Finance Law Daily.

Tuesday, December 4, 2018

Minneapolis Fed opposes Board’s proposal to relax liquidity-related regulations for large banks

By Thomas G. Wolfe, J.D.

In response to the Federal Reserve Board’s request for comments on its proposal to modify the “Prudential Standards for Large Bank Holding Companies and Savings and Loan Holding Companies,” the Federal Reserve Bank of Minneapolis is opposing the Board’s plan to relax liquidity-related regulations for large banks. The Minneapolis Fed’s November 2018 comment letter asserts, “In short, the proposed rule-making would weaken the resiliency of large banks at a time when it should be strengthened.”

In October 2018, in keeping with the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” the Federal Reserve Board generated two proposals to establish a revised framework for applying prudential standards to large U.S. banking organizations based on risk. Generally, the proposals seek to more closely align the regulatory requirements that apply to large banking organizations with their risk profiles. The proposed framework would not apply to the U.S. operations of foreign banking organizations.

While the first proposal seeks to tailor the application of prudential standards to U.S. bank holding companies and to apply enhanced standards to certain large savings and loan holding companies, the Board’s second proposal (posed jointly with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation) seeks to tailor the application of the agencies’ capital and liquidity rules.

Comment letter. In its Nov. 19, 2018, comment letter, the Minneapolis Fed maintains that the Federal Reserve Board is forgetting lessons learned from the financial crisis and the Great Recession. “In this specific case, we are concerned about the unnecessary relaxation of liquidity-related regulations for large banks,” the letter states. Moreover, the Minneapolis Fed agrees with Federal Reserve Board Governor Lael Brainard’s analysis of the Board’s proposal and agrees with Brainard that the Board’s “proposed changes should not move forward.”

Viewing the Board’s proposal as a potential threat to the financial stability of the U.S. financial system by “rolling back” existing regulations, the comment letter also indicates that the Minneapolis Fed is “deeply troubled by ongoing efforts of the Board of Governors to change rules in a way that reduces the equity funding of the largest banks.” Large banks “should have enough skin in the game, through equity funding, to ensure that their shareholders bear the risk of their investments, rather than taxpayers,” the Minneapolis Fed asserts.

For more information about federal regulatory proposals impacting the financial services industry, subscribe to the Banking and Finance Law Daily.

Thursday, November 29, 2018

FDIC considers simpler community bank capital measurement, ‘back to basics’ approach

By Andrew A. Turner, J.D.

The Federal Deposit Insurance Corporation’s Board of Directors has voted to propose a simpler method that qualifying community banks can use to measure their capital adequacy. The community bank leverage ratio (CBLR) framework will allow qualifying banks to satisfy generally applicable capital requirements, prompt corrective action well-capitalized ratio requirements, and all other applicable capital and leverage requirements with a single measurement.
At the same time, FDIC Chair Jelena McWilliams advocated for a “back to basics” approach to capital regulations for community banks in remarks at the Thirteenth Annual Community Bankers Symposium in Chicago. McWilliams suggested simplifying regulations and discussed the proposed Community Bank Leverage Ratio. Such measures would simplify compliance for community banks who already maintain sufficient capital levels, but are faced with significant costs when it comes to compliance. McWilliams also discussed FDIC actions to address issues facing community banks.
The proposed regulation amendments are required by the Economic Growth, Regulatory Relief, and Consumer Protection Act, and the Federal Reserve Board and Office of the Comptroller of the Currency are expected to propose comparable amendments to their rules. The EGRRCPA requires the agencies to adopt rules creating a CBLR of between 8 percent and 10 percent for community banks with total consolidated assets of less than $10 billion. The measurement is intended to simplify compliance for community banks without reducing the capital they hold and require that banks with higher risk profiles remain subject to generally applicable capital requirements.
The agencies have settled on a CBLR of 9 percent. However, understanding the CBLR requires understanding several definitions.
Qualifying community bank. The first specifies which banks qualify for the CBLR framework. To qualify, a bank must have:
  • total consolidated assets of less than $10 billion;
  • total covered off-balance sheet exposures of no more than 25 percent of its total consolidated assets;
  • total trading assets and liabilities of no more than 5 percent of its total consolidated assets;
  • mortgage servicing assets of no more than 25 percent of its CBLR tangible equity capital; and
  • covered deferred tax assets of no more than 25 percent of its CBLR tangible equity capital.
An advanced approaches banking organization cannot qualify; neither can a bank that is subject to a written agreement, order, capital directive, or prompt corrective action directive.
CBLR calculation. A bank would calculate its CBLR by dividing its tangible equity capital by its average total consolidated assets.
Tangible equity capital would be the bank’s total equity capital exclusive of minority interest, accumulated other comprehensive income, deferred tax assets that arise from net operating loss or tax credit carryforwards, goodwill, and other intangible assets. Average total consolidated assets would be calculated similarly to the tier 1 leverage denominator the bank currently must calculate.
If the bank qualified, and the calculation yielded a result of more than 9 percent, the bank would meet all of its capital requirements.
Ceasing to meet standards. The proposal provides a two-calendar quarter grace period for a bank that falls out of compliance with the CBLR criteria. However, this does not apply to a bank that will no longer meet the standards after a merger or acquisition. Such a bank must meet the generally applicable capital standards “as of the completion of the transaction.”
If a bank’s CBLR falls to 9 percent or lower, it will be treated as less than well capitalized. It will be considered to be adequately capitalized, undercapitalized, or significantly undercapitalized, depending on the calculated ratio.
McWilliams: important role of community banks. McWilliams began her remarks by highlighting the crucial role played by community banks in meeting credit needs for small businesses. In fact, by mid-2018, 50 percent of small loans to businesses were held by banks with assets less than $10 billion, and loans to small businesses by small banks may be even greater. In 627 counties, community banks are the only banking offices. Given the significant impact of community banks, McWilliams cited the need for ensuring that regulations are tailored and not too complex to impede community bank survival.
Back to basics. McWilliams’ overarching theme during her remarks was a return to basics for community banks, including the need to simplify capital regulations. For example, Basel III focused too much on large banks; while most community banks maintained sufficient capital to exceed the new minimum thresholds set by the 2013 rules, they were faced with substantial compliance costs. McWilliams acknowledged the need for strengthening capital requirements but argued that requirements, as they relate to community banks, do not need to be complex.
The first step to simplifying capital requirements is the CBLR. An estimated 80 percent of community banks would be eligible. For banks that do not adopt the CBLR, the Economic Growth and Paperwork Reduction Act capital simplification proposal would “provide certainty and clarity to community banks,” McWilliams said. 
McWilliams also suggested tailoring risk-based capital rules for community banks, including a review of capital ratios and buffers, and other complicated calculations. The goal of revisiting this approach would not be to reduce loss-absorbing capacity but to simplify ratio calculation and reduce compliance burdens on small banks.
McWilliams pointed out that the FDIC has also been working on the following areas:
  • implementing provisions from the Economic Growth, Regulatory Relief, and Consumer Protection Act signed into law this year;
  • rulemaking to change the regulatory capital treatment of high-volatility commercial real estate;
  • interim rules to increase small institutions eligible for 18-month, on-site examination cycle;
  • rulemaking that reciprocal deposits not be considered brokered deposits in some instances;
  • comprehensive review of the approach to brokered deposits and national rate caps;
  • interagency statement that supervisory guidance does not have the force and effect of law and not be used as a basis for enforcement actions; and
  • improving de novo application process for bank formation.

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Wednesday, November 28, 2018

Luetkemeyer thanks FDIC, OCC for response to calls for ‘Operation Choke Point’ investigation

By J. Preston Carter, J.D., LL.M.

After claiming it was hiring an outside law firm to investigate allegations of employee misconduct, the Federal Deposit Insurance Corporation received thanks from Rep. Blaine Luetkemeyer (R-Mo), Chairman of the Financial Institutions and Consumer Credit Subcommittee, who credited both it and the Office of the Comptroller of Currency for "swift responses."
"I’m happy see the regulators’ willingness to ensure regulation is never again borne of personal biases or political motivations," Luetkemeyer said in a press release.
Allegations against FDIC employees stem from a suit brought by payday lenders (Advance America, et al. v. Federal Deposit Insurance Corporation) and includes accusations that the banking regulator attempted to coerce banks into cutting off relationships with payday lenders through threats that included lower ratings and more intrusive examinations. Payday lenders argue these actions came as part of a larger, partisan effort against the industry, called "Operation Choke Point," by the U.S. Department of Justice under President Obama.
Though FDIC Chairman Jelena McWilliams said in letter to Luetkemeyer that it had retained an outside law firm to "better ascertain the effectiveness" of the FDIC response to claims of misconduct, she also noted that examiner training was being updated to use case studies based on the allegations. "I am troubled that certain FDIC employees acted in a manner inconsistent with FDIC policies in what has been generically described as ‘Operation Choke Point,’" McWilliams said.
Luetkemeyer originally called on McWilliams and Comptroller Joseph Otting to investigate past misconduct, following the court’s unsealing of various emails submitted as evidence in Advance America. By his own account, Luetkemeyer, a representative from Missouri’s 3rd district, formerly served as a bank regulator for the state of Missouri, and has "lead the charge" against Choke Point over the last five years.
The gratitude from Luetkemeyer’s office comes even as Otting told him the OCC had no part of Operation Choke Point and that "pleadings recently submitted by the plaintiffs [in Advance America] do not establish otherwise."
"I know we are both committed to our nation having a safe and sound banking system that treats all customers fairly," Otting wrote in his letter Luetkemeyer. "To be clear, the OCC has no policy or program that targets any business operating within state and federal law, and I am committed to ensuring that it does not have such policy or program in the future."
For more information about the regulation of payday lenders, subscribe to the Banking and Finance Law Daily.

Tuesday, November 20, 2018

FDIC Chair emphasizes ‘partnership with industry’ at financial technology conference

By Thomas G. Wolfe, J.D.
As a keynote speaker at the Federal Reserve Bank of Philadelphia’s “Fintech and the New Financial Landscape” conference, Federal Deposit Insurance Corporation Chair Jelena McWilliams noted that too often regulatory agencies “play ‘catch up’ with technological advances and their impact on regulated entities and consumers.” With this dynamic in mind, Williams underscored the FDIC’s goal to “reverse that trend through increased collaboration and partnership with the industry” to “increase the velocity of transformation, while ensuring that banks are safe and sound” and that consumers are “sufficiently protected.” In her speech at the mid-November 2018 conference, the FDIC Chair also relayed a set of questions she has posed for her own staff’s consideration as the agency plans for a future FDIC Office of Innovation that will specifically address financial technology (fintech) developments and issues.
In her prepared remarks, McWilliams briefly traced how innovation in the banking and finance field “has been around since at least the 15th century.” “What is different today is the speed and tremendous impact of technological innovation in and on banking,” McWilliams stated. “This is why it is crucial that policymakers and regulators understand the impact, scope, and consequences that are innate to what we have come to refer to as ‘fintechs’,” she said.
Expanding access to banking. McWilliams took the opportunity to stress the role of innovation in expanding consumers’ access to banking. Referencing a recent “FDIC National Survey of Unbanked and Underbanked Households,” McWilliams pointed out that although the survey indicates that unbanked and underbanked rates generally are higher among “lower-income households, less-educated households, younger households, black and Hispanic households, working-age disabled households, and households with volatile income,” new technologies offer a “tremendous opportunity to expand access to the banking system.” In particular, mobile banking and Internet banking “offer important inroads to the banking system,” McWilliams said, because a significant percentage of these unbanked or underbanked households have access to a smartphone or the Internet.
In addition, the FDIC Chair noted that the agency has “dedicated significant resources” to identify and understand emerging technologies—including digital lending, peer-to-peer lending, machine-learning, artificial intelligence, big data, and blockchain. While the new technology “can certainly introduce risk, it can also help regulators and institutions identify and mitigate risk sooner,” and “will undoubtedly present opportunities to ease the burden of regulatory compliance,” McWilliams said.
Future innovation office. While aiming, with humor, to correct any existing misconceptions about the FDIC immediately “rolling out” an Office of Innovation, McWilliams indicated that she is preparing and planning for that eventuality down the road by, among other things, having FDIC staff focus on “four fundamental questions”:
  1. How can the FDIC provide a safe regulatory environment to promote the technological innovation that is already occurring?
  2. How can the FDIC promote technological development at community banks with limited research and development funding to support independent efforts?
  3. What changes in policy—particularly in the areas of identity management, data quality and integrity, and data usage or analysis—must occur to support innovation while promoting safe and secure financial services and institutions?
  4. How can the FDIC transform—in terms of technology, examination processes, and culture—to enhance the stability of the financial system, protect consumers, and reduce the compliance burden on regulated institutions?
For more information about speeches by federal or state regulatory leaders that illuminate an agency's approach to matters impacting the financial services industry, subscribe to the Banking and Finance Law Daily.