April 28, 2023

The Board of Governors of the Federal Reserve System (Fed or FRB) announced the results from the review of the supervision and regulation of Silicon Valley Bank. The review found four key takeaways on the causes of the bank’s failure: Silicon Valley Bank’s board of directors and management failed to manage their risks; Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity; When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough; and The Board’s tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.

House Financial Services Committee Chairman Patrick McHenry (R-NC); Digital Assets, Financial Technology and Inclusion Subcommittee Chairman French Hill (R-AR); and Oversight and Investigations Subcommittee Chairman Bill Huizenga (R-MI) sent letters to Fed Chair Jerome Powell; Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg; and Acting Comptroller of the Currency Michael Hsu. The lawmakers are demanding information related to potential coordinated efforts by the agencies to deny banking services to digital asset firms and the ecosystem as a whole. These letters follow the lawmakers’ March requests for information on the FDIC, Treasury Department, Federal Reserve, and Office of the Comptroller of Currency (OCC)’s actions and agenda toward the digital asset ecosystem moving forward. Read the letter to Chair Powell here, the letter to Chairman Gruenberg here, and the letter to Acting Comptroller Hsu here.

A new GOP-led discussion draft for regulating stablecoins was released earlier this week. The bill is roughly half the length of the draft plan negotiated by HFSC Chairman McHenry and HFSC Ranking Member Maxine Waters (D-CA) last year in the Democrat controlled House. The draft removes provisions related to trading platforms and custodial service providers and would also give state regulators more autonomy when it comes to chartering stablecoin issuers and designing rules for them.

Director Chopra appeared on Bloomberg TV to discuss the report. Director Chopra said that he’s asked CFPB staff to provide options with the goal of promoting fair competition of similar products. He stated that the CFPB wants to ensure that the BNPL industry isn’t seizing any loopholes and said that new rules and guidance may be forthcoming. 

Coinbase announced it is suing the SEC, filing a “narrow action in federal court to compel the SEC to respond yes or no to [Coinbase’s] July 2022 petition asking the SEC to use its formal rulemaking process to provide guidance for the crypto industry.”

The Office of the Comptroller of the Currency (OCC) reported that the performance of first-lien mortgages in the federal banking system improved during the second quarter of 2022. The OCC Mortgage Metrics Report, Second Quarter 2022 showed that 97 percent of mortgages included in the report were current and performing at the end of the quarter, compared to 95 percent a year earlier.

The Office of Financial Research (OFR) published a working paper entitled “Anatomy of the Repo Rate Spikes in September 2019.” The working paper identifies factors that may have contributed to the 2019 spike in repo rates.

The CFPB issued an Advisory Opinion related to time-barred debts. The Advisory Opinion affirms that the FDCPA and the Debt Collection Rule prohibit FDCPA-covered debt collectors from suing or threatening to sue to collect a time-barred debt.  The Advisory Opinion also affirms that this prohibition may apply to debt collectors that bring state-court mortgage foreclosure actions to collect on time-barred mortgage debt.

The CFPB issued an Interim Final Rule related to the LIBOR transition. The 2023 LIBOR Transition Interim Final Rule updates the CFPB’s previous 2021 LIBOR Transition Rule to make changes consistent with the Adjustable Interest Rate Act of 2021 (LIBOR Act), enacted in March 2022.  Those changes include 1) conforming the terminology used to identify the replacement indices and 2) adding an example of a 12-month LIBOR tenor replacement index that meets certain standards in Regulation Z.

Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero delivered remarks entitled “Illicit Finance and Other Key Risks of Digital Assets” at City Week 2023. Commissioner Goldsmith Romero stated that “crypto markets are used to facilitate illicit financing of drugs, human trafficking, ransomware, terrorism, and malicious state sponsored activity posing national security risks,” and that “the use of digital assets for illicit finance poses national security and other risks.” Commissioner Goldsmith Romero further expressed concern about risks of customer loss through cybercrime, fraud, and non-bank financial stability risks, and discussed the responsibility of the Government to manage these risks.

The CFPB published a blog entitled “Who gets sued in civil courts? Civil judgments are not evenly distributed.” The blog discusses credit card delinquencies and civil judgments and their impacts on consumers.

Securities and Exchange Commission (SEC) Chair Gary Gensler delivered remarks before the 2023 42nd Annual Small Business Forum. Chair Gensler discussed the SEC’s Office of the Advocate for Small Business Capital Formation (OASBCF) and the SEC’s efforts to increase “the efficiency, integrity, and resiliency of the markets to lower costs for all businesses raising capital and increase returns for investors.”

The U.S. Department of the Treasury (Treasury)’s Office of Foreign Assets Control (OFAC) announced a $508 million settlement agreement with London-headquartered British American Tobacco p.l.c. (BAT) to resolve its apparent violations of U.S. sanctions on the Democratic People’s Republic of Korea (DPRK) and proliferators of weapons of mass destruction (WMD). This settlement is OFAC’s largest ever with a non-financial institution and reflects the statutory maximum penalty.

The Financial Data and Technology Association, North America, (FDATA) held an event to discuss U.S. open finance, global banking, data privacy in open financial ecosystems, and customer-permissioned data access innovation and inclusion. The Summit hosted two separate fireside chats with Rep. French Hill (R-AR) and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra. Each conversation focused on data privacy and the U.S. regulatory regime on data privacy and open banking. Read our summary here.

The Senate Committee on Banking, Housing, and Urban Affairs held a nominations hearing to fill the roles for Chairman of the Council of Economic Advisers in the Executive Office of the President, the Director of the Office of Financial Research in the Department of the Treasury, and two Assistant Secretary positions in the Department of Housing and Urban Development (HUD). Read our summary here.

The House Financial Services Subcommittee on Capital Markets held a hearing to discuss a regulatory framework that promotes innovation and wealth creation for investors and entrepreneurs. Read our summary here.

The Senate Committee on Finance convened to hear from Mr. Daniel Werfel, Commissioner of the Internal Revenue Service (IRS), about the Fiscal Year 2024 budget for the Service and the 2023 tax filing season. Read our summary here

The Financial Stability Oversight Council (Council) voted unanimously to issue a proposed analytic framework for financial stability risks for public comment. This new framework is intended to provide greater transparency to the public about how the Council identifies, assesses, and addresses potential risks to financial stability, regardless of whether the risk stems from activities or firms. It also proposed guidance on nonbank financial company determinations. House Financial Service Committee Ranking Member Maxine Waters (D-CA) released a statement applauding the move and urging further action to promote financial stability. 

Comments will be due 60 days after the proposed framework and guidance are published in the Federal Register.  

Need to catch up on what happened last week? Check out our April 21st newsletter here.