- Top Lines
The Securities and Exchange Commission (SEC) released new guidance requiring companies that issue securities to disclose to investors their exposure and risk to the cryptocurrency market. Following the demise of crypto exchange FTX, staff within the SEC’s Division of Corporation Finance called on issuers to evaluate their disclosures and consider whether there is any material information that investors need to know about their ties to the asset class.
Congressman Jim Himes (D-CT), a proponent of a potential U.S. central bank digital currency (CBDC) and Chair of the House Financial Service Subcommittee on Subcommittee on National Security, International Development, and Monetary Policy, and Congressman Tom Emmer (R-MN), an proponent of private sector solutions over a potential CBDC and co-Chair of the Congressional Blockchain Caucus, each published op-eds in the American Banker on CBDC. Congressman Himes argues that CBDC could support financial inclusion, U.S. competitiveness and the global role of the U.S. dollar, national security, and payments innovation. Congressman Emmer, on the other hand, focuses on the privacy concerns regarding CBDC issuance and developing digital cash as opposed to CBDC.
- Weekly Wrap Up
The U.S. Department of the Treasury (Treasury) announced the approval of seven additional state plans – Florida, Georgia, Illinois, Louisiana, North Dakota, Oklahoma, and Virginia – for up to $1.5 billion in funding under the State Small Business Credit Initiative (SSBCI). Treasury has now announced the approval of state plans totaling up to $6.3 billion in SSBCI funding.
The Board of Governors of the Federal Reserve (FRB) published a request for comment (RFC) on proposed principles providing a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations. The proposed principles would apply to banking organizations with more than $100 billion in total assets and address both the physical risks and transition risks associated with climate change. The proposed principles would cover six areas: governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis. Comments are due by February 6, 2023.
The State of California released its interagency blockchain progress report reflecting the state’s work to implement Governor Newsom’s Executive Order N-9-22 over the last seven months. The Executive Order aims to ensure continued consumer protections, innovation, job growth, and advance equity and regulatory clarity, among other strategic outcomes.
The Senate Committee on Agriculture, Nutrition and Forestry held a hearing to question Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam about the recent bankruptcy of cryptocurrency exchange platform FTX.
Acting Comptroller of the Currency Michael Hsu discussed the importance of continued prudent credit risk management and diversity and inclusion, two important safety and soundness topics, at the RMA Risk Management and Internal Audit Virtual Conference. The Acting Comptroller highlighted benefits to banks from the Current Expected Credit Losses standard, and the importance of bank commitments to meaningful diversity, equity and inclusion at every organizational level.
Senators Elizabeth Warren (D-MA) and Tina Smith (D-MN), members of the Senate Banking, Housing, and Urban Affairs Committee, sent letters to the Fed, the FDIC, and the Office of the Comptroller of the Currency (OCC) raising concerns about the ties between the banking industry and crypto firms following FTX’s collapse. The senators are asking each regulator how they assess the banking system’s exposure to crypto risks.
The OCC published its Semiannual Risk Perspective for Fall 2022, finding that economic growth slowed sharply in 2022, while high employment rates supported consumer spending and overall bank performance. The report also found that banks, in aggregate, remain well capitalized and with ample liquidity and sound credit quality, although macroeconomic headwinds are a concern.
Secretary of the Treasury Janet L. Yellen delivered opening remarks at the first meeting of the Treasury Advisory Committee on Racial Equity (TACRE). The first-of-its-kind committee aims to provide advice and recommendations to Secretary Yellen and Deputy Secretary Wally Adeyemo on efforts to advance racial equity in the economy and address acute disparities for communities of color. Read the remarks here.
Sen. Elizabeth Warren led a letter with Sen. John Kennedy (R-LA) and Sen. Roger Marshall (R-KS) to the CEO of Silvergate Bank regarding the bank’s relationship with Alameda Research, FTX US, and FTX Trading. The letter concludes by asking about Silvergate’s business dealings with FTX and Alameda Research and asks Silvergate to respond by December 19.
In response to the United States District Court for the DIstrict of Columbia’s order to vacate the Consumer Financial Protection Bureau’s (CFPB) 2020 Home Mortgage Disclosure Act (HMDA) Final Rule with respect to the reporting threshold for closed-end mortgage loan volume in September 2022, the CFPB stated in a blog post that it “does not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data collected in 2022, 2021, or 2020 for institutions subject to the CFPB’s enforcement or supervisory jurisdiction that meet Regulation C’s other coverage requirements and originated at least 25 closed-end mortgage loans in each of the two preceding calendar years but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years.”
The CFPB released research revealing that members of the Reserves and National Guard called to active duty are paying an extra $9 million in interest every year on auto and personal loans because they are not always receiving the benefit of their right to rate reductions under the Servicemembers Civil Relief Act (SCRA). The SCRA gives servicemembers on active duty the right to request interest rate reductions on outstanding loans during the time they are activated and for an additional year in the case of mortgages.
The European Union proposed new rules that would require all digital asset service providers to report transactions. The rules are part of a package to increase transparency in the tax system. The initiative would establish a common minimum level of penalties for cases of serious non-compliance, including the absence of reporting despite reminders. The rules would cover digital asset service providers of all sizes for both domestic and cross-border transactions. The European Commission also proposed extending the reporting obligations of financial institutions to cover e-money and digital currencies.
In response to a congressional report criticizing its handling of fraud in the massive Paycheck Protection Program, the Small Business Administration says it plans to investigate several prominent PPP participants — including two fintechs and three community banks — spotlighted in the report. “The SBA will continue to work with the House Select Subcommittee [on the Coronavirus Crisis] to examine the evidence laid out in its report and continue taking corrective action to address the fraud and weak controls that were so prevalent at the onset of the PPP,” the agency said in a statement this week.
In response to a congressional report criticizing its handling of fraud in the massive Paycheck Protection Program, the Small Business Administration says it plans to investigate several prominent PPP participants — including two fintechs and three community banks — spotlighted in the report. “The SBA will continue to work with the House Select Subcommittee [on the Coronavirus Crisis] to examine the evidence laid out in its report and continue taking corrective action to address the fraud and weak controls that were so prevalent at the onset of the PPP,” the agency said in a statement this week.
In a notice of “Intent to Make Preemption Determination under the Truth in Lending Act (Regulation Z),” the CFPB announced that it is seeking comments on its preliminary determinations that the Truth in Lending Act (TILA) does not preempt certain provisions of the New York Commercial Finance Disclosure Law (CFDL) or the commercial financing laws of California, Utah, and Virginia.
- ICYMI
The Treasury published a report entitled Assessing the Impact of New Entrant Non-bank Firms on Competition in Consumer Finance Markets. This report specifically compares and contrasts new entrant non-bank firms with insured depository institutions and examines their effect on competition and services provided within the financial sector.