Newsletter

July 28, 2023

The Financial Stability Oversight Council (FSOC), during the executive session, heard a presentation from staff from the Treasury, Federal Housing Finance Agency, and Ginnie Mae regarding efforts to address financial stability risks related to nonbank mortgage servicers. Treasury and Office of the Comptroller of the Currency (OCC) staff also informed the FSOC on the Climate-related Financial Risk Committee’s work, including ongoing interagency efforts to identify and monitor financial system vulnerabilities and deepen Council members’ understanding of climate-related financial risks. The Climate-related Financial Risk Committee (CFRC) issued a staff progress report on a range of actions underway to support capacity building and disclosure, address data gaps, and assess climate-related financial risks. The Council also discussed current conditions in the banking sector and heard an update from staff from the Board of Governors of the Federal Reserve System on the results of the 2023 bank stress tests. 

The OCC announced a $15 million civil money penalty against American Express National Bank (American Express) for failing to govern and oversee a third-party affiliate and for violations of regulations relating to certain efforts to retain small business customers.

The Federal Reserve Board (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and OCC requested comment on a proposal to implement the final components of the Basel III agreement and apply a broader set of capital requirements to banks with $100 billion or more in total assets.

The Federal Reserve announced a consent order and a $268.5 million fine with UBS Group AG, of Zurich, Switzerland, for misconduct by Credit Suisse involving unsafe and unsound counterparty credit risk management practices with its former counterparty, Archegos Capital Management LP.

Following its stress test earlier this year, the Federal Reserve Board announced the individual capital requirements for all large banks, effective on October 1.

The Commodity Futures Trading Commission (CFTC) filed a complaint against Michael and Amanda Griffis, charging that the defendants defrauded over 100 people across the United States and failing to register with the CFTC in connection with a multi-million dollar commodity pool scheme. The CFTC seeks restitution, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations.

The Securities and Exchange Commission (SEC) adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. SEC Chair Gary Gensler delivered a statement on the rules.

SEC Chief Accountant Paul Munter delivered remarks aimed at accounting firms and the services they provide to digital asset firms, particularly digital asset trading platforms. He discussed accounting firms’ potential liability for anti-fraud violations, auditor independence, and potential liability pursuant to Rule 102(e) of the SEC’s Rules of Practice.

The SEC proposed new rules that would require broker-dealers and investment advisers to take certain steps to address conflicts of interest associated with their use of predictive data analytics and similar technologies to interact with investors to prevent firms from placing their interests ahead of investors’ interests.

The Consumer Financial Protection Bureau (CFPB) released a new Supervisory Highlights report which found unfair, deceptive, and abusive acts or practices across multiple consumer financial products.

The CFPB published a blog post on cash flow data (broadly defined as various inflows, outflows, and accumulated amounts in checking and savings accounts), finding that such data may provide lenders with more information about how applicants manage current obligations than applicants’ credit repayment histories alone.

CFPB Director Rohit Chopra released a statement discussing the proposal of a rule related to the resilience of banks with $100 billion or more in assets. 

Secretary of the Treasury Janet L. Yellen announced the appointment of Ethan Zindler to serve as the Treasury Department’s new Climate Counselor. Mr. Zindler will lead the Treasury Climate Hub and report directly to and advise the Secretary on a broad range of climate matters.

Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, sent a letter to the Federal Housing Finance Agency (FHFA), expressing support for FHFA’s forthcoming report on its review of the Federal Home Loan Bank (FHLBank) System, ahead of the FHLBanks’ centennial year.

Rep. Waters issued a statement applauding the Federal Reserve’s launch of its instant payment service, FedNow.

The Electronic Transactions Association, Financial Technology Association, Innovative Lending Platform Association, and Small Business Finance Association sent a letter to Senators Ben Cardin (D-MD) and Joni Ernst (R-IA) expressing their concerns regarding the Community Advantage Loan Program Act of 2023.

The House Financial Services Committee held two markups (July 26 and 27) to consider digital asset and ESG legislation, among other bills. With respect to digital assets, the Committee passed the Financial Innovation and Technology for the 21st Century Act, 35-15, with Reps. Jim Himes (D-CT), Josh Gottheimer (D-NJ), Ritchie Torres (D-NY), Steven Horsford (D-NV), Wiley Nickel (D-NC), and Brittany Pettersen (D-CO) breaking with Committee Democrats and supporting the legislation. The market structure bill delineates between the jurisdiction of the CFTC and SEC regarding oversight of digital asset markets. (The market structure bill was also marked up and passed by the House Committee on Agriculture.). The Committee also passed, 34-16, the Clarity for Payment Stablecoins Act of 2023. Reps. Gregory Meeks (D-NY), Jim. Himes (D-CT), Josh Gottheimer (D-NJ), Ritchie Torres (D-NY), and Wiley Nickel (D-NC) broke with Committee Democrats to support the legislation. The Committee also passed the Blockchain Regulatory Certainty Act, which would provide a safe harbor from licensing and registration for certain providers of blockchain services; the Keep Your Coins Act of 2023, which protects self-custody of digital assets; and the Financial Technology Protection Act of 2023, which establishes the Independent Financial Technology Working Group to Combat Terrorism and Illicit Financing under the Department of Treasury. The bill also encourages public-private sector partnership in examining issues surrounding illicit finance in the digital asset ecosystem. With respect to ESG, Committee Republicans approved bills aimed at deterring investment practices that incorporate environmental, social and governance factors. Members voted along party lines, 29-21, on all four measures. Their approval wrapped up the committee’s “ESG month,” which included hearings looking at the role regulators and the private sector play in sustainable investing. The bills include the Guiding Uniform and Responsible Disclosure Requirements and Information Limits Act, or GUARDRAIL Act; the Businesses over Activists Act; the Protecting Americans’ Retirement Savings from Politics Act; and the American Financial Institution Regulator Sovereignty and Transparency Act, or American FIRST Act. The Committee also passed the following legislation: Stop Fentanyl Money Laundering Act of 2023; No Russian Agriculture Act; and Exposing China’s Support for the Taliban Act.

Sen. Elizabeth Warren (D-MA) reintroduced and added as cosponsors to the Digital Asset Anti-Money Laundering Act of 2023 (a.k.a. the Warren-Marshall legislation)  Sen. Joe Manchin (D-WV) and Sen. Lindsey Graham (R-SC), in addition to original cosponsor Sen. Roger Marshall (R-KS). The bill would impose anti-money laundering requirements on self-hosted wallet providers, digital asset miners, validators, and nodes that act to validate or secure third-party transactions and others facilitating or providing services related to the exchange, sale, custody, or lending of digital assets.

The Senate passed its version of the National Defense Authorization Act for the fiscal year 2024. The legislation included an amendment co-sponsored by Sens. Cynthia Lummis (R-WY), Kirsten Gillibrand, (D-NY), Elizabeth Warren, (D-MA), and Roger Marshall, (R-KY) targeting the use of crypto for illicit activities. 

Sens. Elizabeth Warren (D-MA) and Lindsey Graham (R-SC) introduced the Digital Consumer Protection Commission Act, which would establish a new federal commission to regulate online platforms. A one-pager on the bill can be found here, and a section-by-section summary can be found here.

The Senate Committee on Banking, Housing, and Urban Affairs held a hearing to examine potential deposit insurance reforms in the wake of a number of mid-size, regional bank failures earlier this year that stressed the FDIC Deposit Insurance Fund.

The Senate Committee on Small Business and Entrepreneurship held a hearing to examine the status of women-owned small businesses within the United States.

Georgia Secretary of State Brad Raffensperger issued an Investor Alert on “pig-butchering” cryptocurrency scams. 

The Biden-Harris Administration convened seven companies leading in artificial technology (AI) – Amazon, Anthropic, Google, Inflection, Meta, Microsoft, and OpenAI – to announce that these companies have committed to: 1) ensuring products are safe before introducing them to the public; 2) building systems that put security first; and 3) earning the public’s trust. The Administration stated that it is also developing an Executive Order and pursuing bipartisan legislation to keep Americans safe. 

Glenn “GT” Thompson (R-PA), Chairman of the House Committee on Agriculture, and French Hill (R-AR), Chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion, and Dusty Johnson (R-SD), Chairman of the Subcommittee on Commodity Markets, Digital Assets, and Rural Development, introduced H.R. 4763, the Financial Innovation and Technology for the 21st Century Act. Additional cosponsors include Reps. Tom Emmer (R-MN) and Warren Davidson (R-OH).

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