June 16, 2023

The Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) issued final joint guidance designed to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology companies. The final guidance describes principles and considerations for banking organizations’ risk management of third-party relationships. The final guidance covers risk management practices for the stages in the life cycle of third-party relationships: planning, due diligence and third-party selection, contract negotiation, ongoing monitoring, and termination. Federal Reserve Governor Christopher Waller published a statement supporting the interagency guidance while Governor Michelle Bowman dissented.

Patrick McHenry (R-NC), Chairman of the House Financial Services Committee (HFSC), and Glenn “GT” Thompson (R-PA), Chairman of the House Committee on Agriculture, released a discussion draft of legislation providing a statutory framework for digital asset regulation. The bill is intended to “provide clarity, fill regulatory gaps, and foster innovation, while providing adequate consumer protections.”

The Securities and Exchange Commission (SEC) charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. The SEC also charged Coinbase for allegedly failing to register the offer and sale of its crypto asset staking-as-a-service program. The Committee on Capital Markets Regulation, a non-profit organization, issued a policy statement in response to the SEC’s actions stating that crypto asset trading platforms cannot register as securities exchanges. Separately, on the same day the SEC filed its enforcement action against Coinbase, the U.S. Court of Appeals for the Third Circuit, which is currently overseeing the matter related to Coinbase’s petition for guidance from the SEC, issued an order regarding the rulemaking petition, asking the SEC to respond within 7 days. The order includes questions such as whether recent statements from Chair Gensler and the enforcement action mean the SEC is denying Coinbase’s petition. 

The SEC charged Binance Holdings, which operates the global exchange,  its founder Changpeng Zhao, and BAM Trading Services, which operates Binance.US, for allegedly violating the federal securities laws. The SEC subsequently filed an emergency application for a temporary restraining order to freeze assets.

The Consumer Financial Protection Bureau (CFPB) published its Semi-Annual Report to Congress for the period beginning April 1, 2022 and ending September 30, 2022. Director Rohit Chopra will testify before the Senate Banking Committee on Tuesday, June 13, and the House Committee on Financial Services on Wednesday, June 14.

The SEC adopted rules to “prevent fraud, manipulation, and deception in connection with security-based swap transactions and to prevent undue influence over the chief compliance officer (CCO) of security-based swap dealers and major security-based swap participants (SBS Entities).” The anti fraud and anti-manipulation rule is designed to prevent misconduct in connection with effecting any transaction in, or attempting to effect any transaction in, or purchasing or selling, or inducing or attempting to induce the purchase or sale of, any security-based swap. The Commission also adopted a rule to protect the independence and objectivity of the CCO of a security-based swap dealer or major security-based swap participant.

The House of Representatives passed seven pieces of bipartisan financial services legislation intended to facilitate capital formation by strengthening public markets, helping small businesses and entrepreneurs, and creating opportunities for all investors. The bills passed by the house include H.R. 2792, the Small Entity Update Act; H.R. 2795, the Enhancing Multi-Class Share Disclosures Act; H.R. 2796, the Promoting Opportunities for Non-Traditional Capital Formation Act; and H.R. 2797, the Equal Opportunity for All Investors Act.

The FRB, CFPB, FDIC, OCC, and National Credit Union Administration (NCUA) requested public comment on proposed guidance addressing reconsiderations of value (ROV) for residential real estate transactions. The proposed guidance advises on policies that financial institutions may implement to allow consumers to provide financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal. Comments must be received within 60 days of the proposed guidance’s publication in the Federal Register. Read the Board memo here and the Federal Register notice here.

The OCC is requesting information on a proposed new OCC survey about the public’s trust in banking and bank supervision. The survey would be conducted annually, and it would be used to track and assess consumer trust in banks and banking supervision over time. Results from the survey would help the OCC to identify areas in which trust could be further enhanced. Comments must be received within 60 days of publication in the Federal Register.

The FDIC Office of the Ombudsman published a report highlighting its activities and the services provided to stakeholders during 2022. The Office’s accomplishments include: 1) acting as a liaison between bankers and the FDIC; 2) working to resolve disagreements with supervisory findings or conclusions; 3) stakeholder engagement; and 4) responding to the FDIC’s requests for information regarding regulatory or resolution–related activities.

The CFPB Office of Research posted a blog giving an update on student loan borrowers as the payment suspension is set to expire 60 days after June 30. The update shows that more than one-in-thirteen student loan borrowers are currently behind on their other payment obligations; about one-in-five student loan borrowers have risk factors that suggest they could struggle when scheduled payments resume; median scheduled payments on other debt obligations have increased by 24 percent for student loan borrowers likely returning to repayment; and more than four-in-ten borrowers in the sample will return to repayment with a new student loan servicer.

The Commodity Futures Trading Commission (CFTC) approved an amended order of registration for Cboe Clear Digital, LLC (Cboe Clear) to clear additional products, subject to the terms and conditions specified in the Order, as a derivatives clearing organization (DCO) under the Commodity Exchange Act. The amended Order permits Cboe Clear to provide clearing services for digital asset futures on a margined basis for futures commission merchants, in addition to the fully collateralized futures and fully collateralized swaps authorized previously. CFTC Commissioner Christy Goldsmith Romero published a statement in support of the amended order.

The CFPB took action against medical debt collector Phoenix Financial Services (Phoenix) for numerous debt collection and credit reporting violations. Phoenix allegedly continued to attempt to collect on a debt that was not substantiated after a consumer disputed the validity of the debt in at least thousands of cases. The order requires Phoenix to pay redress to affected consumers, and pay a $1.675 million penalty to the CFPB’s victims relief fund.

Senate Majority Leader Chuck Schumer (D-NY), joined by Senators Mike Rounds (R-SD), Martin Heinrich (D-NM), and Todd Young (R-IN) sent a Dear Colleague letter on the three bipartisan Senators-only AI briefings that will take place this summer. The last briefing – our adversaries’ use of AI — will be the first classified all-Senators briefing on AI. Read Senator Schumer’s remarks on the briefings here.

The Public Company Accounting Oversight Board (PCAOB) issued for public comment a proposal that would amend PCAOB auditing standards related to an auditor’s responsibility for considering a company’s noncompliance with laws and regulations, including fraud. If adopted, the proposal would strengthen auditor requirements to identify, evaluate, and communicate possible or actual noncompliance with laws and regulations. The deadline for public comment on the proposal is August 7, 2023.

The Center for Responsible Lending (CRL) and the Consumer Bankers Association (CBA) jointly petitioned the CFPB to develop a rule that would define larger participants in the market for personal loans so that sizable non-depository lenders would be subject to consistent CFPB supervision as large banks and credit unions making such loans already are.

President Joe Biden issued a Presidential Proclamation declaring June 2023 as National Homeownership Month. The Department of Housing and Urban Development (HUD) published a press release announcing their commemoration of the month through the launch of “Let’s Make Home the Goal,” a nationwide, multi-year campaign to promote awareness of housing counseling provided by HUD-certified housing counselors.

The Department of the Treasury announced a new effort to help ensure fairness and increase transparency in the Department’s compliance and enforcement practices. The framework, laid out in a memo authored by Deputy Secretary of the Treasury Wally Adeyemo, is intended to provide a roadmap for Department bureaus and offices to guide their compliance and enforcement efforts with the public.

HFSC Chairman McHenry; National Security, Illicit Finance, and International Financial Institutions Subcommittee Chairman Blaine Luetkemeyer (R-MO); House Committee on Small Business Chairman Roger Williams (R-TX); and House Appropriations Subcommittee on Financial Services and General Government Chairman Steve Womack (R-AR) sent a letter to Financial Crimes Enforcement Network (FinCEN) Acting Director Himamauli Das and Treasury Secretary Janet Yellen demanding that FinCEN outline its plan for educating small businesses about their reporting responsibilities as they pertain to the agency’s forthcoming beneficial ownership proposed rule. Read the full letter here.

Sen. Dick Durbin (D-IL) reintroduced S. 1838, the Credit Card Competition Act, alongside Sens Roger Marshall (R-KS), Peter Welch (D-VT), and J.D. Vance (R-OH). Rep. Lance Gooden announced he is sponsoring the bill’s House companion, H.R. 3881. Unlike last year, both Senate & House bills have garnered broader bipartisan, bicameral support. Sen. Vance (R-OH), a member of the Senate Banking Committee, is an original Senate cosponsor. The bill text is available here.

The CFPB released a new issue spotlight on the expansive adoption and use of chatbots by financial institutions. “To reduce costs, many financial institutions are integrating artificial intelligence technologies to steer people toward chatbots,” said CFPB Director Rohit Chopra. “A poorly deployed chatbot can lead to customer frustration, reduced trust, and even violations of the law.”

The Joint Regulatory Oversight Committee (JROC) of the United Kingdom’s Financial Conduct Authority (FCA) set out a programme of work to take forward recommendations for the next phase of open banking in the U.K. The programme includes setting up dedicated work streams to action the key themes and priorities outlined in the JROC recommendations for the next phase of open banking.

Senators Mark Warner (D-VA) and Mike Crapo (R-ID), co-chairs of the Community Development Finance Caucus, and Deputy Secretary of the Treasury Wally Adeyemo held an event on Capitol Hill to announce that members of the Economic Opportunity Coalition reached their goal of securing $1 billion in committed deposits in Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) to expand their lending power for underserved communities and small businesses emerging from the pandemic.

Deputy Secretary of the Treasury Wally Adeyemo published remarks on racial equity entitled “Racial Equity Benefits All Americans” ahead of the third meeting of the Treasury Advisory Committee on Racial Equity (TACRE). Deputy Secretary Adeyemo discussed TACRE, the American Rescue Plan (ARP), and the Inflation Reduction Act (IRA) and efforts to expand employment, prevent evictions and poverty, and build broadband access.

Treasury Secretary Janet Yellen delivered remarks before TACRE and discussed key areas of progress, including equitable implementation of the IRA, progress in creating a more modern and fairer tax system, legislation to address the debt limit, the Emergency Rental Assistance Program (ERA), the ARP, and additional resources channeled into CDFIs and MDIs.

SEC Chair Gary Gensler delivered remarks before the Piper Sandler Global Exchange and Fintech Conference. Chair Gensler discussed well-regulated markets, crypto asset securities, crypto intermediaries, lending and staking-as-a-service, and conduct, including fraud, manipulation, and bankruptcies.

The Senate Committee on Banking, Housing, and Urban Affairs held a hearing to discuss strategic competition with China, highlighting issues and actions needed to advance U.S. national security, economic, and foreign policy interests. 

The House Committee on Agriculture held a hearing discussing regulatory clarity for digital asset spot markets. Read our summary here

The Senate passed a House-approved bill late Thursday evening to suspend the nation’s debt limit through January 1, 2025. President Joe Biden is expected to sign the bill on Friday and address the nation at 7 pm ET. The White House issued a statement thanking Leader Schumer and Leader McConnell for quickly passing the debt limit bill. Treasury Secretary Janet Yellen’s statement on the bipartisan passage of the bill to suspend the debt limit is available here.

The Commodity Futures Trading Commission (CFTC) released on its website a forthcoming advance notice of proposed rulemaking (ANPRM) to identify areas of emerging risk for swap dealers and futures commission merchants regarding risk management program governance, enumerated risks in the risk management program regulations, periodic risk exposure reporting by swap dealers and futures commission merchants, and other risk. Commissioner Christy Goldsmith Romero released a statement regarding the ANPRM that calls for exploration into novel risk such as technology risk, including digital assets and smart contracts; cyber risk; affiliate risk; risk related to the segregation of customer property and safeguarding counterparty collateral in the digital asset space; and climate-related financial risk. Comments will be due 60 days after the ANPRM is published in the Federal Register.

Need to catch up on what happened last week? Check out our June 2 newsletter here.