HFSC Ranking Member Maxine Waters (D-CA) and Senate Banking Committee (SBC) Chairman Sherrod Brown (D-OH) led 144 current and former Members of Congress in filing an amicus brief in the United States Supreme Court defending the Consumer Financial Protection Bureau (CFPB) in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America which seeks to challenge the constitutionality of the CFPB’s funding structure.
New York Attorney General Letitia James led Attorneys General in 22 other states and the District of Columbia in filing a separate amicus brief filing to the court in support of the CFPB.
President Biden announced the nomination of Dr. Philip Jefferson for Vice Chair and Dr. Adriana Kugler to serve as a Member on the Board of Governors of the Federal Reserve System. President Biden also announced that he will renominate Dr. Lisa Cook for an additional full term as a Member.
House Financial Services Committee (HFSC) Chairman Patrick McHenry (R-NC) released the latest draft of his stablecoin legislation. The new draft largely mirrors the April 23 version, which was released by the Chairman’s staff shortly after the April 19 HFSC stablecoin hearing. Last week, HFSC Democrats internally circulated their own stablecoin legislation, which builds off the bipartisan October 2022 version, negotiated by then-HFSC Chair Maxine Waters (D-CA) and then-Ranking Member McHenry. Of note, Waters’ draft includes a requirement that customer assets be segregated, prohibiting commingling of funds, removes access to Federal Reserve programs for nonbank stablecoin issuers, and provides the Federal Reserve Board with the authority to decline registration of a State-approved stablecoin issuer. Read our summary of the new Republican draft here.
Eun Young Choi, the Director of the National Cryptocurrency Enforcement Team (NCET) within the Department of Justice (DOJ), said the NCET is targeting digital asset trading platforms that are enabling “criminal actors to easily profit from their crimes and cash out,” as the DOJ focuses on platforms that are circumventing anti-money laundering and know-your-customer (AML/KYC) compliance requirements, including those who do not engage in thorough compliance and risk mitigation.
Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam said in a podcast that decentralized exchanges operating in the decentralized finance (DeFi) space will be regulated by either the Securities and Exchange Commission (SEC) or the CFTC. “It’s easy to suggest, ‘Oh there’s no institution, there’s no individual, it’s just code, you can’t regulate that, it’s self-effectuating,’ but that really is the wrong set of questions. It’s really about what are U.S. customers being offered and exposed to? And who is either the individual or group of individuals who set up that entity, that code, to offer those products?” Chair Behnam said.
SEC Chair Gary Gensler said, regarding companies in the digital asset industry, “[t]heir business models, though, tend to be built on non-compliance. Their business models tend to be built on customer funds, commingling it, they’re rife with conflicts.” Discussing the recent bank failures, Chair Gensler noted also that three of the four recent bank failures in the U.S. “had significant crypto books.”
The U.S. Secret Service San Francisco Field Office and the Bay Area Regional Enforcement Allied Computer Team (REACT), which support cyber and financial crimes investigations, said in a joint Reddit Ask Me Anything session that “blockchain provides us with an amazing opportunity to track the flow of money,” and they are able to track and return funds to victims.
New York Attorney General Letitia James announced her office brought an enforcement action against digital asset trading platform Coin Cafe for allegedly misleading customers about “exorbitant and undisclosed” fees for digital asset custody, despite advertising this service would be free.
The Federal Deposit Insurance Corporation (FDIC)’s Board of Directors met to discuss the Notice of Proposed Rulemaking on Special Assessments Pursuant to Systemic Risk Determination. The rulemaking would implement a special assessment to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. The fact sheet for the rulemaking is available here. Statements about the rulemaking were made by FDIC Chairman Martin Gruenberg, FDIC Vice Chairman Travis Hill, FDIC Director Jonathan McKernan, and Office of the Comptroller of the Currency (OCC) Director Michael Hsu.
The Federal Reserve published their 2023 Supervision and Regulation Report. The report summarizes banking conditions and the Federal Reserve’s supervisory and regulatory activities, in conjunction with testimony before the House Financial Services Committee and Senate Banking Committee by Vice Chair for Supervision Michael Barr.
Federal Reserve Governor Christopher Waller gave a speech entitled “Climate Change and Financial Stability.” Governor Waller stated that while he believes climate change is real, he does not believe that it poses a serious risk to the safety and soundness of large banks or the financial stability of the United States.
The Financial Industry Regulatory Authority (FINRA) and the National Futures Association (NFA) held a summit focused on crypto assets and agreed to expand their memorandum of understanding (MOU) to address crypto activities that fall within their regulatory mandates. FINRA and NFA also discussed the importance of investor protection, as well as potential risks, reporting, and supervisory obligations associated with crypto-related activities. The meeting culminated in an agreement to expand the existing MOU to address information sharing and collaboration regarding crypto assets, blockchain technology developments, and crypto asset regulatory risks.
The SEC proposed rule amendments and a new rule intended to improve the resilience and recovery and wind-down planning of covered clearing agencies. The proposal would amend the existing rules regarding intraday margin and the use of substantive inputs to a covered clearing agency’s risk-based margin system and add a new rule to establish requirements for the contents of a covered clearing agency’s recovery and wind-down plan. The public comment period will remain open for 60 days following publication of the proposing release on the SEC website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer. A fact sheet on the proposed rule is available here.
The CFPB issued a small entity compliance guide for the small business lending rule.
CFPB Director Rohit Chopra published a blog entitled “Building resilience and durability into mortgage rules.” The blog states that the CFPB has found that many of its rules and guidance documents were drafted in ways that are unnecessarily complex, and that there is a particular problem with this within federal mortgage rules. The blog discusses the CFPB’s revised methodology for determining Average Prime Offer Rates (APOR) and the CFPB’s efforts to rethink their approach to rulemaking.
The Office of Financial Research (OFR) published a Working Paper entitled Sustainability with Risky Growth. The report intends to help policymakers understand how economic growth, risk, and the financial sector influence sustainability objectives.
U.S. Secretary of the Treasury Janet Yellen met with CEOs and executives convened by the Bank Policy Institute (BPI) to discuss the current state of the economy and President Biden’s economic agenda. Secretary Yellen reaffirmed the strength and soundness of the U.S. banking system, thanked participants for their leadership and support, and made clear that the Treasury Department continues to closely monitor conditions across the banking sector. Secretary Yellen also discussed the urgent need for Congress to address the debt limit and underscored the real and severe consequences of default for the banking system and the domestic and global economy.
Deputy Secretary of the Treasury Wally Adeyemo also met with the group to discuss President Biden’s economic priorities. Deputy Secretary Adeyemo thanked banks for their collaboration in implementing sanctions imposed on Russia, discussed Treasury’s efforts to bolster cybersecurity in the financial sector, shared updates on Treasury’s ongoing anti-money laundering regulatory reform work, and underscored the need for Congress to raise or suspend the debt limit.
The CFPB published a Data Spotlight on consumer experiences with overdraft programs. Consumers who took part in the engagement discussed confusion about overdrafts; concerns about fees, payment timing, and notifications; experiences with financial hardships and fee waivers; experiences with account closures; approaches to avoid overdraft fees; and limited awareness of account options without overdraft fees.
Federal Reserve Governor Michelle Bowman gave a speech entitled “Considerations for Revisions to the Bank Regulatory Framework.” Governor Bowman discussed bank supervision and risk-tailored bank regulation, the benefits of nimble supervision, and the importance of ensuring that both banks and examiners are well prepared and positioned for potential stress in the banking market.
The CFPB published a blog entitled “Bringing tech enforcers together to protect consumers.” The blog discusses efforts to convene enforcement agencies across the government – including federal agencies, state attorneys general, and state insurance commissioners – to sharpen their combined efforts on consumer financial protection initiatives.
CFTC Commissioner Caroline Pham announced the 2023-2025 proposed work program for the CFTC’s Global Markets Advisory Committee (GMAC), including the Global Market Structure Subcommittee, the Digital Asset Markets Subcommittee, and the Technical Issues Subcommittee. Commissioner Pham is the sponsor of the GMAC and is seeking input to the proposed work program. The deadline for input is May 30, 2023.
Treasury Secretary Yellen delivered remarks at the Independent Community Bankers of America (ICBA) 2023 Capital Summit. Secretary Yellen discussed community banks, recent developments in the regional banking system, and the debt limit.
The Federal Trade Commission (FTC) is seeking comment on proposed changes to the Health Breach Notification Rule (HBNR) that include clarifying the rule’s applicability to health apps and other similar technologies.
The FTC issued a Policy Statement stating that increased use of biometrics raises “significant” concerns about security, privacy, and discrimination. FTC Commissioner Alvaro M. Bedoya’s response to the Policy Statement can be found here. FTC Commissioner Rebecca Kelly Slaughter’s Statement can be found here.
FTC Chair Lina Khan delivered remarks at the FTC’s May Open Commission Meeting raising concerns about dark patterns and the misuse of biometric information.
The OCC released April enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations.
The Senate Banking Committee held a hearing focused on examining cannabis banking challenges faced by small businesses and workers.
The House Committee on Oversight and Accountability held a hearing discussing the use of Environmental, Social and Governance (ESG) principles for investing and other financial activities.
The House Committee on Small Business held a hearing examining the Small Business Administration’s (SBA) proposed rules that would rescind the moratorium on Small Business License Companies (SBLCs) and clarify eligibility requirements for certain SBA loan programs.
The House Financial Services Committee Subcommittee on Housing and Insurance and the Senate Banking Committee held hearings overseeing the prudential regulators.
The FDIC Board of Directors issued a notice of proposed rulemaking (NPRM), which would implement a special assessment to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. CFPB Director Rohit Chopra’s statement supporting the NPRM can be found here.
Following the recent finalization of two new rules aimed at closing gaps in capital access for America’s small business owners, the Small Business Administration (SBA) announced its plans to streamline eligibility determinations of SBA-backed loans and add new fraud review on all loans. The SBA also published new guidelines for lenders on how to make SBA loans as part of a new Standard Operating Procedure (SOP); a Procedural Notice removing the requirement for a Loan Authorization; and an Informational Notice clarifying affiliation standards.
The Biden Administration is working to establish G-7 sanctions coordination and monitoring activity and expand Russia sanctions. Additionally, the large fines for egregious violations of sanctions may be indicative of those types of fines that the Administration may pursue for future sanctions violations, particularly under the Russia sanctions regime. Read more in our latest Sanctions Watch here.
Need to catch up on what happened last week? Check out our May 12 newsletter here.