October 4, 2023

On Tuesday, the U.S. Supreme Court held oral argument in the Community Financial Services Association of America Ltd. (CFSA) v. Consumer Financial Protection Bureau (CFPB), in which the CFSA argued that the CFPB’s “double insulated” funding structure is unconstitutional. According to reports, the Supreme Court Justices suggested they are not likely to declare the CFPB’s funding system unconstitutional.

Deputy Secretary of the Treasury Wally Adeyemo delivered remarks, announcing new actions against the fentanyl supply chain. Treasury is imposing major sanctions against 28 individuals and entities involved in the illicit drug trade that traffics deadly substances like fentanyl and xylazine into the United States. Effective immediately, these individuals and entities, located in the People’s Republic of China and in Canada, are cut off from using the U.S. financial system and all U.S. persons are barred from transacting with them. Additionally, Treasury identified and blocked over a dozen virtual currency wallets associated with these actors.

The Board of Governors of the Federal Reserve (FRB) launched its Instagram and Threads accounts with the aim of increasing the accessibility and availability of Board news and educational content. The first post on Instagram will include a brief welcome video from Chair Jerome H. Powell.

FRB Governor Michelle Bowman delivered brief remarks on the economy and bank regulation at the CEO/Executive Management Conference sponsored by the Mississippi Bankers Association and the Tennessee Bankers Association. Governor Bowman discussed inflation and the federal funds rate, monetary policy, banking regulation, and regulatory reform.

FRB Governor Michelle Bowman delivered remarks on the role of research, data, and analysis in banking reforms at the Community Banking Research Conference. Governor Bowman discussed how these tools can be used to develop and implement appropriate regulatory reforms that do not impair the long-term health or impede the future growth of the U.S. banking system.

The Federal Deposit Insurance Corporation (FDIC), FRB, and the Office of the Comptroller of the Currency (OCC) (collectively, the agencies), under the auspices of the Federal Financial Institutions Examination Council (FFIEC), published proposed regulatory reporting changes in the Federal Register for public comment. These proposed changes apply to all three versions of the Call Report (FFIEC 031, FFIEC 041, and FFIEC 051) and to the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002), as applicable, and are proposed to take effect as of the March 31, 2024, report date.  Comments must be submitted by November 27, 2023.

The FDIC published a financial institution letter pertaining to the Consolidated Reports of Condition and Income for the September 30, 2023, report date and providing guidance on certain reporting issues. Notably, the updated guidance includes, among other things that, “The agencies are still reviewing the implications of SAB 121,” staff level guidance from the Securities and Exchange Commission that requires banks to include on their balance sheets as liabilities digital assets held in custody. The guidance provides that “[a]n institution that determines that it is appropriate for it to apply SAB 121 for SEC or other financial reporting purposes should complete its Call Report consistent with the classification determination made for SEC or other financial reporting purposes.” 

Acting Comptroller of the Currency Michael J. Hsu issued remarks via webcast at the BIS International Data Hub (IDH) 10th Anniversary Conference. In his remarks, Mr. Hsu discussed how the IDH’s work to gather and analyze data helps national authorities perform ongoing monitoring and analysis of key risks affecting the global financial system. He also highlighted how the IDH’s work supports greater financial stability.

Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam gave a speech discussing recent digital asset enforcement actions and the need for entities engaging in CFTC-registered activities to register. He also raised concerns around vertical integration of markets in decentralized finance (DeFi). Chair Behnam also responded to dissenting statements that question the CFTC bringing enforcement actions where consumers have not been harmed.

The Futures Industry Association (FIA) held a conference in Chicago, where a diverse panel of experts, including CFTC Commissioner Caroline Pham, had a discussion about the future outlook for the technology and the path to widespread adoption of tokenized collateral. The general consensus was that the industry is a long way from a widespread embrace of the technology, but market participants are still making steady progress and strategic investments in the future of this technology.

The Securities and Exchange Commission (SEC) announced it will highlight the importance of investor education and protection during World Investor Week (WIW) 2023. As in previous years, the SEC is serving as the national coordinator in the U.S., working with the CFTC, Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Corporation, National Futures Association, and North American Securities Administrators Association. Together with these organizations, the SEC’s Office of Investor Education and Advocacy (OIEA) issued a joint Investor Bulletin to promote WIW’s key initiatives.

Judge Analisa Torres of the District Court for the Southern District of New York (SDNY), the judge presiding over the SEC’s case against Ripple Labs, denied the SEC’s request to appeal her recent decision, which found, among other things, that programmatic sales of XRP sold on exchanges did not constitute investment contracts, stating that an appeal would not materially advance the case towards a conclusion. The trial will begin on April 23, 2024.   

Seven House Financial Services Republicans are warning the CFPB against fining federal student loan servicers for degrading servicing quality. They argue in a letter that it’s the fault of Education Department funding cuts and Biden Administration mismanagement.

The Financial Technology Association (FTA) joined a group of trade associations in calling on Congress not to move forward with legislation that would limit competition and impede access to capital for small businesses. In a letter to the House Small Business Committee, FTA and other trades urged Congress to leave in place SBA’s news rules for loans under $500,000 and reduce costs and complexity for lenders, among other suggestions. Read the letter here

The Treasury announced it released a report prepared in consultation with members of the Financial Literacy and Education Commission (FLEC), entitled “The Impact of Climate Change on American Household Finances.” Specifically, the report explores the impacts of climate hazards, i.e., climate-related events and conditions that cause harm or damage to people, property, resources, and the environment. It also identifies certain populations and places that may face heightened financial strain due to their vulnerability and exposure to climate hazards. 

The Consumer Financial Protection Bureau (CFPB) published a blog highlighting the milestone of four million consumer complaints submitted to the agency and the importance of complaints in the CFPB’s work. 

Need to catch up on what happened last week? Check out our End of Week Wrap Up here