September 20, 2023

Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg delivered remarks on the financial stability risks of nonbank financial institutions (NBFIs). Chairman Gruenberg discussed nonbank financial institutions’ – often referred to as “shadow banks” – role during the global financial crisis and pandemic, as well as some of the current financial stability risks posed by certain NBFIs. Additionally, Chair Gruenberg highlighted recent Financial Stability Oversight Council (FSOC) proposals to help address risks in the financial system. 

The Consumer Financial Protection Bureau (CFPB) issued guidance about certain legal requirements that lenders must adhere to when using artificial intelligence and other complex models. The guidance describes how lenders must use specific and accurate reasons when taking adverse actions against consumers, meaning that creditors cannot simply use CFPB sample adverse action forms and checklists if they do not reflect the actual reason for the denial of credit or a change of credit conditions.

The White House published a readout of last week’s Climate Risk Modeling Roundtable, which brought together academic experts on climate risk, representatives from insurance industries, federal and state financial regulators, and representatives from federal agencies tasked with managing climate risks to discuss climate modeling for risk management applications.

On Friday, September 22, Secretary of the Treasury Janet L. Yellen will preside over a meeting of the FSOC at the Treasury Department. The meeting will consist only of an executive session. The preliminary agenda for the meeting includes international market developments; the FSOC’s proposed analytic framework for financial stability risk identification, assessment, and response; its proposed guidance on nonbank financial company determinations; the FSOC’s 2023 annual report; and its fiscal year 2024 budget.

FDIC Board of Directors appointed Arthur J. Murton to serve as Director of the Division of Complex Institution Supervision and Resolution (CISR), following Acting Director James McGraw’s retirement on October 20, 2023. Mr. Murton will perform these duties while retaining his role as Deputy to the Chairman for Financial Stability.

The U.S. Department of the Treasury (Treasury) published the Principles for Net-Zero Financing & Investment (the Principles). The voluntary Principles highlight emerging best practices for private sector financial institutions that have made net-zero commitments and promote consistency and credibility in approaches to implementing them.

House Financial Services Committee (HFSC) Chairman Patrick McHenry (R-NC) issued a statement in response to the guidance, arguing that “regulators should be focused on immediate risks to our financial system—not climate policy beyond their expertise and statutory authority.” 

Treasury Assistant Secretary for Financial Institutions Graham Steele delivered remarks at the Electronic Transaction Association Fintech Policy Forum, discussing competition in payments, regulation of payments, emerging issues in payment instruments, Big Tech entering financial services, and financial inclusion strategy and outreach.

The Treasury convened a meeting of the Treasury Advisory Committee on Racial Equity (TACRE). During the meeting, the Committee advanced new recommendations and received an update from Lily Batchelder, Assistant Secretary for Tax Policy, on previous recommendations. In addition, Internal Revenue Service (IRS) Commissioner Danny Werfel provided an update on efforts to increase fairness in tax administration, including by rebalancing enforcement priorities toward high-income, high-wealth individuals, large corporations, and complex partnerships. Commissioner Werfel also discussed new efforts to pursue unscrupulous paid preparers who have targeted taxpayers across the tax system, including those who claim refundable credits like the Earned Income Tax Credit.

Treasury Secretary Janet Yellen delivered remarks on the one-year anniversary of the launch of the Pandemic Fund. Secretary Yellen discussed the accomplishments of the fund as well as the work that still needs to be done both on the fund and on broader efforts to strengthen global health and finance architecture.

The Financial Crimes Enforcement Network (FinCEN) published a Small Entity Compliance Guide to assist the small business community in complying with the beneficial ownership information (BOI) reporting rule. Starting in 2024, many entities created in or registered to do business in the United States will be required to report to FinCEN information about their beneficial owners—the individuals who ultimately own or control a company. FinCEN is also issuing revised and new FAQs about the BOI reporting requirements that incorporate content from the Guide.

The Securities and Exchange Commission (SEC) announced the release of the agency’s Diversity, Equity, Inclusion, and Accessibility (DEIA) Strategic Plan for fiscal years 2023-2026 which builds on and advances the SEC’s DEIA commitment and previous successes.

SEC Chair Gary Gensler delivered remarks at the meeting of the SEC Small Business Capital Formation Advisory Committee. Chair Gensler discussed the importance of capital markets facilitating capital formation for businesses and the SEC’s role in helping small businesses navigate the capital raising process.

SEC Commissioner Hester Peirce also delivered remarks at the meeting. Commissioner Peirce discussed smaller venture capital funds and emerging fund managers.

The Public Company Accounting Oversight Board (PCAOB) issued a proposal for public comment to amend PCAOB Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations. The rule, originally enacted in 2005, governs the liability of associated persons who contribute to registered public accounting firms’ violations of the laws, rules, and standards that the PCAOB enforces. The deadline for public comment on the proposal is November 3, 2023.

Senators are circulating a revised version of the cannabis banking-related SAFE Banking Act (now the Secure and Fair Enforcement Regulation Banking Act (SAFER) Banking Act)) which includes additional provisions aimed at ensuring that banking regulators can still deter illegal activity. The changes made include details on exactly when and how the bank account of a business can be terminated, and a new section outlining the duty of federal banking agencies — no later than two years after the bill’s enactment — to create new rules and guidance to “increase access to deposit accounts for businesses and consumers.” The legislation is slated for a markup before the Senate Committee on Banking, Housing, and Urban Affairs on September 27. 

The HFSC held a hearing on the implications of a central bank digital currency (CBDC). The hearing covered topics including privacy, cybersecurity, market liquidity, stablecoins, and the international implications of a new CBDC.

The House Committee on Small Business met for a full committee markup. H.R. 5424, H.R. 5425, H.R. 5265, H.R. 5426, and H.R. 5427 were all favorably reported to the House floor by unanimous roll call votes.

The HFSC Subcommittee on Financial Institutions and Monetary Policy held a hearing discussing the Basel III proposed rules and their potential impact on American financial institutions. Broadly, the hearing covered the economic impacts of the proposal and the alleged lack of transparency from the Federal Reserve while drafting the proposal.

The Senate Banking Committee Subcommittee on Housing, Transportation, and Community Development held a hearing discussing housing supply and innovation. Broadly, the hearing focused on federal, state, and local policies that could help contribute to housing development in both rural and urban communities.

New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris issued an update on an ongoing initiative to strengthen DFS oversight of virtual currencies. Superintendent Harris published proposed guidance adopting enhanced criteria for coin-listing and delisting procedures, as well as updated guidance on the framework for designating coins or tokens to the DFS greenlist.

The California legislature passed a bill that would establish a licensing and regulatory framework administered by the Department of Financial Protection and Innovation (DFPI) for digital financial asset business activity. California Governor Gavin Newsom has until October 14, 2023, to pass or veto the bill.  

The Idaho Department of Finance (IDOF) announced the creation of its Financial Innovation Lab (FIL) and Securities Bureau Emerging Technology Advisory Committee (ETAC) composed of financial and technology experts who will assist the IDOF to better understand and address technological innovations in the financial sector. 

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra delivered remarks at the Better Markets Conference on the 15th Anniversary of the Collapse of Lehman Brothers and the Onset of the Global Financial Crisis. Director Chopra discussed lessons learned from the 2008 financial crisis and the CFPB’s upcoming Supreme Court case and urged regulators to review whether this is an appropriate tool to address the risks posed by uninsured balances on popular nonbank payment apps.

Representative Stephen Lynch (D-MA), Ranking Member of the Financial Service Committee’s Subcommittee on Digital Assets, Financial Technology, and Inclusion, reintroduced H.R. 5410, the Electronic Currency and Secure Hardware (ECASH) Act, which would develop an electronic version of the U.S. Dollar for use by the American public. In addition, Rep. Lynch announced the creation of the Digital Dollar Caucus to keep Congress updated on critical issues related to the digital dollar including its development, role in promoting financial inclusion, privacy and data security, fraud prevention, payment system efficiency, and other factors.

The Biden Administration’s release of inaccessible Iranian funds in exchange for the release of Americans has placed that sanctions regime at the center of both congressional and public attention. Russia sanctions continued to be implemented, with a large designation package and likely future measures to focus on art and child abduction. Read more in our latest Sanctions Watch here

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