Regulatory News

Supervision, Regulation, and Credit: Regulatory News

Updated 5/15/2020

Regulatory News makes current information from the Supervision, Regulation, and Credit Division easily accessible.

  • Recent News

    Supervision and Regulation Report Released
    On May 8, 2020, the Board of Governors released its semiannual Supervision and Regulation Report. The report discusses banking system conditions as well as regulatory and supervisory developments, including actions taken to maintain the supply of credit to both businesses and households and cushion the impact of the COVID-19 crisis.

    Spontaneity and Order: Transparency, Accountability, and Fairness in Bank Supervision
    February 11, 2020
    Vice Chair for Supervision Randal K. Quarles

    Empowering Community Banks
    February 10, 2020
    Governor Michelle W. Bowman
    At the Conference for Community Bankers sponsored by The American Bankers Association, Orlando, Florida

    How to Keep Community Banks Thriving
    American Banker, January 15, 2020, 10:02 a.m. EST
    Raphael Bostic and Michael Johnson

  • COVID-19

    Rule Announced Modifying Coverage Ratio for Some Banks
    On May 5, 2020, the federal bank regulatory agencies announced an interim final rule that modifies the agencies' liquidity coverage ratio rule to support banking organizations' efforts to support the flow of credit to households and businesses by participating in the Federal Reserve's Money Market Mutual Fund Liquidity Facility and the Paycheck Protection Program Liquidity Facility.

    Rule Amending Monthly Transfer Limit Announced
    On April 24, 2020, the Board adopted an interim final rule that allows depository institutions to immediately to suspend enforcement of the limit of six transfers and allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent.

    Fed Makes Rule Change to Bolster Program
    On April 17, 2020, the Board modified the provisions of Regulation O to temporarily permit certain bank directors and shareholders to apply for Paycheck Protection Program (PPP) loans for their small businesses so that banks can make PPP loans to a broader range of small businesses within their communities.

    Some Real Estate Valuations, Appraisals Deferred
    On April 14, 2020, the federal banking agencies issued an interim final rule allowing institutions to temporarily defer, for up to 120 days, real estate–related appraisals and evaluations required under the agencies' interagency appraisal regulations. This interim rule excludes transactions involving acquisition, development, and construction of real estate. These temporary provisions will expire on December 31, 2020, unless the banking agencies extend them.

    Rule to Encourage Lending Announced
    On April 9, 2020, the federal bank regulators issued an interim final rule modifying the agencies' capital rules to neutralize the regulatory capital effects of participating in the Federal Reserve's Paycheck Protection Program (PPP) facility because there is no credit or market risk in associated with the PPP loans pledged to the facility. Consistent with the agencies' current capital rules and the Coronavirus Aid, Relief, and Economic Security Act requirements, the interim final rule also clarifies that a zero percent risk weight applies to loans covered by the PPP for capital purposes. The rule is effective immediately.

    Statement Encourages Banks to Work with Virus-Affected Borrowers
    On April 7, 2020, the federal financial institution regulatory agencies, in consultation with state financial regulators, issued a revised interagency statement encouraging financial institutions to work with borrowers affected by COVID-19. The statement clarifies the interaction between a previous statement, issued on March 22, 2020, and the temporary relief provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was signed on March 27, 2020. The statement also provides supervisory interpretations on past due and nonaccrual regulatory reporting of loan modification programs and regulatory capital, as well as the agencies' views on consumer protection considerations.

    Community Bank Leverage Ratio Changes Announced
    On April 6, 2020, as required by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the federal bank regulatory agencies issued two interim final rules to temporarily lower the community bank leverage ratio to 8 percent, beginning in the second quarter 2020. The rules also provide a transition period for the gradual reestablishment of the community bank leverage ratio requirement to 9 percent and provides a two-quarter grace period for a qualifying banking organizations whose leverage ratio falls no more than 1 percent below the required ratio.

    Mortgage Companies Encouraged to Work with Virus-Affected Consumers
    On April 3, 2020, the federal financial institution regulatory agencies and the state financial regulators issued a statement providing regulatory flexibility regarding certain communications required by the mortgage servicing rules. This action was taken to facilitate mortgage servicers' ability to place consumers in short-term payment forbearance programs such as the one established by the Coronavirus Aid, Relief, and Economic Security Act.

    Leverage Ratio Rule Temporarily Changed
    On April 1, 2020, the Federal Reserve Board announced a temporary change to the supplementary leverage ratio rule, which allows firms to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the ratio for holding companies. This change better enables firms to support the economy and is effective until March 31, 2021.

    Federal Reserve Delays Framework's Effective Date
    On March 31, 2020, the Federal Reserve Board announced that the effective date for its revised control framework will be delayed by six months, moving the date to September 30 from the original date of April 1. The change will reduce operational burden and allow institutions to focus on current economic conditions.

    Actions Supporting Lending to Households, Businesses Announced
    On March 27, 2020, the federal bank regulatory agencies announced two actions to support the U.S. economy and allow banking organizations to continue lending to households and businesses. Regulators will:

    • Allow early adoption, for the reporting period ending March 31, of a new methodology on how certain banking organizations are required to measure counterparty credit risk derivatives contracts. Previously firms could adopt for the period beginning April 1, 2020; and
    • Provide an optional extension of the regulatory capital transition for the new credit loss accounting standard to mitigate the effects of the current expected credit loss, or CECL, accounting standard in their regulatory capital. The changes will be effective immediately.

    Federal Reserve Offers Regulatory Relief to Virus-Affected Banks
    On March 26, 2020, the Federal Reserve announced that it will not take action against a financial institution with $5 billion or less in total assets for submitting its March 31, 2020, Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) or Financial Statements of U.S. Nonbank Subsidiaries of U.S. Bank Holding Companies (FR Y-11) within 30 days after the official filing deadline. Institutions were encouraged to contact their Reserve Bank in advance of the official filing deadline if they anticipated a delayed submission. On March 25, similar reporting relief was provided to financial institutions affected by COVID-19 for their March 31, 2020, call reports.

    Regulators Encourage Lending to Consumers, Small Firms
    On March 26, 2020, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency issued a statement recognizing the role that responsible small-dollar loans can play in meeting customers' credit needs during periods of economic stress or disaster recoveries. Such loans should be offered in a manner that provides fair treatment of consumers, complies with applicable laws and regulations, and is consistent with safe and sound practices.

    Fed Discusses Adjustments to Its Supervisory Approach
    On March 24, 2020, the Federal Reserve Board provided additional information to financial institutions on how its supervisory approach is adjusting in light of the coronavirus. In response to the crisis, the Fed will:

    • focus on monitoring and outreach to help financial institutions of all sizes understand the challenges and risks of the current environment;
    • temporarily reduce its examination activities, with the greatest reduction in activities occurring at the smallest banks;
    • use information institutions submitted for the Comprehensive Capital Analysis and Review to monitor how firms are managing their capital in the current environment;
    • grant additional time for resolving noncritical existing supervisory findings; and
    • work with financial institutions to understand the specific issues they are facing in their markets.

    Federal Reserve Announces Technical Rule Change
    On March 23, 2020, the Board announced an interim final rule that will phase in gradually, as intended, the automatic restrictions associated with a firm's "total loss absorbing capacity," or TLAC, buffer requirements, if the levels decline. TLAC is an additional cushion of capital and long-term debt that could be used to recapitalize a bank if it is in distress. The change will facilitate the use of firms' buffers to promote lending activity to households and businesses.

    Banks Encouraged to Work with Virus-Affected Borrowers
    On March 22, 2020, the federal financial institution regulatory agencies and the state banking regulators issued an interagency statement encouraging financial institutions to work constructively with borrowers affected by COVID-19 and providing additional information regarding loan modifications. The statement noted that they will not criticize institutions for doing so in a safe and sound manner and will not direct supervised institutions to automatically categorize loan modifications as troubled debt restructurings (TDRs). Regardless of whether modifications are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify terms on existing loans for affected customers.

    Regulators Issue Joint Statement on Virus-Related Activities
    On March 19, 2020, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint statement on Community Reinvestment Act (CRA) consideration for activities in response to COVID-19, stating that for CRA purposes, the agencies will favorably consider retail banking and lending activities that meet the needs of affected low- and moderate-income individuals, small businesses, and small farms, consistent with safe and sound banking practices and applicable laws, including consumer protection laws. This statement noted such activities could include offering short-term, unsecured credit products for creditworthy borrowers. According to the regulators, the expansion of CRA-eligible activities will be in effect through the six-month period after the United States lifts the national emergency declaration.

    New Actions Allow Banks to Support Lending to Households, Businesses
    On March 17, 2020, the federal bank regulatory agencies announced two actions to support the U.S. economy and allow banks to continue lending to households and businesses. One action was a statement encouraging banks to use their resources to support households and businesses. The other action was a technical change to phase in, as intended, the automatic distribution restrictions gradually if a firm's capital levels decline.

    Fed Encourages Banks to Use Discount Window
    On March 16, 2020, the federal bank regulatory agencies released a statement encouraging banks to use the Federal Reserve's discount window so that they can continue supporting households and businesses. The discount window provides short-term loans to banks and plays an important role in supporting the liquidity and stability of the banking system. By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers.

    Agencies Acknowledge Coronavirus Impact
    On March 9, 2020, federal financial institution and state regulators encouraged financial institutions to meet the financial needs of customers and members affected by the coronavirus. Prudent efforts that are consistent with safe and sound lending practices should not be subject to examiner criticism. In cases where operational challenges persist, regulators will expedite, as appropriate, any request to provide more convenient availability of services in affected communities. The regulators also will work with affected financial institutions in scheduling examinations or inspections to minimize disruption and burden.

  • Final Rules

    Federal Reserve Simplifies Capital Rules for Large Banks
    On March 4, 2020, the Federal Reserve Board approved a rule to simplify its capital rules for large banks, preserving the strong capital requirements already in place. The stress capital buffer integrates the Board's stress test results with its nonstress capital requirements. By combining the Board's stress tests—which project the capital needs of each firm under adverse economic conditions—with the Board's nonstress capital requirements, large banks will now be subject to a single, forward-looking, and risk-sensitive capital framework. The simplification would result in banks needing to meet eight capital requirements, instead of the current 13.

    Rule Finalized to Simplify, Increase Transparency for Determining Control
    On January 30, 2020, the Federal Reserve Board finalized a rule to simplify and increase the transparency of the Board's rules for determining control of a banking organization. If a company has control over a banking organization, the company generally becomes subject to the Board's rules and regulations. The final rule establishes a comprehensive and public framework to determine when a company controls a bank or a bank controls a company. On March 31, 2020, the Federal Reserve Board announced that the effective date for its revised control framework will be delayed by six months, moving the date to September 30 from the original date of April 1. The change will reduce operational burden and allow institutions to focus on current economic conditions.

    Federal Reserve Announces Technical Rule Change
    On March 23, 2020, the Board announced an interim final rule that will phase in gradually, as intended, the automatic restrictions associated with a firm's "total loss absorbing capacity," or TLAC, buffer requirements, if the levels decline. TLAC is an additional cushion of capital and long-term debt that could be used to recapitalize a bank if it is in distress. The change will facilitate the use of firms' buffers to promote lending activity to households and businesses.

    Agencies Finalize Regulatory Capital Treatment for High Volatility Commercial Real Estate (HVCRE) Exposures
    On November 19, 2019, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency adopted a final rule to revise the definition of"high volatility commercial real estate (HVCRE) exposure" in the regulatory capital rule.

    Community Bank Leverage Ratio Finalized; Early Adoption of Prior Simplifications Permitted
    On October 29, 2019, the federal bank regulatory agencies finalized a rule allowing community banks to adopt a simple leverage ratio to measure capital adequacy. 

    Rules Finalized to Tailor Regulations for Large Domestic and Foreign Banks
    On October 10, 2019, the Federal Reserve Board finalized proposals to tailor regulations for domestic and foreign banks with $100 billion or more in total assets.

    Agencies Update Management Interlock Rules for Community Banks with Less Than $10 Billion in Total Assets
    On October 2, 2019, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency finalized updates to the rules restricting the ability of a director or other management official to serve at more than one depository institution or depository holding company.

    Final Rule Increases Residential Appraisal Threshold Requirement
    On September 27, 2019, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued a final rule to increase the threshold for appraisal requirements on residential real estate transactions from $250,000 to $400,000.

  • Guidance

    Regulators Approve Statement on Credit Loss Allowances, Finalize Guidance on Risk Reviews
    On May 8, 2020, four federal financial regulatory agencies released a policy statement on allowances for credit losses. The statement will promote consistency in the interpretation and application of the Financial Accounting Standards Board's credit losses accounting standard, which introduces the current expected credit losses (CECL) methodology. The agencies also finalized interagency guidance on credit risk review systems. The guidance presents principles for establishing a system of independent, ongoing credit risk review in accordance with safety and soundness standards.

    The Use of Alternative Data in Consumer Credit Underwriting
    On December 3, the Federal Reserve, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration released a statement on the use of alternative data in credit underwriting.

    Federal Agencies and State Bank Supervisors Clarify Requirements for Providing Financial Services to Hemp-Related Businesses
    On December 3, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Financial Crimes Enforcement Network (FinCen), and the Conference of State Bank Supervisors issued guidance clarifying the legal status of hemp growth and production and the implications for Bank Secrecy Act compliance.

    Interagency Statement on Risk-Focused Approach to Bank Secrecy and Anti-Money Laundering Supervision
    On July 22, 2019, an interagency working group, including the Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the U.S. Treasury’s Financial Crimes Enforcement Network released a statement on their risk-focused approach to Bank Secrecy Act (BSA)/anti-money laundering (AML) supervision.

    Information Provided on Risk-Focused Supervision Program
    The Board of Governors issued Supervision and Regulation letter SR 19-9, about the Bank Exams Tailored to Risk (BETR) program, on June 3. The letter describes a key aspect of the Federal Reserve's risk-focused supervision program for most community and regional state member banks (SMBs) with less than $100 billion in assets.

    Interagency Statement on the Role of Supervisory Guidance in Examination
    On September 12, 2018, the Agencies issued a statement reaffirming the role of supervisory guidance in examinations. This information was distributed in SR 18-5, which explains the differences between supervisory guidance and laws and regulations.

  • Requests for Comment

    Agencies Request Comment on Use of CAMELS Ratings
    Regulators are requesting comment on their use of the Uniform Financial Institutions Rating System, also known as the CAMELS system.

  • CECL

    The Federal Reserve has received considerable feedback from state member banks on the implementation of the Financial Accounting Standard Board's Current Expected Credit Loss (CECL) model. Among the comments frequently received from supervised institutions was a request for essentially a "one stop shop" for CECL resources. The CECL Resource Center was developed to meet this need.

    The center, which is currently being maintained by the Federal Reserve Bank of St. Louis, contains many useful resources, including an Excel workbook containing examples of three methodologies commonly used by community banks:

    • Snapshot/Open Pool
    • Remaining Life/Weighted Average Remaining Maturity (WARM)
    • Vintage

    The site will be updated with new resources as they become available.

  • Fintech

    Fintech (financial technology) refers to a wide range of rapidly developing digital products and processes that are changing the way financial institutions and customers conduct business and manage risks.

    The Federal Reserve Board is committed to supporting responsible innovation, both by the firms it directly regulates, and in the financial markets. The Board recently launched an Innovation website to serve as a resource for stakeholders interested in engaging with the System on innovation-related matters. Supervisory information is available, along with research, events, resources, and other news.

    The Federal Reserve is also pursuing many avenues to keep you updated on rapidly developing digital innovations and has recently announced Fintech Office Hours, a program to engage with fintech companies for mutually beneficial discussions. The inaugural program was held at the Atlanta Fed on February 26. Attendance is open to all supervised financial institutions, including holding companies, as well as nonbank fintech firms. Other Reserve Banks will offer additional sessions.

    In addition, the Atlanta Fed hosts the Center for Financial Innovation and Stability to improve knowledge of financial innovation and financial stability as well as the connection between the two, especially as it pertains to Federal Reserve policymaking.

  • LIBOR

    The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans. LIBOR will no longer be used at the end of 2021. To avoid potential operational and legal issues and protect customers, financial institutions should be making preparations to transition to alternative benchmark rates.

    The Federal Reserve Board, in partnership with the New York Fed, convened the Alternative Reference Rates Committee (ARRC) in 2014. The committee includes private sector stakeholders. ARRC has undertaken a significant effort to identify an alternative reference rate, the Secured Overnight Funding Rate (SOFR) and map a path for a smooth transition. A Users' Guide to SOFR can be found on the site as well, along with a Practical Implementation Checklist for SOFR Adoption.

    Additional information on the Federal Reserve's perspective on the transition from LIBOR may be found in the "ViewPoint" article, LIBOR: Ready or Not? and in recent remarks by Federal Reserve officials:

    The Next Stage in the LIBOR Transition (via prerecorded video)
    June 3, 2019
    Vice Chair for Supervision Randal K. Quarles
    At the Alternative Reference Rates Committee Roundtable, cohosted by the Alternative Reference Rates Committee and the New York University Stern School of Business and its Salomon Center for the Study of Financial Institutions, New York

    Progress on the Transition to Risk-Free Rates
    April 10, 2019
    Vice Chair for Supervision Randal K. Quarles
    At the Financial Stability Board Roundtable on Reforming Major Interest Rate Benchmarks, Washington, D.C.

  • Tools

    HOAM (Home Ownership Affordability Monitor) Index
    To help business economists and analysts track the relative changes in home ownership affordability at a higher frequency and more granular level of geography, the Atlanta Fed developed an interactive home affordability tool which measures the ability of a median-income household to absorb the estimated annual costs associated with owning a median-priced home.