Regulatory Bulletin: August 2017

 
 

Regulatory Bulletin: August 2017

  • Are You Aware of Proposed Rules for Real Estate Appraisals, Additional Mortgage Disclosure (Regulation C) and Federal Mortgage Disclosure (Regulation Z)?  
  • Does Your Institution Engage in Derivative Contracts?  If So, Need to Know About Capital Treatment Changes
  • Did You Know that the OCC Updated its Bank Accounting Series to Assist Your CFO and Chief Accountant?
  • Are You Continually Vigilant in Knowing Your Employee as Well as Your Customer?
  • Contact Our President or Marketing Director for More Information

 

Are You Aware of Proposed Rules for Real Estate Appraisals, Additional Mortgage Disclosure (Regulation C) and Federal Mortgage Disclosure (Regulation Z)?

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• Proposed Increase of Appraisal Threshold for Commercial Real Estate
The OCC, Board, and FDIC (collectively, the agencies) are inviting comment on a proposed rule to amend the agencies’ regulations requiring appraisals of real estate for certain transactions.  The proposal would increase the threshold level at or below which appraisals would not be required for commercial real estate transactions from $250,000 to $400,000.  This proposed change to the appraisal threshold reflects comments the agencies received through the regulatory review process.  For more information, see
https://www.occ.gov/news-issuances/news-releases/2017/nr-ia-2017-81a.pdf

• Home Mortgage Disclosure (Regulation C) Temporary Increase in Institutional and
Transactional Coverage Thresholds for Open-End Lines of Credit
The Bureau of Consumer Financial Protection proposes amendments to Regulation C that would, for a period of two years, increase the threshold for collecting and reporting data with respect to open-end lines of credit so that financial institutions originating fewer than 500 open-end lines of credit in either of the preceding two years would not be required to begin collecting such data until January 1, 2020.   For more information, see http://files.consumerfinance.gov/f/documents/201707_cfpb_NPRM_HMDA-temporary-threshold-increases.pdf

• Amendments to Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z)
The Bureau of Consumer Financial Protection is proposing to amend Federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act that are implemented in Regulation Z.  The proposed amendments relate to when a creditor may compare charges paid by or imposed on the consumer to amounts disclosed on a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith.  Specifically, the proposed amendments would permit creditors to do so regardless of when the Closing Disclosure is provided relative to consummation. For more information see http://files.consumerfinance.gov/f/documents/201707_cfpb_Proposed-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf

FRC can help you navigate any issues that may affect your institution.

 

Does Your Institution Engage in Derivative Contracts? If So, Need to Know About Capital Treatment Changes

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Regulatory Capital Treatment of Certain Centrally-Cleared Derivative Contracts Under the FDIC’s Capital Rule
(see FIL 33-2017) https://www.fdic.gov/news/news/financial/2017/fil17033.pdf
The FDIC is issuing supervisory guidance on the regulatory capital treatment of certain centrally-cleared, settled-to-market derivative contracts.  For more details, see https://www.fdic.gov/news/news/financial/2017/fil17033a.pdf

Certain central counterparties have revised their rulebooks such that variation margin is considered a settlement payment and not collateral. If an FDIC-supervised institution determines the transfer of variation margin on a centrally-cleared, settled-to-market contract settles any outstanding exposure on the contract and resets the fair value of the contract to zero, the contract’s remaining maturity is the time until the next exchange of variation margin. This guidance may affect a derivative contract’s calculation of potential future exposure, which uses a conversion factor based, in part, on the contract’s remaining maturity.

FRC can help large and small banks meet compliance objectives so please contact us for any assistance that may be needed.

 

Did You Know that the OCC Updated its Bank Accounting Advisory Series to Assist Your CFO and Chief Accountant?

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The Office of the Comptroller of the Currency (OCC) today released an update to the Bank Accounting Advisory Series (BAAS).  The BAAS covers a variety of topics and promotes consistent application of accounting standards among national banks and federal savings associations.  This edition of the BAAS reflects accounting standards issued by the Financial Accounting Standards Board on topics such as the recognition and measurement of financial instruments, leases, and revenue recognition. Additionally, this edition includes recent answers to frequently asked questions from the industry and examiners.


The BAAS does not represent official rules or regulations of the OCC. Rather, it represents the OCC’s Office of the Chief Accountant’s interpretations of generally accepted accounting principles and regulatory guidance based on the facts and circumstances presented. National banks and federal savings associations that deviate from these stated interpretations may be required to provide justification to the OCC.  The OCC updates the BAAS annually.

The Office of the Chief Accountant’s August 2017 edition of the Bank Accounting Advisory Series (BAAS expresses the office’s views on accounting topics relevant to national banks and federal savings associations (collectively, banks or institutions, unless otherwise specified).  For details, see the following:

https://www.occ.gov/publications/publications-by-type/other-publications-reports/baas.pdf

 

Are You Continually Vigilant in Knowing Your Employee as Well as Your Customer?

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Banks should continually take actions to know their employees and customers.  A recent example of failure to do so involved a banker (Kim) who plead guilty to conspiracy to commit bank fraud, which also related to his business relationship with a physician client.

In resolving the charge, Kim admitted that he conspired with his client (Dr. Aslam), to obtain loans from Citibank and WSFS Bank under false pretenses. In particular, Kim admitted that he and Dr. Aslam agreed to submit loan requests in the names of third parties when they knew that the loan proceeds would be controlled by Dr. Aslam. The loans at issue consisted of a $1.76 million loan funded by Citibank (and guaranteed by the Small Business Administration) in July 2012, and a $2.183 million loan funded by WSFS Bank in August 2013. In addition, Kim failed to disclose to Citibank and WSFS Bank the existence of an extensive business relationship between himself and Dr. Aslam, as well as his receipt of a $60,000 loan and a BMW from Dr. Aslam, during the period in which he acted as Dr. Aslam’s loan officer. As part of his guilty plea, Kim agreed to forfeit the BMW and $60,000 in cash.

Acting U.S. Attorney Weiss said, “Tae Kim abused his position as a loan officer by defrauding three financial institutions and the Small Business Administration for the benefit of a key client. He further leveraged his position to profit personally from an extensive business relationship with that client, all of which he concealed from his employers. “

For further details, see https://www.justice.gov/usao-de/pr/pennsylvania-banker-pleads-guilty-conspiracy-commit-bank-fraud-admits-business

Failure for a bank to know its employee as well as the customer can lead to actual damages and loss of reputation.  In many instances there are clear warning signs of an improper relationship which need to be recognized and acted upon.  FRC can provide additional training to increase the bank’s awareness of such early warning signs and methods to reduce these risks.

Contact Our President or Marketing Director for More Information

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• Mr. Kevin Kane, President, CEO and Founder of FRC, who has substantial legal, compliance and regulatory experience – (212) 849-6828 ktk@frcconsult.com
• Ms. Shelly Berman, Marketing Director, who has substantial experience in assisting financial institutions obtain the products and services they need to meet their goals – (301) 262-6987 sberman@frcconsult.com

 

For more information visit our website at frcconsult.com

 

 

 

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This entry was posted on Monday, August 21st, 2017 at 8:44 am and is filed under Regulatory Bulletins, Regulatory Insights. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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