Banking and Consumer Regulatory Digest - May 2024

Davis Wright Tremaine LLP

Davis Wright Tremaine LLP

Regulatory Developments

  • Bank for International Settlements. Credit risk management. On April 30, 2024, Bank of International Settlements issued updated guidance on counterparty credit risk management. The fresh guidance reaffirms the need for ongoing due diligence and the development of a comprehensive risk mitigation strategy to control counterparty credit risk.
  • Department of Housing and Urban Development. Fair Housing Act. On May 2, 2024, HUD released guidance on the role of artificial intelligence in tenant screening and online housing advertising. The growing use of AI in both areas poses new Fair Housing Act concerns for housing providers, tenant screening companies, and advertisers, HUD said.
  • Federal Reserve Board. Payments. On May 3, 2024, FRB proposed adding weekends and holidays to the operating days of Fedwire and the National Settlement Service. The additional service days would support the safety and efficiency of the U.S. payment system, according to the agency. FRB will accept comments on the proposal until July 8, 2024.

Rulemaking Updates

  • Federal Housing Finance Authority. Fair lending. On April 28, 2024, FHFA announced its final fair lending rule, which codifies the agency's oversight requirements related to Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System. The rule adds new fair lending and fair housing requirements, with the goal of promoting sustainable housing opportunities for underserved communities.
  • Federal Deposit Insurance Corp. Incentive-based compensation. On May 3, 2024, FDIC, OCC, and FHFA issued a proposal that would set limits on how large bank executives' bonuses are established. The proposal revives a 2016 plan on incentive compensation designed to reduce excessive risk-taking by bank executives, including a prohibition on incentive‑based compensation arrangements that do not include risk adjustment of awards, deferral of payments, and forfeiture and clawback provisions. Any rule regarding incentive compensation would have to be co-signed by a handful of agencies, including the Federal Reserve, but the central bank declined to add its name to the recent proposal.

Other News of Note

  • House Financial Services Committee. Bank merger review. On May 1, 2024, members of the House Financial Services Committee told senior officials from major banking regulators that they should set clearer timelines for deciding whether to approve bank mergers. The current process too often leaves customers, shareholders, and employees of a target bank "on the hook indefinitely," said Rep. Andy Barr of Kentucky. Officials from the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency rejected the idea that bank deals consistently face drawn-out periods of regulatory uncertainty.
  • Consumer Financial Protection Bureau. Credit card rewards. On May 9, 2024, CFPB Director Rohit Chopra said his agency and the Department of Transportation began studying credit card rewards programs within the airline industry. The CFPB's objectives are protecting points against currency devaluation; ensuring that companies follow through on promised rewards; examining exclusive deals between financial institutions and airlines; and promoting competition on interest rates.

Orla McCaffrey is a regulatory analyst with Davis Wright Tremaine LLP.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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