Nutter Bank Report, December 2018

Nutter McClennen & Fish LLP
Contact

Headlines 

  1. FDIC Approves 3-Year Phase-In for Adverse Effects on Capital from CECL
  2. FDIC Launches Initiative to Encourage De Novo Bank Formations
  3. Federal Agencies Issue Joint Guidance on Innovative BSA/AML Solutions
  4. FDIC Adopts Final Rule to Implement Expanded Exam Cycle for Smaller Banks
  5. Other Developments: Brokered Deposits and Volcker Rule

1. FDIC Approves 3-Year Phase-In for Adverse Effects on Capital from CECL

The FDIC has approved a final rule that will provide banks with the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new current expected credit losses (“CECL”) methodology accounting standard. The final rule approved by the FDIC on December 18 is still being considered by the OCC and the Federal Reserve, and will not become effective until those agencies have approved it. According to the FDIC, the three-year phase-in is expected to help banks adjust for any higher-than-anticipated increases in allowances due to unexpected economic conditions at the time that CECL becomes mandatory. The FDIC explained that CECL requires banks to consider current and future expected economic conditions to estimate allowances, and banks will not be able to anticipate these conditions until closer to the CECL effective date. The final rule will also revise the federal banking agencies’ regulatory capital rule, stress testing rules, and regulatory disclosure requirements to reflect CECL, and make conforming amendments to other regulations that reference credit loss allowances. Click here for a copy of the final rule.

Nutter Notes: The Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses, Topic 326, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduced CECL to U.S. GAAP, in 2016. The effective date of ASU 2016-13, and therefore the mandatory use of the CECL methodology, varies for different banking organizations. For banking organizations that are U.S. Securities and Exchange Commission (“SEC”) filers, CECL will be mandatory for the first fiscal year beginning after December 15, 2019, including interim periods within that fiscal year. For banking organizations that are public business entities but not SEC filers, CECL will become mandatory for the first fiscal year beginning after December 15, 2020. For all other banking organizations, CECL will become mandatory for the first fiscal year beginning after December 15, 2021. Under the final rule, a bank that experiences a reduction in retained earnings due to CECL adoption as of the beginning of the fiscal year in which the bank must adopt CECL may elect to phase in the regulatory capital impact of adopting CECL over a three-year transition period. The bank will be required to begin applying the CECL transition provision as of the applicable CECL effective date. The rule requires that the bank indicate its election to use the three-year phase in its Call Report for the quarter in which the bank first reports its credit loss allowances as measured under CECL.

2. FDIC Launches Initiative to Encourage De Novo Bank Formations

The FDIC has announced a number of new measures and resources related to the deposit insurance application process that are meant to encourage the formation of new, or de novo, banks. The FDIC’s announcement on December 6, 2018 includes a new voluntary process that gives organizers of new banks the option to request feedback from the FDIC on a draft deposit insurance proposal before filing a formal application. In connection with the initiative, the FDIC has requested public comments on all aspects of the deposit insurance application process, and has updated two publications related to the deposit insurance application process: Applying for Deposit Insurance – A Handbook for Organizers of De Novo Institutions and the Deposit Insurance Applications Procedures Manual. The FDIC also has updated and is re-publishing its timeframe guidelines for deposit insurance and other applications, and has created a new, designated email address for bankers, applicants, and other interested parties to submit questions about specific applications or the application process in general. Click here to access the documents related to the FDIC’s de novo bank initiative.

Nutter Notes: According to the FDIC, the new draft review process for deposit insurance applications is intended to provide the organizers and the FDIC staff the opportunity to better understand and consider possible solutions to challenges that a de novo bank proposal may pose before a formal application is filed. The process may be initiated by submitting a written request to the applicable FDIC regional office, including a draft of the deposit insurance application. The FDIC expects to provide initial feedback to the organizers within 30 days, and will provide an overall review within 60 days. The FDIC’s request for comments on the deposit insurance application process includes a request for feedback on ways in which the FDIC could or should support the continuing evolution of emerging technology and fintech companies. The FDIC is also requesting information about aspects of the deposit insurance application process that may discourage potential applications, suggestions for changes to the application process for traditional community bank proposals, and suggestions for improving the effectiveness, efficiency, or transparency of the application process generally. Public comments are due by February 11, 2019.

3. Federal Agencies Issue Joint Guidance on Innovative BSA/AML Solutions

The federal banking agencies, along with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) and the NCUA, have jointly issued a statement to encourage banks to develop innovative approaches to meet their Bank Secrecy Act/anti-money laundering (“BSA/AML”) compliance obligations. The types of innovative BSA/AML tools discussed in the December 3 joint statement include building or enhancing innovative internal financial intelligence units within a bank that are devoted to identifying complex and strategic illicit finance, artificial intelligence-based transaction monitoring systems, and digital identity technologies. The joint statement clarifies that examiners will not penalize or criticize banks that maintain effective BSA/AML compliance programs commensurate with their risk profiles even if they do not implement the types of innovative approaches described in the statement. According to the joint statement, the agencies will not advocate a particular method or technology for banks to meet their BSA/AML obligations. Click here for a copy of the joint statement.

Nutter Notes: The joint statement also invites bank management to discuss pilot programs for innovative BSA/AML approaches with their regulators. According to the statement, the agencies believe that engaging with regulators early in the process of making changes to a BSA/AML program can promote a better understanding of the new approaches by regulators, and provide feedback to the bank about the regulators’ compliance and risk management expectations. As part of the agencies’ initiative, the joint statement announced that FinCEN will consider requests for exceptions to the requirements of its customer identification program and anti-money laundering regulations to support the testing and use of new technologies and methods, as long as banks maintain the overall effectiveness of their BSA/AML compliance programs. The joint statement also announced that FinCEN plans to launch an innovation initiative to “foster a better understanding of the opportunities and challenges of BSA/AML-related innovation in the financial services sector.” According to the statement, FinCEN and the other agencies have established, or will establish, projects or offices dedicated to supporting the implementation of responsible innovation and new technologies.

4. FDIC Adopts Final Rule to Implement Expanded Exam Cycle for Smaller Banks

The FDIC has adopted a final rule to permit the on-site examination of qualifying banks with under $3 billion in total assets at least once every 18 months, rather than once every 12 months. The final rule adopted on December 18 will implement section 210 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”), which amended section 10(d) of the Federal Deposit Insurance Act (“FDI Act”) to permit the federal banking agencies to examine qualifying banks (generally, those that are well capitalized and well managed) with under $3 billion in total assets not less than once during each 18-month period. The Federal Reserve and OCC are still considering the final rule, and it will not become effective until those agencies have approved it. However, the federal banking agencies jointly issued interim final rules to permit an 18-month examination cycle for qualifying banks with under $3 billion in total assets, which is currently effective. Click here for a copy of the final rule.

Nutter Notes: To qualify for an 18-month on-site examination cycle, a bank must have total assets of less than $3 billion, be well capitalized (within the meaning of the applicable federal banking agency’s prompt corrective action rules), be well managed as of its most recent examination, and have a composite condition of “outstanding” or, in the case of a bank with total assets of not more than $200 million, “outstanding” or “good.” In addition, a bank will not qualify for an extended 18-month examination cycle if it is subject to a formal enforcement proceeding or order by the FDIC or its primary federal bank regulator, or if it has undergone a change in control during the previous 12-month period in which a full-scope, on-site examination otherwise would have been required. Prior to enactment of section 210 of the EGRRCPA, only qualifying banks with less than $1 billion in total assets were eligible for an 18-month examination cycle.

5. Other Developments: Brokered Deposits and Volcker Rule

  • FDIC Adopts Final Rule on Exception for Reciprocal Brokered Deposits

The FDIC adopted a final rule on December 18 that amends its regulations that implement brokered deposits and interest rate restrictions to create an exception for a capped amount of reciprocal brokered deposits from treatment as brokered deposits. The final rule implements section 202 of the EGRRCPA, which amended section 29 of the FDI Act related to reciprocal deposits. The final rule will become effective 30 days after it is published in the Federal Register, which is expected shortly. Click here for a copy of the final rule.

Nutter Notes: The FDIC has also invited the public to comment on, and submit proposed changes to all aspects of, the FDIC’s brokered deposit and interest rate regulations in an advance notice of proposed rulemaking issued on December 18. Public comments will be due 90 days after publication in the Federal Register, which is expected shortly. Click here for a copy of the advance notice of proposed rulemaking.

  • Agencies Propose Rule to Ease Volcker Rule Restrictions on Community Banks

The federal banking agencies, along with the SEC and the U.S. Commodity Futures Trading Commission, have issued a proposed rule to exclude certain community banks from the Volcker Rule. The proposed rule issued on December 18 would exclude a bank from the restrictions of the Volcker Rule if the bank, and every entity that controls it, has total consolidated assets equal to or less than $10 billion, and trading assets and liabilities equal to or less than 5% of its total consolidated assets.

Nutter Notes: The proposed rule would also implement section 204 of the EGRRCPA by permitting banking organizations subject to the Volcker Rule to share a name with a hedge fund or private equity fund that it organizes and offers under certain circumstances. Public comments on the proposed rule will be due 30 days after publication in the Federal Register, which is expected shortly. Click here for a copy of the proposed rule.

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.

© Nutter McClennen & Fish LLP | Attorney Advertising

Written by:

Nutter McClennen & Fish LLP
Contact
more
less

Nutter McClennen & Fish LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.