Regulatory Update for July 2017

On July 10, 2017, President Trump announced his intention to nominate Randal Quarles of Colorado to be a Member of the Board of Governors of the Federal Reserve System for the remainder of a 14-year term expiring January 31, 2018, and for an additional 14-year term expiring January 31, 2032, and to be Vice Chairman for Supervision of the Federal Reserve System for a term of four years. Mr. Quarles has had an extensive career in government and international finance. He served as Under Secretary for Domestic Finance in the George W. Bush Administration, and before that as Assistant Secretary of the Treasury for International Affairs and U.S. Executive Director of the IMF. He had earlier served in the George H.W. Bush Administration as Deputy Assistant Secretary for Financial Institutions Policy. He is a founder and managing director of The Cynosure Group, a private investment firm in Salt Lake City. Before founding Cynosure, Mr. Quarles was a partner of The Carlyle Group and, earlier, of the law firm of Davis Polk & Wardwell. He graduated summa cum laude in philosophy and economics from Columbia University and earned a J.D. from the Yale Law School.

On July 7, the Office of the Comptroller of the Currency released the Semiannual Risk Perspective for Spring 2017, which reported that strategic, credit, operational, and compliance risks remain top concerns for the federal banking system. Highlights from the report include:

  • Strategic risk remains elevated as banks make decisions to expand into new products or services or consider new delivery channels and continue merger and acquisition activity. Banks face competition from nonfinancial firms, including financial technology companies entering the traditional banking industry. This competition is causing changes in the way customers and financial institutions approach banking.

  • Credit underwriting standards and practices across commercial and retail portfolios remain an area of OCC emphasis. Over the past two years, commercial and retail credit underwriting has loosened, showing a transition from a conservative to an increasing risk appetite as banks strive to achieve loan growth and maintain or grow market share. 

  • Operational risk continues to challenge banks because of increasing cyber threats, reliance on concentrations in significant third-party service providers, and the need for sound governance over product service and delivery.

  • Compliance risk remains high as banks continue to manage money-laundering risks and implement changes to comply with the amended customer protection requirements under the Military Lending Act and integrated mortgage disclosure rules.

The report covers risks facing national banks and federal savings associations based on data for the 12 months ending December 31, 2016. The report presents data in four main areas: the operating environment, bank performance, trends in key risks, and regulatory actions. It focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public.

For more Regulatory news, visit RMA's member's only Washington Wrap-Up page.

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