Financial Services Spotlight

February 2017 Developments

Posted by Roy Andersen on Mar 1, 2017 3:07:00 PM

Overview

Donald Trump may make this newsletter obsolete. Further to the Trump effect on regulations: before January 23—the first government business day after the Inauguration—there were 7631 pages of new and proposed regulations under the auspices of the Obama administration. In the next 30 days, under the Trump regime only 3666 pages of new proposed and final regulations made it into the Federal Register. This is almost a 75% reduction in Federal Register page count so something is afoot. Not a single new or proposed rule worth mentioning was published since February 8. I was concerned at one point that the regulatory output was so low that no February report could be prepared—luckily, Trump himself is responsible for 50% of this report.

Trump’s Financial Regulation Manifesto

On February 8, 2017, the President published an Executive Order regarding the policy of regulating the financial system. The President has suggested certain Core Principles be followed including: prevent taxpayer-funded bailouts; foster economic growth; make regulation efficient, effective, and appropriately tailored; and restore public accountability [See the CFPB] within Federal financial regulatory agencies. The Treasury has to file a report within 120 days on the extent to which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies promote the Core Principles and what actions have been taken, and are currently being taken, to promote and support the Core Principles. See the Order at: https://www.gpo.gov/fdsys/pkg/FR-2017-02-08/html/2017-02762.htm

Credit Union Alternative Capital

On February 8, 2017, the NCUA published its request for comments on the types of alternative capital that Credit Unions could use to meet capital standards required by law. Alternative capital includes two different categories: Secondary capital and supplemental capital. Secondary capital is currently permissible under the Federal Credit Union Act only for low-income designated credit unions. See the request for comments at: https://www.gpo.gov/fdsys/pkg/FR-2017-02-08/html/2017-01713.htm

Capital Plan and Stress Tests

On February 3, 2017, the Fed published its final amendments to the Capital Plan and Stress Tests rules for bank holding companies with $50 billion or more in total consolidated assets and U.S. intermediate holding companies (IHCs) of foreign banking organizations. The final rule does not apply to bank holding companies with total consolidated assets of less than $50 billion or to any state member bank or savings and loan holding company. The final rule simplifies the initial applicability provisions of both the capital plan and the stress test rules, reduces the amount of additional capital distributions that a bank holding company may make during a capital plan cycle without seeking the Board's prior approval. Banks that are exempted are no longer subject to the provisions of the Board's capital plan rule whereby the Board may object to a capital plan on the basis of qualitative deficiencies in the firm's capital planning process. Accordingly, these firms will no longer be subject to the qualitative component of the annual Comprehensive Capital Analysis and Review (CCAR). See the final rule at:

https://www.gpo.gov/fdsys/pkg/FR-2017-02-03/html/2017-02257.htm

Proposed: https://www.gpo.gov/fdsys/pkg/FR-2016-09-30/pdf/2016-23629.pdf

Presidential Order on New Regulations

On February 3, 2017, the President published an executive order regarding new regulations. The President ordered for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process. Further, the President ordered that the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget. See the order at: https://www.gpo.gov/fdsys/pkg/FR-2017-02-03/html/2017-02451.htm

About the Spotlight


The Financial Services Spotlight examines the regulatory and technology developments impacting banks, asset managers and other financial services providers—where challenges meet opportunities.

 

Meet the Authors


Roy C. Andersen, of counsel in Sullivan & Worcester's New York office, is a member of the Corporate Department. Mr. Andersen focuses on bank regulatory and compliance matters, including international banks and their branches and agencies in New York.

Joel Telpner, partner in the firm's New York office, is a seasoned advisor, strategist and problem solver. Mr. Telpner brings more than 30 years of legal experience in a career that includes time as an AmLaw 100 partner, the former U.S. general counsel of a global financial institution, and a venture capitalist. He is recognized for his ability to deftly manage complex financial transactions, especially those involving sophisticated structured finance and derivatives matters and has an extensive and unique combination of transactional and regulatory experience.

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