Financial Services Spotlight

March 2016 Second Half Developments

Posted by Roy Andersen on Apr 6, 2016 12:00:00 PM


The Fed published a proposed rule that would establish a credit limit for doing business with other large institutions.  In effect, this is a super lending limit for large banks.  It applies at a fairly low level of $50 billion in assets. This is a Dodd-Frank requirement and perhaps part of the rush of the Obama administration to put as many rules as possible over the finish line before a potential change of political will.  The former Federal Bank of the Middle East now known as FBME continues its fight against death sentence effect of the US government determining that a bank is of “primary money laundering concern.” The effect of such a determination can be seen in the Credexbank FinCEN notice whereby the bank was put out of business.   FBME is fighting against this determination and is at least having an independent party determine whether it is indeed engaged in money laundering activities such that it should be put out of business.

Fed Single Counterparty Credit Limits for Large Banks

On March 16, 2016, the Fed published a proposed rule that would establish single-counterparty credit limits for domestic and foreign bank holding companies with $50 billion or more in total consolidated assets.  The Dodd-Frank Act required the Board to impose limits on the amount of credit exposure that such a domestic or foreign bank holding company can have to an unaffiliated company in order to reduce the risks arising from the company's failure.  See the proposed rule as part of Regulation YY at:

Special Measures against FBME Bank Ltd.

On March 31, 2016, FinCEN published a final rule imposing a prohibition on U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, FBME.  In 2014, FinCEN found that reasonable grounds exist for concluding that FBME Bank Ltd. (FBME), formerly known as the Federal Bank of the Middle East Ltd., is a financial institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act.  This bank sued to prevent this designation.  This rule will not be effective until August.  See the final rule at:


On March 16, 2016, OFAC published a final rule regarding Cuba to implement the President’s policy on Cuba.  These amendments further facilitate travel to Cuba for authorized purposes, expand the range of authorized financial transactions, and authorize additional business and physical presence in Cuba.  See the final rules at:

Withdrawal of Special Measures against JSC Credexbank

FinCEN has determined that Credex is no longer a primary money laundering concern that warrants the implementation of a special measure under Section 311.  This bank is in liquidation.  See the order at:

Executive Order Blocking North Korea

On March 18, 2016, the President published an Executive Order blocking all property of the Government of North Korea and the workers’ party.  This includes any industry from North Korea.   No exports are allowed from the US, no new investment by a US person is allowed.  See the Order at:

CFTC Trade Options Exemption

On March 21, 2016, the CFTC published a final rule to amend the limited trade options exemption in the Commission's regulations, as described herein, with respect to the following subject areas: Reporting requirements for trade option counterparties that are not swap dealers or major swap participants; recordkeeping requirements for trade option counterparties that are not swap dealers or major swap participants.  See the exemption release at:

CFTC Substituted Compliance for certain EU Entities

On March 22, 2016, the CFTC published a notice that certain EU institutions registered with the CFTC may do business here if they comply with home country rules. European CCPs registered with the CFTC can comply with many of our rules by meeting the corresponding European Market Infrastructure Regulation (EMIR) requirements.  The Commission is working with U.S. clearinghouses seeking recognition by the European Securities and Market Authority (ESMA) to ensure ESMA has all necessary information to review their applications in a timely manner. See the notice at:

Truth in Lending in Rural Areas

On March 25, 2016, the CFPB published an interim final rule that amends Regulation Z concerning two matters: the eligibility of certain small creditors that operate in rural or underserved areas for special provisions that permit the origination of balloon-payment qualified mortgages and balloon-payment high cost mortgages and for an exemption from the requirement to establish an escrow account for higher-priced mortgage loans and the determination of whether an area is rural for the purposes of Regulation Z.  See the final rule at:

Deposit Insurance Assessments Surcharge on Banks over $10 Billion

On March 25, 2016, the FDIC published a final rule that is imposing a surcharge on the quarterly assessments of insured depository institutions with total consolidated assets of $10 billion or more. The surcharge will equal an annual rate of 4.5 basis points applied to the institution's assessment base (with certain adjustments).  Surcharges will continue through the quarter that the reserve ratio first reaches or exceeds 1.35 percent, but not later than December 31, 2018. The surcharge would equal an annual rate of 4.5 basis points applied to the institution's assessment base (with certain adjustments). The FDIC expects that these surcharges will commence in 2016 and that they should be sufficient to raise the reserve ratio to 1.35 percent before the end of 2018.  This was the new amount set by the Dodd-Frank Act.  This includes branches and agencies of foreign banks with over $10 Billion in assets.  See the final rule at:


FFIEC Cyber Security Tools Meeting

On March 28, 2016, the banking agencies published a notice of a public meeting to review the FFIEC assessment of cyber security preparedness.  The Assessment to assist financial institutions of all sizes in assessing their inherent cyber risks and their cyber security preparedness. The Assessment is intended to allow a financial institution to identify its inherent cyber risk profile based on the financial institution's technologies and connection types, delivery channels, online/mobile products and technology services it offers, organizational characteristics, and current threats.  See the notice of the meeting at:

Highly Enriched Uranium Controls

On March 29, 2016, OFAC published a final rule that the rules governing highly enriched uranium would be removed.  These rules grew out of the Russian situation where they were removing such material from nuclear weapons and the US was concerned about the security of such materials.  In 2015, the President terminated the emergency upon which these rules were promulgated, and thus OFAC is removing the regulations.  See the OFAC final rule at:

Credit Union Bank Notes Activities

On March 30, 2016, the NCUA published a final rule to permit Credit Unions to invest in bank obligations with a maturity of 5 years or less.  One issue is whether these notes may be treated as deposits.  Currently, only notes with an “original” maturity of 5 years are sufficient.  See the final rule at:


National Emergency on Malicious Cyber Activities

President Obama continued the emergency he declared last year on cyber activities as a threat to our national security and economy.  He is continuing the emergency for another year.  See the notice at:

Topics: OFAC, North Korea, Cuba, European Union, CFTC, ESMA, EMIR

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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