August 23, 2019 Banconcomics Compliance News Report

Hey there! I believe introductions are in order...

We (Banconomics) think you are a super cool person working in the financial compliance world or working to help create important policy. So let us do the heavy lifting for you. Each week, we'll send out the Banconomics Compliance News Report that summarizes 

  • one top compliance news item
  • action by federal regulators (distilled for your convenience)
  • distraction of the week

Pretty cool right? You can sign up for our weekly email here that shows we released the news report. We think this is the beginning of a beautiful relationship.

August 23, 2019 

Top Story

Regulators cut banks a break from the Volcker Rule

Interesting. I want details.... You got questions, we got answers. On Tuesday, the FDIC and OCC voted to relax limits on speculative trading under the Volcker Rule, which in case you forgot, was a major rule put into effect as a response to the crisis during the recession. 

Who's dishing out the break? The OCC and FDIC issued separate statements saying they signed off on the five-agency rewrite of the rule. The Fed, CFTC and SEC are expected to sign off on the revised rule in the coming weeks.

Why is this break happening? This rule has long been criticized because it's about complex as your ex and caused so much confusion that even regulators didn't know what they were getting themselves into during exams. Under this new roll out, nicknamed Volcker Rule 2.0, investment banks will be able to trade securities using their own funds. The group signing off on the rule also plans to roll out another makeover of the covered-funds provision part of this rule in the fall. 

What do the banks say about this? Depends on who you ask. The regulators left the provision that prevents large banks from engaging in risky-trades by using federally insured deposits, which is also the most controversial part of the rule. But supporters say that this will most benefit small banks by creating a tiered framework for regulators to use that exempts them from the strictest provisions of the rule.

And everyone is happy about this? Of course not. Many people are not pleased. Critics argue that the revamp could open a back door to skirt around ban on proprietary trades and provide an opportunity for securing risky loans similar to those that led to the recession in 2008. 

Banconomic's take...This is just another example of how the Trump administration is making rules a lot easier for banks to navigate about the industry freely, but it could also opens Pandora's box to potential toxic loans that could lead us to another recession. Stay tuned.

OCC Press Release; FDIC Press Release;

Other Important Compliance News

HUD's making it harder to bring discrimination claims

This sounds controversial... It sure is. Last Friday, HUD proposed a rule that raises the standard for bringing claims of discrimination. Under the proposed rule, unintentional discrimination, aka disparate impact, would need to be proven under a five-pronged standard. The new standard requires the plaintiff to prove that the policy or practice resulted in disparity, caused harm on the members of a protected class, and a statistical disparity exists and it was directly caused by that policy or practice, not just coincidence. In a nut shell, it shifts the burden of proof from the defense to the plaintiff. Who's doing the chacha about this? Mortgage industries, home insurance and the Treasury department. These groups say that the proposed rule will increase access to affordable housing. The other side of the coin? Critics say that this will perpetuate a cycle that creates barriers for marginalized groups to gain access to housing by making it harder to prove discrimination. Feeling passionate about this either way? Comments are due October 18th, so get writing.

HUD Press Release; Federal Register

FDIC proposes to ease restrictions on high-rate deposits

Tell me more...Sure thing. FDIC previously asked the industry to give some feedback about easing restrictions on high-rate deposits. This is because the regulation had not been touched since the year Kanye interrupted Taylor Swift's VMA speech in 2009. And the industry responded, so changes are going to be made. Community banks have criticized the rule because they say that the rule makes it difficult for them to compete with bigger banks and other financial institutions for funds. Under FDIC's new plan, a new method would be developed for calculating the cap on deposit rates for banks that are less than well-capitalized, based on a national average rate. In theory, this would give institutions a better way to adapt to market fluctuations. However, some are worried that the proposed changes do not fully address community bankers' concerns. 

FDIC Press Release

Credit unions get the okay to hemp

They're finally okay to jump on board? Credit unions are feeling easy being green. On Monday, NCUA issued a letter with guidance that allows credit unions the legal thumbs up to provide financial services to legally operating hemp businesses. It's still up to the jury to decide whether FinCEN will also follow in NCUA's foot steps and issue a similar guidance. For all you hemp loving institutions out there, be aware that you still have many compliance obligations under the Bank Security Act (BSA) and Anti-Money Laundering Act (AML). But in the meantime, happy hemp banking.

NCUA Press Release

Distraction of the Week

This one goes out to all of you parents out there...

Looking to be further educated?

Take me to last week's Compliance News Report

Take me to the Home Page

This week's Compliance News Report is sponsored by...

Introducing ShareFI: Your Risk and Operations Management Solution

FIPCO is pleased to announce the launch of a brand-new service for Wisconsin banks: ShareFI. This consulting and shared services solution offers compliance and risk management, operational and financial management, and/or shared professionals services designed to meet the needs of small- to mid-size financial institutions. Banks who choose FIPCO’s ShareFI as their risk and operations management solution will receive consulting, guidance, and shared services from industry experts. Leading the team is Jeff Schmid, who joined FIPCO on July 15 after over three decades of experience in bank compliance and operations. Contact Jeff today ( or 608-441-1220) to discuss what ShareFI can do for your bank or click here to sign up for more information.