August 9, 2019 Banconomics Compliance News Report

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  • action by federal regulators (distilled for your convenience)
  • distraction of the week

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August 9, 2019


Top Story

The Fed jumps on the tech train

All aboard to the 21st century...Take me to the future. On Monday, the Federal Reserve announced the launch of FedNow, the Fed's new round-the-clock real-time payment and settlement service that is intended to eliminate the delay between when a person deposits a check and when it can be recognized in that person's account. 

Good, I don't like waiting for things... You're not alone. The new payment service will provide almost instantaneous transfers of funds 'round the clock for personal and business use, and prevent the delays that cost Americans billions of dollars in overdraft charges and late fees. The Fed wants to roll it out in 2023.

Wait. It will be ready in 2023?.. Yeah, about that instant thing. Turns out it will take a few years to make payments instant.

Seems like a great idea... Not everyone is popping the champagne. The Clearing House, owned by the largest 24 banks, like JPMorgan Chase and Bank of America, have already been working on this for a few years and are worried that tech companies *cough* Facebook *cough* could use the Fed's system (or the newly announced Facebook Libra), to slither further into the banking game. How would they do it, you ask? By using the payment system as a direct route to transferring funds. Banks currently act as a gatekeeper in this process. But with the Fed's new payment service, these tech companies could completely bypass that gatekeeping system.

ICBA's take...  After “years of advocacy,” ICBA applauded the Fed on the announcement, claiming a victory for Main Street. The system will, according to ICBA, “ensure universal access to real-time payments, avoid a megabank monopoly, and encourage innovation that will benefit consumers nationwide." ICBA also issued an interactive timeline showing its years-long advocacy on the issue.

ABA's take... ABA’s Banking Journal reported that while the Fed said that while interoperability with other real-time payments networks—namely the Clearing House’s RTP network—would be “a desirable outcome, it did not commit in its notice to make FedNow interoperable with other networks," which is a capability that ABA has said would be critical to the success of real-time payments in the U.S. Further, ABA President/CEO Rob Nichols said, “We believe any Fed system must be fully interoperable with the RTP network, remain accessible only to chartered financial institutions, and be available through all core processing companies and without volume discounts that disadvantage smaller banks."

The Clearing House's take... Another major player in this debate, The Clearing House, operator of RTP® network, a real-time payment system that modernizes core payments capabilities for all U.S. financial institutions, focused on its current capabilities and services in its reaction statement: “We are already seeing how these real-time capabilities are providing for tremendous advances in speed, convenience, and security in how Americans receive and send funds. We are excited about the many ways that this revolution in payments will continue to deliver new benefits to depository institutions and their customers. While we will stay abreast of the Fed’s efforts to develop its own real-time payments system which may become available in 2023 or 2024, our focus will remain on ensuring that the RTP network has reach to all depository institutions.”

BANCONOMIC's take... Somebody do something that will make customers feel like the banking industry understands what customers want. Please. Competition is good for banking, but this seems like a giant government-backed institution wants to compete with the private sector after it asked the private sector to do that exact thing. On the other hand, 24 banks owning the whole shebang seems a little too cozy. It’s a clash of the old titans vs. the new titans vs. regulators in a he-said, she-said, we-said game. Stay tuned

Want to read it for yourself? Read the Federal Reserve's Press Release announcing the new service.


Other Important Compliance News

FDIC and OCC release their CRA evaluation lists into the world

Ah, the lists… On Monday, FDIC released its list of state nonmember banks that were recently evaluated for compliance under the Community Reinvestment Act (CRA). And because OCC didn't want to feel left out, it also issued CRA evaluations on Thursday. Under the CRA, certain regulatory agencies must publicly disclose the evaluation and rating from each financial institution assessed for CRA compliance. Yes, it's sort of like when your high school chemistry teacher posted your class' chemistry grades on her door for everyone to see. The most recent lists disclose the evaluation ratings that FDIC assigned to institutions in May 2019, and OCC's evaluation ratings assigned to institutions in July 2019. Copies of an individual bank's CRA evaluation is available directly from the bank.

FDIC CRA Evaluation Results; OCC CRA Evaluation Results

Even regulatory agencies make mistakes

Now I feel better about spilling my coffee this morning… We're all human. The Fed, FDIC, SEC and CFTC issued a correction on Tuesday regarding amendment instructions to the Volcker Rule. The final rule that is corrected was issued on July 22, 2019, which excluded community banks from the Volcker Rule. Details on the specific columns that are corrected are listed in the Federal Reigster.

Federal Register

A NCUA department's getting a new name

New name, new me...That's what NCUA's Office of External Affairs is saying. As of Thursday, the office will now be named the "Office of Public Congressional Affairs". According to the agency, the new name is more fitting for the duties of the office. We'll let you be the judges.

Federal Register


Distraction of the Week

Still stressed after Monday's stock plunge? We feel you.



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