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Yesterday, the FDIC's Board of Directors approved a final Statement of Policy on Bank Merger Transactions (Final SOP). The Final SOP addresses the scope of transactions subject to FDIC approval, the FDIC’s process for evaluating merger applications, and the principles that guide the FDIC’s consideration of the applicable statutory factors as set forth in the Bank Merger Act.

With respect to the statutory factors, the Final SOP:

• Confirms that the FDIC’s evaluation of a merger’s competitive effects may take into account concentrations beyond deposits, including small business or residential loan originations;
• Clarifies that the proposed merger should result in less financial risk than the risk posed by the institutions on a standalone basis;
• Elaborates on the FDIC’s expectation that a merger will enable the resulting institution to better meet the convenience and needs of the community to be served;
• Applies additional scrutiny to the evaluation of financial stability for transactions resulting in an institution with $100 billion or more in total assets; and
• Communicates the FDIC’s expectation to hold public hearings for mergers resulting in an institution with over $50 billion in total assets.

The Final SOP supersedes the existing Statement of Policy, which was last updated in 2008. The updates approved by the FDIC Board yesterday account for the significant changes that have occurred in the banking industry and financial system over the last several decades. The Final SOP refines, and in some cases, broadens the description of the analytical considerations for each statutory factor.

The FDIC Board of Directors approved yesterday a notice of proposed rulemaking that would strengthen recordkeeping for bank deposits received from third party, non-bank companies accepting those deposits on behalf of consumers and businesses. The proposal seeks to address risks related to these third-party arrangements, protect depositors, and promote public confidence in insured deposits.

Non-banks may deposit funds together into a single custodial account at a bank. These custodial accounts may hold funds of many thousands of consumers and businesses, and the bank may not readily know or be able to determine the individual owners of funds in the custodial account. Under the proposed rule, FDIC-insured banks holding certain custodial accounts, as defined in the proposal, would be required to take certain steps to ensure accurate account records are maintained in order to determine the individual owner of the funds, including a requirement to reconcile the account for each individual owner on a daily basis. These requirements, as well as others, apply if the bank uses a third party to maintain records.

The proposal’s provisions also provide for oversight by the banks’ primary federal supervisor to review for compliance with this rule and enforcement authority to compel compliance if the bank fails to meet these requirements.

The FDIC invites public comments on all aspects of the proposal. Public comments on the proposal are due 60 days after publication in the Federal Register.

The CFPB has announced it has published Consumer Financial Protection Circular 2024-05 on "Improper Overdraft Opt-In Practices" to address whether a financial institution can violate the law if there is no proof that it has obtained consumers' affirmative consent before levying overdraft fees for ATM and one-time debit card transactions.

According to CFPB Director Rohit Chopra, “The CFPB has found instances where banks have no evidence that they obtained consent for overdraft. No Americans should be hit with bank account fees that they never agreed to.”

The CFPB reports it has observed that in many circumstances, financial institutions have created serious obstacles to consumers taking steps to anticipate and avoid overdraft fees, and cites several enforcement actions the Bureau has taken against banks that failed to properly adhere to the requirements of section 1005.17 of Regulation E.

The Bureau's press release suggests that consumer protection law enforcers "should assume consumers have not opted into overdraft [service for ATM and one-time debit card transactions] unless the banks can prove otherwise," and that "some banks have been unable to provide such evidence." The Circular lists three examples of forms of records that banks might use to document consumer consent, depending on the channel through which the consumer opts in. The examples are not all-inclusive or exhaustive:

• For consumers who opt into covered overdraft services in person or by postal mail, a copy of a form signed or initialed by the consumer indicating the consumer’s affirmative consent to opting into covered overdraft services would constitute evidence of consumer consent to enrollment.
• For consumers who opt into covered overdraft services over the phone, a recording of the phone call in which the consumer elected to opt into covered overdraft services would constitute evidence of consumer consent to enrollment.
• For consumers who opt into covered overdraft services online or through a mobile app, a securely stored and unalterable “electronic signature” as defined in the E-Sign Act (15 U.S.C. 7006(5)) conclusively demonstrating the specific consumer’s action to affirmatively opt in and the date that the consumer opted in would constitute evidence of consumer consent to enrollment.

The OCC has reported it has approved a final rule updating its regulations for business combinations involving national banks and federal savings associations and a policy statement clarifying its review of applications under the Bank Merger Act (BMA).

The final rulemaking is part of the OCC’s effort to enhance transparency around its process of reviewing transactions under the BMA. It also provides additional guidance to stakeholders around the OCC’s review of applications. The policy statement specifically discusses:

• general principles for the OCC’s review of applications under the BMA, including:
  • indicators for applications that are more likely to withstand scrutiny and be approved expeditiously; and
  • indicators for applications that raise supervisory or regulatory concerns which most likely need to be resolved prior to OCC approval;
• the OCC’s consideration of the financial stability; managerial and financial resources and future prospects; and convenience and needs statutory factors under the BMA; and
• the OCC’s decision process for extending the public comment period or holding a public meeting.

Publication and effective date information: Published [89 FR 78207] on 9/25/2024, with an effective date of 1/1/2025.

FinCEN has published [89 FR 76187] in this morning's Federal Register a notice and request for comments on its proposed renewal, without change, of existing information collection requirements found in Bank Secrecy Act regulations [31 CFR § 1010.415] that require financial institutions to maintain records related to the issuance or sale of bank checks and drafts, cashier’s checks, money orders, and traveler’s checks when the issuance or sale involves the use of currency in an amount between $3,000 and $10,000, inclusive.

Comments will be accepted through November 18, 2024.

OFAC has published [89 FR 75955] in this morning’s Federal Register a final rule updating provisions related to blocking and other actions related to specific property or interests in property.

The rule is meant to clarify OFAC’s process for issuing certain orders that block or identify as blocked specific property or interests in property, or that impose other prohibitions less than full blocking with respect to specific property or interests in property. OFAC is adding information about these orders in regulatory notes in 35 of OFAC’s sanctions regulations — 31 CFR Parts 510, 525, 526, 536, 542, 544, 546, 547, 548, 549, 550, 551, 552, 553, 555, 558, 560, 562, 569, 570, 576, 578, 579, 582, 583, 584, 585, 587, 588, 589, 590, 591, 594, 598, and 599. The rule is effective upon publication.

The Treasury Department has issued announcements of designations under OFAC's Global Magnitsky and Cyber-related sanctions programs.

The Global Magnitsky sanctions designations included individuals who have undermined fundamental freedoms, including freedom of expression, in the country of Georgia. Specifically, the Department of the Treasury sanctioned two Georgian government officials associated with brutal crackdowns on peaceful protestors and political opponents, and two private Georgian citizens that are responsible for or complicit in, or have directly or indirectly engaged in violently suppressing the exercise of the freedom of peaceful assembly of Georgians engaged in the democratic process and peaceful expression.

OFAC also designated five individuals and one entity associated with the Intellexa Consortium under its Cyber-related sanctions for their role in developing, operating, and distributing commercial spyware technology that presents a significant threat to the national security of the United States.

For the names and identification information of the designated parties covered by both announcements, see the September 16, 2024, BankersOnline OFAC Update.

The FDIC, OCC, and Federal Reserve Board have jointly announced they will extend until October 30, 2024, the comment period on a request for information on bank-fintech arrangements involving banking products and services.

The agencies are seeking input on the nature and implications of bank-fintech arrangements and effective risk management practices. Extending the comment period will allow the public more time to consider the request, prepare comments, and address the questions posed by the agencies. Comments were originally due by September 30, 2024.

• Federal Register Extension Notice

The FDIC has issued FIL-62-2024 with guidance to provide regulatory relief to financial institutions and facilitate recovery in areas of Pennsylvania — Lycoming, Potter, Tioga, and Union Counties — affected by Tropical Storm Debby August 9–10, 2024.

The OCC has announced it has entered into a Formal Agreement with Wells Fargo Bank, N.A.

The Formal Agreement identifies deficiencies relating to the bank’s financial crimes risk management practices and anti-money laundering internal controls in several areas including suspicious activity and currency transaction reporting, customer due diligence, and the bank’s customer identification and beneficial ownership programs.

The agreement requires the bank to take comprehensive corrective actions to enhance its Bank Secrecy Act/anti-money laundering and U.S. sanctions compliance programs.