In this Issue. The Federal Deposit Insurance Corporation's (FDIC) board of directors considered competing resolutions concerning possible amendments to regulations implementing the Change in Bank Control Act (CBCA); the Consumer Financial Protection Bureau (CFPB) issued a spotlight on health savings accounts (HSAs); the CFPB reported that higher price complexity can lead to detrimental outcomes for consumers; the FDIC's board of directors released its semiannual update on the restoration plan for its Deposit Insurance Fund (DIF); and the Financial Crimes Enforcement Network (FinCEN) reminded financial institutions to remain vigilant to environmental crimes. These and other developments are discussed in more detail below.
Regulatory Developments
FDIC's Board of Directors Considers Proposed
Rulemaking Amending Regulations Implementing the Change in Bank
Control Act
On April 25, the FDIC's board of directors met to consider
competing resolutions introduced by Director Chopra and Director
McKernan related to the CBCA, which generally requires prior notice
to, and the non-objection of, the appropriate federal bank
regulatory agency before a person, directly or indirectly, or
acting in concert with others, may acquire control of an insured
bank. Both resolutions were withdrawn, and no votes were taken on
these matters. These proposals were prompted, at least in part, by
concerns related to the increased "popularity" of index
funds and the role of three large asset managers responsible for
the index funds' holdings of equity – including voting
securities – issued by the holding companies of many
FDIC-supervised banks.
Under the proposal introduced by Director Chopra, the FDIC would have issued a notice of proposed rulemaking to remove an exemption contained in the FDIC's CBCA regulations that exempts change in control transactions from the FDIC's notice requirement in cases where the Board of Governors of the Federal Reserve System will review a notice for acquisition of control of an FDIC-insured bank's holding company. This proposal also would have sought information and comment from the public on the FDIC's approach for evaluating CBCA notices more generally. Chairman Gruenberg and Director Chopra supported this proposal, but it was not supported by any other Director, including Acting Comptroller Hsu. In declining to support the proposal, Director Hsu highlighted the need for any proposed rulemaking to be done on an interagency basis after public discussion and debate occurring prior to its issuance.
Under the proposal introduced by Director McKernan, the FDIC's staff would monitor compliance by certain "investment fund complexes" with passivity commitments and other conditions in so-called "FDIC control comfort" (i.e., "regulatory comfort that fund complexes rely on to acquire and hold up to a specified percentage of the voting securities of one or more FDIC-supervised institution, or a controlling affiliate of an FDIC-supervised institution, without being considered to control the FDIC-supervised institution") and make annual determinations as to whether the covered fund complexes control any FDIC-supervised banks. This proposal was supported by Vice Chair Hill, but not by Chairman Gruenberg or Directors Chopra or Hsu.
CFPB Issues Spotlight on Health Savings
Accounts
On May 1, the CFPB issued a report and press release on HSA
fees. The CFPB's report examines consumer experiences and
concerns with HSA plans and details the complex costs and fees
associated with HSAs. Further, the report outlines the tax benefits
of HSA plans, but notes that benefits are being offset by charges
like monthly maintenance fees, paper statement fees, outbound
transfer fees, and account closure fees. The report and press
release were followed by a statement on the
report by Director Rohit Chopra.
CFPB Reports that Higher Price Complexity Can Lead to
Detrimental Outcomes for Consumers
On April 30, the CFPB issued a report on two
laboratory experiments it conducted, finding that when prices are
separated into multiple fees and are harder to understand,
consumers have more difficulty comparing options, pay higher total
prices, and pay more overall. The CFPB noted that the report
findings have implications for understanding how junk fees impede
fair and competitive pricing in markets like credit cards, deposit
accounts, mortgages, and auto loans where consumers must evaluate a
variety of factors such as extended warranties, add-ons, closing
costs, and other fees, instead of one all-inclusive price.
"The resolution would also require a prescriptive
set of monitoring procedures. This strikes me as a premature step
to take prior to seeking notice and comment on a significant change
in FDIC rule and practice."
— FDIC Chairman Martin J. Gruenberg, in his comments regarding
FDIC Director Jonathan McKernan's proposal
FDIC Board of Directors Releases Semiannual Update on
Restoration Plan
On April 25, the FDIC board of directors released its semiannual update on
the restoration plan for its DIF. The Federal Deposit Insurance Act
requires the FDIC to restore the DIF reserve ratio to a statutory
minimum of a 1.35% by September 30, 2028. This reserve ratio
measures the fund balance relative to insured deposits. In 2022,
the FDIC Board amended the restoration plan to ensure that this
goal would be met, and this revision included a requirement that
the FDIC make updates on the DIF reserve ratio at least
semiannually. The April 25 semiannual update states that the DIF
reserve ratio increased from 1.11% to 1.15% from June 30, 2023 to
December 31, 2023.
FinCEN Reminds Financial Institutions to Remain Vigilant
to Environmental Crimes
On April 22, FinCEN issued a reminder to
financial institutions urging them to remain vigilant in
identifying and reporting suspicious activity related to
environmental crimes. FinCEN noted that these crimes often relate
to its Anti-Money Laundering
and Countering the Financing of Terrorism (AML/CFT) National
Priorities, such as corruption and human trafficking. FinCEN
outlined resources available for institutions seeking to combat
environmental crimes, including its November 2021 Notice
containing Suspicious Activity Report filing instructions and its
December 2021 Financial
Threat Analysis containing information on wildlife trafficking
and trends identified in Bank Secrecy Act data.
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