OCC Provides Insight into Regulators’ 2020 Priorities

Regulators in 2020 may look at cybersecurity, BSA, underwriting practices, CECL, and more.

10/15/19

The supervisory priorities of the OCC would not generally apply to credit unions; however, they do provide insight into what the other regulators, including the National Credit Union Administration (NCUA), might be looking at in 2020.

The OCC’s Bank Supervision Operating Plan for 2020 will focus on:

  • Cybersecurity and operational resiliency.
  • Bank Secrecy Act/anti-money laundering (BSA/AML) compliance management.
  • Commercial and retail credit underwriting practices and oversight and control functions.
  • Impact of changing interest rate outlooks on bank activities and risk exposures.
  • Preparedness for the current expected credit losses (CECL) account standard, and preparation for the potential phase-out of the London Interbank Offering Rate (LIBOR).
  • Technological innovation and implementation.

Other than the LIBOR, most of the other priorities could be the focus of NCUA and state regulator examinations. 

Question of the Week

Q. Can a credit union open a donation or memorial account? If so, how do we open this type of account?

A. Yes, credit unions can open donation and memorial accounts, however, there are two issues to be considered before opening such an account.

    1. One of the first issues is that unless the member has established a charitable organization through the Internal Revenue Service (IRS) and obtained an Employee Identification Number (EIN) contributions to the account will not be tax deductible. The fact that the donations are not tax deductible may be of concern to donors and cause confusion, and the credit union will not want to devote staff time to resolving these issues.
    2. Should the credit union open a donation or memorial account without requiring it to be held in the name of the charitable organization and reported under an EIN, it will have to do so using a member’s own SSN. While this would be permissible, the member could spend the funds for purposes other than for the charitable purpose. This situation could result in reputation risk for the credit union.

In summary, a credit union can set up a donation account using an SSN to create the account. However, the risks are that the individual who controls the account will not use the funds for the benefit of the person or charitable cause that is intended, and that donors may think donations are tax deductible when they may not be. Also, if anything fraudulent were to happen, it could create reputation risk for the credit union.

Before offering donation or memorial accounts, a credit union should develop a policy governing donation accounts that includes guidance on when the credit union will open them and for whom. The policy should also include guidance on how the accounts will be titled and which tax identification number (an SSN or EIN) will be used.

Related Links

Checklist for Opening Donation Accounts

Legal Briefs

Consumer Financial Protection Bureau (CFPB)

Final HMDA Rule Threshold Amendments
The CFPB issued a final rule which finalizes certain aspects of its May 2019 Notice of Proposed Rulemaking under the Home Mortgage Disclosure Act (HMDA). It extends the current temporary threshold for collecting and reporting data about open-end lines of credit under HMDA until Jan. 1, 2022. The current threshold is 500 open-end lines of credit. For data collection years 2020 and 2021, financial institutions that originate fewer than 500 open-end lines of credit in either of the two preceding calendar years will not need to collect and report data with respect to open-end lines of credit.

Federal Reserve (FRB)

Simplification of the Volker Rule requirements
Five federal financial regulatory agencies on Tuesday announced that they finalized revisions to simplify compliance requirements relating to the “Volcker” rule. By statute, the Volcker rule generally prohibits banking entities from engaging in proprietary trading, investing in or sponsoring hedge funds or private equity funds. Under the revised rule, firms that do not have significant trading activities will have simplified and streamlined compliance requirements, while firms with significant trading activity will have more stringent compliance requirements. The revisions continue to prohibit proprietary trading while providing greater clarity and certainty for activities allowed under the law. With the changes, the agencies expect that the universe of trades that are considered prohibited proprietary trading will remain generally the same as under the agencies’ 2013 rule.

Office of the Comptroller of the Currency (OCC)

Final rule increasing the appraisal threshold for national banks and federal savings associations
The final rule increases the appraisal threshold for residential transactions from $250,000 to $400,000. The new threshold of $400,000 reflects increases in residential real estate transaction values and general indexes of inflation since adoption of the existing threshold in 1994 as well as safety and soundness considerations. The final rule extends the requirement for banks to obtain evaluations on exempt residential transactions from $250,000 to $400,000, although banks retain the discretion to use appraisals.

Washington State Department of Financial Institutions (DFI)

Fall 2019 DFI Newsletter
The Department of Financial Institutions (DFI) released its fall 2019 newsletter. Within the newsletter there are several articles that provide updates from the DFI. Of interest are articles on the ongoing efforts to allow Washington financial institutions to work with marijuana businesses, improvements in efficiency with offsite examinations, and that Washington is among the first states to pilot a new modern examination and risk identification tool for credit unions which will replace the old AIRES examination software.

Office of Foreign Assets Control (OFAC)

OFAC has updated the Specially Designated Nationals And Blocked Persons (SDN) list as of Oct. 11, 2019. The last update before this was Oct. 4, 2019.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].