"Washington Report 360 | March 8, 2019"

Key highlights

• The FTC proposed to amend the GLBA, including requirements for encryption, access, and authentication.
• The FSOC proposed to amend its nonbank SIFI designation process by introducing a system-wide “activities-based approach” focused on products, activities, and practices.
• The Federal Reserve will limit the use of the “qualitative objection” of operational and risk management issues in the 2019 CCAR stress testing exercise.
• The federal banking regulators are re-considering proposed rules covering incentive compensation and Volcker Rule restrictions.

Financial services legislative and regulatory news

The FTC proposed amendments to the GLBA Safeguards Rule that would require financial institutions to encrypt customer data, prevent unauthorized access, use multifactor authentication, and require periodic Board reporting.

The FSOC proposed guidance that would amend its nonbank SIFI designation process by introducing a system-wide “activities-based approach” focused on products, activities, and practices.
The Federal Reserve:

• Affirmed the Countercyclical Capital Buffer (CCyB) at the current level of zero.
• Will limit use of the “qualitative objection” of operational and risk management issues to the 2019 CCAR stress testing exercise.

The OCC released guidance for OCC-supervised entities about key data fields examiners will “typically use to test and validate the accuracy and reliability” of HMDA data collected beginning in 2018.
The CFPB:

• Published an ANPR on residential Property Assessed Clean Energy financing.
• Released a Quarterly Consumer Credit Trends report focusing on first-time servicemember homebuyers.

The federal banking regulators are considering revisiting their previously proposed:

• Incentive compensation rule mandated by Dodd-Frank. (WSJ)
• Rule to simplify the Volcker Rule restrictions. (American Banker)

The House Financial Services Committee conducted its semi-annual hearing on the CFPB with a focus on the Bureau’s Office of Fair Lending, the Military Lending Act, student lending, payday lending, and the complaints database; upcoming hearings will address “megabanks,” the National Flood Insurance Program, and financial crimes.

The Senate Committee on Homeland Security conducted a hearing to examine private sector data breaches.

Financial services policy news

A CFTC Commissioner announced a data protection initiative to inform the agency’s policies for data collection, access, controls, cyber security, and retention.

The U.S. stock exchanges have selected the Financial Industry Regulatory Authority (FINRA) to serve as the plan processor for the consolidated audit trail. (Catnmsplan.com)

The BCBS and IOSCO released a statement on the final implementation stages of the framework for margin requirements on non-centrally cleared derivatives, acknowledging the potential need to amend certain contracts in response to interest rate benchmark reforms.

The BIS highlighted a growing exposure to BBB-rated bonds in the portfolios of investment grade corporate bond mutual funds in the U.S. and Europe.