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Impact of Proposed “Regulatory Off-Ramp” for Community Banks

February 15, 2017

Authors

Robert Klingler

Impact of Proposed “Regulatory Off-Ramp” for Community Banks

February 15, 2017

by: Robert Klingler

A key component of the proposed roadmap for Republican efforts to provide regulatory relief is based on reduced regulatory burdens in exchange for holding higher capital levels.  Specifically, Title I of the proposed Financial Choice Act, as modified by Representative Hensarling’s “Choice Act 2.0 Changes” memo of February 7, 2017, proposes to provide significant regulatory relief for institutions that maintain an average leverage ratio of at least 10 percent.

The principal concepts of this “regulatory off-ramp” have, so far, remained relatively constant since first published by the House Financial Services Committee in June of 2016; any institution that elects to maintain elevated capital ratios (set at a 10% leverage ratio) would enjoy exemptions from the need to comply with certain other bank regulatory requirements.

Choice 2.0

In February 2017, Jeb Hensarling, Chairman

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Core Principles for Financial Regulation

February 7, 2017

Authors

Robert Klingler

Core Principles for Financial Regulation

February 7, 2017

by: Robert Klingler

On February 3, 2017, President Trump issued an executive order setting forth his administration’s core principles for the regulation of the U.S. financial system.  While generally touted as the administration’s first affirmative steps to dismantle the Dodd-Frank Act, the executive order actually does little to implement any immediate change but says a lot about the overall framework by which the Trump Administration intends to approach financial regulation.

In addition to standard executive order boilerplate, the executive order sets forth two specific actions.  First, it establishes the “principles of regulation” that the administration will look at in evaluating regulations.

Section 1. Policy. It shall be the policy of my Administration to regulate the United States financial system in a manner consistent with the following principles of regulation, which shall be known as the Core

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What Will The Proposed New York Cybersecurity Requirements For Financial Institutions Really Make Companies Do?

January 23, 2017

Authors

David Zetoony

What Will The Proposed New York Cybersecurity Requirements For Financial Institutions Really Make Companies Do?

January 23, 2017

by: David Zetoony

In early September 2016, the New York Department of Financial Services (“DFS”) proposed a set of data security regulations (the “Proposal”) that would govern financial institutions, banks, and insurance companies subject to the jurisdiction of the agency (“covered entities”).  After receiving public comments, DFS revised and resubmitted the Proposal on December 28, 2016.  If the Proposal ultimately goes into effect it would require that covered entities have a written information security policy (“WISP”) and outline specific provisions (substantive and procedural) that must be contained in that document.  While the Proposal has garnered a great deal of public attention, the majority of the provisions in the latest version are not unique.

Prior to the Proposal at least four states already required that if a company collected financial information about consumers within their

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Fraudster Beware: Your Scheme Could be a Federal Crime if it Involves a Bank

December 14, 2016

Authors

Robert Klingler

Fraudster Beware: Your Scheme Could be a Federal Crime if it Involves a Bank

December 14, 2016

by: Robert Klingler

Normally, a scheme to defraud another individual would be a state crime, prosecuted and sentenced at the state level (leaving aside use of U.S. mail or wires). To be convicted of the state crime of fraud usually requires proof of some combination of a false statement or representation and an actual intent to defraud.

On December 12, 2016, in a remarkably unpretentious opinion by Justice Breyer, the U.S. Supreme Court, in Shaw v. United States, U.S., No. 15-5991, resolved a circuit split by ruling that such a scheme can also constitute federal bank fraud, even if there was intent only to defraud the individual, not the bank itself.

The case stemmed from Shaw’s successful efforts to defraud a bank customer of more than $300,000. Shaw

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To Deposit or Not to Deposit: a Question for Fintech Charters

December 7, 2016

Authors

John ReVeal, Robert Klingler and Seyi Iwarere

To Deposit or Not to Deposit: a Question for Fintech Charters

December 7, 2016

by: John ReVeal, Robert Klingler and Seyi Iwarere

The fintech industry has justifiably greeted the OCC’s announcement of a national fintech charter with optimism. But one area where we have seen significant confusion is the possibility of the fintech charter being granted without deposit insurance, and the implications thereof.

Background.  On December 2, 2016, OCC Comptroller Thomas Curry announced that the OCC is planning to take applications from fintech companies wishing to obtain a special purpose national bank charter.  These banks would be national banks with the same privileges and obligations as traditional full-service national banks, but with specialized business plans and that may or may not choose to have deposit taking authority.

In his remarks, Comptroller Curry expressed his excitement about the great potential to expand financial inclusion and reach unbanked and underserved populations.  At the same time,

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Starting a New Bank

December 5, 2016

Authors

Jonathan Hightower

Starting a New Bank

December 5, 2016

by: Jonathan Hightower

piggybankOn November 29, 2016, the FDIC, as part of its Community Banking Initiative, held an outreach meeting in Atlanta.  While the FDIC has indicated that it will publish a handbook regarding applications for deposit insurance in the coming weeks (which we’ll also summarize), we thought it made sense to provide a few highlights from that meeting:

Mechanics.  The mechanics of the chartering process are the same as before.

Business Plans.  As expected, there will be greater scrutiny on business plans, making sure that banks stick to their business plans post-opening, and (not expressly stated but as translated by me) ensuring that the results of the bank’s business plan do not deviate greatly from the original projections (i.e., providing for limited ability to take advantage of natural growth in the new bank’s markets or lines

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Reviewing Third Party Vendor Service Contracts

November 14, 2016

Authors

Jerry Blanchard

Reviewing Third Party Vendor Service Contracts

November 14, 2016

by: Jerry Blanchard

OLYMPUS DIGITAL CAMERAManaging third party vendor relationships has always been an important function in banks. More recently it has become a hot topic for state and federal financial bank regulators.

As a result, we have compiled our Seven Part Guide on reviewing third party vendor service contracts into one article.  A checklist for reviewing third party vendor contracts is included in the article, and also available separately.

The analysis covers typical elements that should be found in any third party vendor contract, including provisions on the nature of services to be provided, the location where the word is to be performed, breach and termination, as well as provisions related to the potential outbreak of zombies.

Reviewing Third Party Vendor Service Contracts

Checklist for Vendor Service Contracts

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12 Questions You Need to Answer Before Starting a New Bank

November 4, 2016

Authors

Robert Klingler

12 Questions You Need to Answer Before Starting a New Bank

November 4, 2016

by: Robert Klingler

With paths recently being cleared from a regulatory perspective and the consolidation in the market, we’re hoping to see a pickup in de novo applications (and one that is far greater than the five applications the FDIC has indicated it has received for all of 2015). Because of the recent history of difficulty starting new banks and the extremely limited number of applications this year, we imagine many of the qualified candidates are hesitant to take the first steps. We’d like to make the process easier for you.

In his article, “Thinking of Starting a New Bank? Answer These Questions First,” which was published in The Banking Law Journal today, my partner, Jonathan Hightower (@hightowerbanks), covers twelve questions that organizing groups and individuals should answer as they begin a venture toward a de novo bank.

Please call any member of our Financial Institutions team if you’d like to start

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Federal Rules Target Student Bank Accounts

October 20, 2016

Authors

Bryan Cave

Federal Rules Target Student Bank Accounts

October 20, 2016

by: Bryan Cave

As previously discussed on BankBryanCave.com, new Department of Education regulations will impact the terms and conditions of bank accounts that institutions of higher education and postsecondary vocational institutions may offer to students to receive disbursements of Title IV Higher Education Act funds. While the regulations apply directly to colleges, many banks and third-party servicers will need to change their products, services and practices if they want to contract with colleges to offer accounts to students.

The DOE rules require covered colleges to ensure that student account terms are in the best financial interest of students, present Title IV fund disbursement and account options to the student in a fact-based and neutral manner, and ensure that students have access to an appropriate number of surcharge-free ATMs. The rules also prohibit many account fees and impose ongoing monitoring obligations on colleges to ensure that student accounts meet all requirements of

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Supreme Court to Address Whether Collection of Time-Barred Debts Violate FDCPA

October 14, 2016

Authors

Robert Klingler

Supreme Court to Address Whether Collection of Time-Barred Debts Violate FDCPA

October 14, 2016

by: Robert Klingler

Our colleagues at The Bankruptcy Cave, Bryan Cave’s Bankruptcy & Restructuring Blog, recently published a blog post on the Supreme Court agreeing to to hear the issue of whether a debt collector that buys old, charged off debt which is beyond the statute of limitations violations the Fair Debt Collection practices Act when it files a proof of claim on that debt in a Chapter 13 bankruptcy (which they all do, as no one has an incentive to object to the claim, and they often collect far more on the debt than what they paid).

[On October 11, 2016,] the Supreme Court granted certiorari on an issue that (a) is pretty important in the world of consumer debt collection, and (b) makes some folks pretty darn furious. The issue is this:  if you file a proof of claim in a bankruptcy case, and you know such claim is barred

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