Regulatory Developments
The Board took a number of policy actions from April 1, 2020 to April 15, 2021.8 Many of these supported the flow of credit to help underpin economic recovery, while others advanced the Federal Reserve's objectives of improving transparency and efficiency in supervision and regulation. In addition, the Federal Reserve and other regulators issued statements to continue the public dialogue of how the Federal Reserve's approach to supervision and regulation should evolve based on new technology—such as artificial intelligence (AI)—and new risks—such as those related to operational resilience.9
These regulatory developments are set forth in table 1 and in the discussion below.
Table 1. Federal Reserve or interagency rulemakings/statements (proposed and final)
From 4/1/2020 to 4/15/2021
| Date issued | Rule/guidance |
|---|---|
| 4/3/2020 | Interagency Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200403a1.pdf |
| 4/6/2020 | Agencies announce changes to the community bank leverage ratio. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200406a.htm |
| 4/6/2020 | SR 20-10 Small Business Administration (SBA) and Treasury Small Business Loan Programs: https://www.federalreserve.gov/supervisionreg/srletters/SR2010.htm |
| 4/7/2020 | Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200407a.htm |
| 4/15/2020 | SR 20-11 Release of Updated Sections of the Federal Financial Institutions Examination Council's Bank Secrecy Act/Anti-Money-Laundering Examination Manual: https://www.federalreserve.gov/supervisionreg/srletters/SR2011.htm |
| 4/17/2020 | Federal Reserve adopts a change in Regulation O to temporarily modify the Board's rules so that certain bank directors and shareholders can apply to their banks for a loan under the Small Business Administration's Paycheck Protection Program. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200417a.htm |
| 4/27/2020 | Agencies extend comment period on updates to resolution plan guidance for large foreign banks. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200427a.htm |
| 4/30/2020 | The FFIEC, on behalf of its members, issues a statement to address the use of cloud computing services and security risk-management principles in the financial services sector. FFIEC press release: https://www.ffiec.gov/press/pr043020.htm |
| 5/1/2020 | Federal Reserve Board finalizes rule to extend by 18 months the initial compliance dates for certain parts of its single-counterparty credit limit rule. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200501a.htm |
| 5/5/2020 | Federal bank regulatory agencies modify the liquidity coverage ratio for banks participating in Money Market Mutual Fund Liquidity Facility and Paycheck Protection Program Liquidity Facility. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200505a.htm |
| 5/8/2020 | Federal financial regulatory agencies issue interagency policy statement on allowances for credit losses and interagency guidance on credit risk review systems. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200508a.htm |
| 5/8/2020 | SR 20-12 Interagency Policy Statement on Allowances for Credit Losses: https://www.federalreserve.gov/supervisionreg/srletters/SR2012.htm |
| 5/8/2020 | SR 20-13 Interagency Guidance on Credit Risk Review Systems: https://www.federalreserve.gov/supervisionreg/srletters/SR2013.htm |
| 5/15/2020 | Regulators temporarily change the supplementary leverage ratio to increase banking organizations' ability to support credit to households and businesses in light of the coronavirus response. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200515a.htm |
| 5/20/2020 | Federal agencies share principles for offering responsible small-dollar loans, including during periods of economic stress, natural disasters, or other extraordinary circumstances such as the public health emergency created by the COVID-19 event. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200520a.htm |
| 6/15/2020 | Federal Reserve Board resumes examination activities for all banks, after previously announcing a reduced focus on exam activity in light of the coronavirus response. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200615a.htm |
| 6/23/2020 | Federal and state regulatory agencies issue examiner guidance for assessing safety and soundness considering the effect of the COVID-19 pandemic on financial institutions. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200623a.htm |
| 6/23/2020 | SR 20-15 Interagency Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Institutions: https://www.federalreserve.gov/supervisionreg/srletters/sr2015.htm |
| 6/24/2020 | SR 20-16 Supervision of De Novo State Member Banks: https://www.federalreserve.gov/supervisionreg/srletters/SR2016.htm |
| 6/25/2020 | Financial regulators modify provisions of Volcker rule related to "covered funds." Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200625a.htm |
| 6/25/2020 | Agencies finalize amendments to swap margin rule. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200625b.htm |
| 7/1/2020 | Agencies provide largest firms with information for next resolution plans. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200701a.htm |
| 7/1/2020 | Financial regulators issue statement on managing the London Inter-Bank Offer Rate (LIBOR) transition. FFIEC press release: https://www.ffiec.gov/press/pr070120.htm |
| 7/15/2020 | Federal Reserve extends a change in Regulation O to temporarily modify the Board's rules so that certain bank directors and shareholders can apply to their banks for a Small Business Administration's Paycheck Protection Program loan. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200715a.htm |
| 8/3/2020 | SR 20-18/CA 20-13 Joint Statement on Additional Loan Accommodations Related to COVID-19: https://www.federalreserve.gov/supervisionreg/srletters/SR2018.htm |
| 8/21/2020 | SR 20-21 Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons: https://www.federalreserve.gov/supervisionreg/srletters/SR2021.htm |
| 8/26/2020 | Agencies issue three final rules: • a final rule that temporarily modifies the community bank leverage ratio, as required by the CARES Act; • a final rule that makes more gradual, as intended, the automatic restrictions on distributions if a banking organization's capital levels decline below certain levels; and • a final rule that allows institutions that adopt the current expected credit losses, or "CECL," accounting standard in 2020 to mitigate the estimated effects of CECL on regulatory capital for two years. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200826a.htm |
| 9/1/2020 | Federal and state financial regulatory agencies issue interagency statement on supervisory practices regarding financial institutions affected by Hurricane Laura and California wildfires. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200901b.htm |
| 9/21/2020 | The Federal Reserve Board issues an Advance Notice of Proposed Rulemaking to modernize the regulations to implement the Community Reinvestment Act. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200921a.htm |
| 9/29/2020 | Agencies issue two final rules: • a final rule that temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions; and • a final rule that neutralizes—because of the lack of credit and market risk—the regulatory capital and liquidity effects for banks that participate in certain Federal Reserve liquidity facilities. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200929a.htm |
| 9/30/2020 | Federal Reserve Board invites public comment on proposal to update the Board's capital planning requirements to be consistent with other Board rules that were recently modified. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200930a.htm |
| 10/9/2020 | SR 20-22 ISDA IBOR Fallback Protocol and IBOR Fallback Supplement: https://www.federalreserve.gov/supervisionreg/srletters/SR2022.htm |
| 10/9/2020 | SR 20-23 Interagency Order Granting an Exemption from Customer Identification Program Requirements for Loans Extended by Banks and Their Subsidiaries to All Customers to Facilitate Purchases of Property and Casualty Insurance Policies: https://www.federalreserve.gov/supervisionreg/srletters/SR2023.htm |
| 10/20/2020 | The federal banking agencies finalize a rule to limit the interconnectedness and reduce the impact from failure of the largest banking organizations. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201020a.htm |
| 10/23/2020 | The Federal Reserve Board and the Financial Crimes Enforcement Network (FinCEN) issue for public comment a proposed rule that would amend the recordkeeping and travel rule regulations under the Bank Secrecy Act. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201023a.htm |
| 10/29/2020 | Agencies propose regulation on the role of supervisory guidance. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201029a.htm |
| 10/30/2020 | Agencies release paper on operational resilience. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201030a.htm |
| 11/6/2020 | Agencies release a statement on reference rates for loans: https://www.federalreserve.gov/supervisionreg/srletters/SR2025.htm |
| 11/19/2020 | Federal Reserve Board issues final rule modifying the annual assessment fees for its supervision and regulation of large financial companies. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201119a.htm |
| 11/19/2020 | Agencies release fact sheet to clarify Bank Secrecy Act due diligence requirements for banks and credit unions that offer services to charities and nonprofits. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201119b.htm |
| 11/20/2020 | Agencies provide temporary relief to community banking organizations related to certain regulations and reporting requirements as a result of their growth in size from the COVID event. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201120a.htm |
| 11/30/2020 | Agencies issue statement on LIBOR transition. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201130a.htm |
| 11/30/2020 | Federal Reserve Board welcomes and supports release of proposal and supervisory statements that would enable clear end date for U.S. Dollar (USD) LIBOR and would promote the safety and soundness of the financial system. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201130b.htm |
| 12/9/2020 | Agencies announce finalized guidance for resolution plans of certain large foreign banks and provide information regarding the content of the next resolution plans for large foreign and domestic banks. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201209a.htm |
| 12/18/2020 | Federal Reserve Board issues guidance describing financial institutions which are subject to the Large Institution Supervision Coordinating Committee program: https://www.federalreserve.gov/supervisionreg/srletters/sr2030.htm |
| 12/18/2020 | Agencies propose requirement for computer security incident notification. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20201218a.htm |
| 1/19/2021 | Federal Reserve Board finalizes a rule that updates the Board's capital planning requirements to be consistent with other Board rules that were recently modified. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210119a.htm |
| 2/9/2021 | Federal Reserve Board announces the second extension of a rule to bolster the effectiveness of the Small Business Administration's Paycheck Protection Program (PPP). Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210209a.htm |
| 3/5/2021 | Federal Reserve Board clarifies guidance as it relates to definitions for minority depository institutions. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210305a.htm |
| 3/9/2021 | Federal bank regulators issue rule supporting the Treasury's investments in minority depository institutions and community development financial institutions. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210309a.htm |
| 3/9/2021 | Federal Reserve Board issues guidance on assessing supervised institutions' plans to transition away from the use of LIBOR: https://www.federalreserve.gov/supervisionreg/srletters/SR2107.htm |
| 3/19/2021 | Temporary supplementary leverage ratio changes to expire as scheduled. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210319b.htm |
| 3/19/2021 | Federal Reserve Board announces that the temporary change to its supplementary leverage ratio (SLR) for bank holding companies will expire as scheduled on March 31. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210319a.htm |
| 3/25/2021 | Federal Reserve announces temporary and additional restrictions on bank holding company dividends and share repurchases currently in place will end for most firms after June 30, based on results from upcoming stress test. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210325a.htm |
| 3/29/2021 | Agencies seek wide range of views on financial institutions' use of artificial intelligence. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210329a.htm |
| 3/31/2021 | Federal Reserve Board issues guidance describing the application of its Large Institution Supervisory Coordinating Committee program to foreign banking organizations: https://www.federalreserve.gov/supervisionreg/srletters/sr2030.htm |
| 3/31/2021 | Federal Reserve Board adopts final rule outlining and confirming the use of supervisory guidance for regulated institutions. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210331a.htm |
| 3/31/2021 | Federal Reserve Board publishes frequently asked questions (FAQs) comprising existing legal interpretations related to a number of the Board's longstanding regulations. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210331b.htm |
| 4/08/2021 | Federal Reserve Board invites public comment on a proposal to automate non-merger-related adjustments to member banks' subscriptions to Federal Reserve Bank capital stock. Federal Reserve Board press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210408a.htm |
| 4/09/2021 | Agencies issue statement and request for information on Bank Secrecy Act/anti-money-laundering compliance. Interagency press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210409a.htm |
Box 2: Temporary Relief from Asset-Based Thresholds in Regulations
Asset-based thresholds in the Federal Reserve's regulations are designed, in part, to appropriately calibrate regulatory requirements given a banking organization's size. As a result of banks' response to the COVID event, including participation in the PPP, the balance sheets of some community banking organizations have grown unexpectedly since the beginning of 2020. Consequently, these institutions could become subject to new regulatory requirements.
Therefore, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued an interim final rule to provide temporary regulatory relief to community banking organizations to address the consequences of the unanticipated asset growth in 2020. This action provides community banking organizations with time to reduce their assets or prepare for additional regulatory and reporting standards.
The agencies' interim final rule permits community banking organizations1 as of December 31, 2019, to use asset data as of December 31, 2019, to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021.2 This means that asset growth in 2020 or 2021 will not trigger new regulatory requirements, including reporting requirements. These banking organizations have until January 1, 2022, at the earliest, to address the unanticipated asset growth.
Similar to the relief provided in the interim final rule, the agencies temporarily revised applicable FFIEC Call Report instructions to provide reporting relief for those community banking organizations experiencing temporary asset growth.3 Further, the Federal Reserve temporarily revised the reporting instructions for a number of its regulatory reports 4 for community holding companies to determine the applicability of asset-based reporting thresholds set at $10 billion or less using asset data as of December 31, 2019.5 Therefore, a community bank's and community holding company's asset growth in 2020 or 2021 will not trigger new reporting requirements until January 1, 2022, at the earliest.
1. The interagency interim rule defines the term "community banking organizations" as national banks, savings associations, state banks, bank holding companies, savings and loan holding companies, and U.S. branches and agencies of foreign banking organizations with under $10 billion in total assets. Return to text
2. See 85 Fed. Reg. 77,345 (December 2, 2020). The notice provides a summary of the regulations with asset-based regulatory thresholds that are covered by the interagency interim rule. https://www.federalregister.gov/documents/2020/12/02/2020-26138/temporary-asset-thresholds. Return to text
3. See 86 Fed. Reg. 10,157 (February 18, 2021) and appendix A for the definition of the FFIEC Call Reports. https://www.federalregister.gov/documents/2021/02/18/2021-03210/agency-information-collection-activities-submission-for-omb-review-comment-request. Return to text
4. See 85 Fed. Reg. 77,351–77,352 (December 2, 2020) for Table 1, Reporting Requirements for Affected Federal Reserve Reports Under Interim Final Rule and After Regulatory Burden Relief Ends, available at www.federalregister.gov/documents/2020/12/02/2020-26138/temporary-asset-thresholds. Return to text
5. The following regulatory reports were temporarily revised: Financial Statements for Holding Companies (FR Y-9 reports; OMB No. 7100-0128); Statements of U.S. Nonbank Subsidiaries of U.S. Holding Companies (FR Y-11 and FR Y-11S; 7100-0244) (FR Y-11 reports); Reports of Foreign Banking Organizations (FR Y-7N, FR Y-7NS, and FR Y-7Q; 7100-0125) (FR Y-7 reports); and Statements of Foreign Subsidiaries of U.S. Banks (FR2314 and FR 2314S; OMB No. 7100-0073) (FR 2314 reports). Return to text
Box 3: Exploring Artificial Intelligence
Banks use artificial intelligence (AI) in a growing number of areas, including fraud monitoring, customer service, trading, and loan underwriting. This has prompted the Federal Reserve to explore how best to support the responsible use of AI and provide clarity around supervisory expectations.
The Federal Reserve is seeking input from a broad variety of stakeholders on these questions. In December 2020, the Federal Reserve, the FDIC, the OCC, and the Consumer Financial Protection Bureau (CFPB) co-hosted a public session to explain the current regulatory landscape and highlight commonly asked questions. Over 3,000 attendees participated, including supervised institutions, AI technology vendors, and consumer advocates.
In January 2021, the Federal Reserve held a two-day academic symposium on AI with over 2,000 attendees, including regulators, members of the financial services industry, consumer advocates, and academics. The symposium included some of the leading researchers in the field and generally focused on potential benefits and limits of AI. The speakers discussed the importance of understanding how AI systems make decisions and reviewed various techniques under development to provide that transparency.
On March 29, the Federal Reserve, the FDIC, the OCC, the CFPB, and the National Credit Union Administration issued a request for information on the risk management of AI applications in financial services. The request for information addresses a wide range of AI-related topics, including the potential for a lack of transparency in AI models, the use of data in AI applications, cybersecurity risks, and fair lending considerations. The responses will be used to inform whether additional clarity around supervisory expectations on the use of AI is warranted.
References
8. The Federal Reserve publishes Supervision and Regulation (SR) letters and Consumer Affairs (CA) letters to address significant policy and procedural matters related to the Federal Reserve System's supervisory responsibilities and its consumer compliance supervisory responsibilities, respectively. Return to text
9. See boxes 3, 4, and 8. Return to text