Weekly Rewind...News from Your Regulators

FDIC  Announces Risk Management Manual Update


RMS Examination Manual Update – The FDIC updated Section 21.1-Examination Planning of its Risk Management Manual of Examination Policies. Included are an update on the identification of examination activities that are appropriate for off-site review and those that are better suited for on-site review, and the incorporation of best practices for requesting examination information from financial institutions.


FDIC Issues Guidance on NSF Fees

Re-Presentment NSF Fees - The FDIC issued guidance to address certain consumer compliance risks associated with assessing multiple non-sufficient funds (NSF) fees arising from the re-presentment of the same unpaid transaction. During consumer compliance examinations, the FDIC found that some disclosures provided to customers did not fully or clearly describe the institution’s re-presentment practice, including not explaining that the same unpaid transaction might result in multiple NSF fees if an item was presented more than once.


Insider Lending Violations


Insider Lending Violation – The Federal Reserve fined a Maryland bank $9.5 million for violation of the Fed’s insider lending regulation for improperly extending credit to entities owned or controlled by its CEO and Chairman. The Board found deficient internal controls over insider lending practices between 2015 and 2018, which allowed the bank to extend credit totaling nearly $100 million to entities that the CEO owned or controlled, including certain family trusts, without making appropriate disclosures to, or obtaining required approvals from, a majority of the bank's board of directors. These internal control deficiencies also extended to the bank's supervision of lending staff, who permitted the CEO to participate in matters in which he had a conflict of interest. The Board also cited the bank for third-party risk management deficiencies over the same period that resulted in inadequate oversight of contracts between the bank and a local government official.

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From the OCC

Illegal Kickbacks – A former vice-president and home mortgage area manager was assessed a $150,000 civil money penalty by the OCC for requiring kickbacks from subordinates for loans originated from certain real estate agents. The kickbacks were required to be made in cash and were not reported to the bank. In 2020, the OCC issued a notice that it was taking action against the ex-employee.


Crypto-Asset Related Activities

Crypto-Asset-Related Activities – The Federal Reserve issued a supervisory letter which outlines the steps Board-supervised banks should take prior to engaging in crypto-asset-related activities, such as assessing whether such activities are legally permissible and determining whether any regulatory filings are required. Additionally, the supervisory letter states that Board-supervised banking organizations should notify the Board prior to engaging in crypto-asset-related activities. The supervisory letter also emphasizes that Board-supervised banking organizations should have adequate systems and controls in place to conduct crypto-asset-related activities in a safe and sound manner prior to commencing such activities.

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