The Federal Financial Institutions Examination Council (FFIEC)—the interagency body tasked with setting uniform principles and standards for the examination of financial institutions by federal regulators, including the Consumer Financial Protection Bureau—has adopted a Policy Statement designed to streamline the information presented in examination reports (“ROE”). While the agencies represented by the FFIEC will make any individual adjustments deemed necessary for their existing ROE guidance, financial institutions should be aware of the new format outlined in the Policy Statement which sets forth minimum expectations for what should be included in all ROEs.

In the Policy Statement, the FFIEC explicitly rescinds and replaces the 1993 Interagency Policy Statement on the Uniform Core Report of Examination. The Policy Statement is the latest in a series of FFIEC announcements related to their Examination Modernization Project which was launched to identify and assess ways to improve the effectiveness, efficiency and quality of examination processes, particularly through the use of technology, and to reduce unnecessary regulatory burden on community financial institutions. The Policy Statement list of minimum expectation for ROEs includes:

  • Identifying information about the institution and agency;
  • A statement on the confidentiality of information;
  • Conclusions presented in the order of importance;
  • A brief narrative on the financial institution’s condition and risk profile, including assigned regulatory component and composite ratings;
  • A discussion of the adequacy of the financial institution’s risk management practices;
  • Prominent notice of any issues of supervisory concern or warranting corrective action; and
  • Signatures of the board of directors acknowledging receipt and review.

As with the recent FFIEC’s guidance regarding Home Mortgage Disclosure Act rules (as discussed in our prior blog post), the Policy Statement is an important resource for financial institutions interacting with the FFIEC member agencies.

The federal banking agencies (the Federal Reserve Board, OCC, and FDIC (FBAs)), recently issued a “Policy Statement on Interagency Notification of Formal Enforcement Actions” that is intended “to promote notification of, and coordination on, formal enforcement actions among the FBAs at the earliest practicable date.”  The issuance of the policy statement follows the DOJ’s announcement last month of a new policy to encourage coordination among the DOJ and other enforcement agencies when imposing multiple penalties for the same conduct to discourage “piling on.”

The new policy statement recites that it is not intended as a substitute for routine informal communications among FBAs in advance of an enforcement action, including verbal notification of pending enforcement actions “to officials and staff with supervisory  and enforcement responsibility for the affected institution.”

The policy statement’s key instructions are:

  • When an FBA determines that it will take formal enforcement action against a federally-insured depository institution, depository institution holding company, non-bank affiliate, or institution-affiliated party, it should evaluate whether the action involves the interests of another FBA.  By way of example, the policy statement notes that an entity targeted by an FBA for unlawful practices might have significant connections with an institution regulated by another FBA.
  • If it is determined that one or more other FBAs have an interest in an enforcement action, the FBA proposing the action should notify the other FBA(s) at the earlier of the FBA’s written notification to the targeted entity or when the responsible agency official or group of officials determines that enforcement action is expected to be taken.
  • The information shared should be appropriate to allow the other FBA(s) to take necessary action in examining or investigating the entity over which they have jurisdiction
  • If two or more FBAs is considering bringing a complementary action, such as an action involving a bank and its parent holding company, those FBAs should coordinate the preparation, processing, presentation, potential penalties, service, and follow-up of the enforcement action.

We view the new policy statement as a very positive development.

Since the day it officially opened its doors for business (July 21), the CFPB has been taking credit card complaints on its website and via calls to a toll-free number. Now it has issued a proposed policy statement to address its plans for publicly disclosing credit card complaint data through a database and in published periodic reports. Comments are due by January 30, 2012.

The Dodd-Frank Act makes it the CFPB’s objective to ensure that “consumers are provided with timely and understandable information to make responsible decisions about financial transactions” and credit card markets operate “transparently and efficiently.” The CFPB thinks making the complaint data public will serve that objective because it expects the data to be mined “for trends and patterns” by “academics and groups dedicated to empowering consumers in making well-informed decisions.”

The database would not include any confidential personal information such as the consumer’s name, address or card number. However, the disclosed data would include the issuer’s name as well as the complaint subject, the consumer’s zip code, the date of the complaint and whether or how the issuer responded. The policy statement contemplates that an issuer will have at least one month after a complaint is submitted to establish that it did not issue the card in question before the complaint data is updated to the database. Due to perceived privacy risks, the database would not initially include narrative data provided by consumers, such as a description of “what happened” or what would be a “fair resolution.”

Periodic reports may contain an analysis of patterns or trends identified in the complaint data. The types of data aggregations published in the reports will depend on what conclusions the CFPB thinks it can fairly draw from the data for particular reporting periods.

The CFPB’s own discussion of its proposal recognizes some of the potential pitfalls in drawing conclusions from the data. Most importantly, we hope the CFPB will be mindful that its complaint data is not empirical data and will not attempt to use it as a basis for future rulemaking.  (In his recent post on the CFPB’s interim report on credit card complaints, my colleague Chris Willis discussed some of the risks created by the CFPB’s focus on complaints.)