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Financial Services Weekly Update

December 7, 2013

Author: Alexis Victoria DeBernardis.

New and Noteworthy Regulations

CFPB: On Tuesday, December 3, the Consumer Financial Protection Bureau announced it will expand its student loan industry oversight to include non-bank servicers. The Bureau will amend its regulation defining “larger participants” in the student loan and servicing market pursuant to its rule-making authority under Dodd-Frank. The Bureau will specifically examine such larger participants’ disclosures, consumer reporting, charges and application of payments. The rule will be effective March 1, 2014.

Upcoming Regulations

Volcker Rule: The Fed, the FDIC, and the CFTC issued sunshine notices stating that they would hold open meetings on December 10 to reveal the final version of the Volcker Rule. A spokesman from the OCC stated that it would also consider the rule on December 10. The SEC has stated it will also vote on or about that date.

Long-Term Debt Ratios:
Before the end of 2013, U.S. banking regulators are expected to issue a “bail-in” proposal that would require the biggest U.S. banks to hold greater long-term unsecured debt that could be easily converted to equity and reduce systemic risk should a firm fail.

SIFI Rules and Designations:
The Federal Reserve is expected to complete the rules for the “enhanced prudential standards” for systemically significant (“SIFI”) institutions. These new requirements will relate to liquidity, risk management and early remediation. In addition, the Federal Reserve plans to propose a capital surcharge rule for global SIFIs sometime before the end of 2013.

In the News

Volcker Rule to Include CEO Attestation: Just days before federal regulators are set to release the final version of the Volcker Rule, rumors abound as to what the rule may provide. Of particular interest is a leak claiming that the rule will require some form of CEO guarantee that its financial institution is in compliance with the rule. A CEO attestation provision was not included in the original drafting of the rule, and the inclusion of such a provision has drawn much criticism from banks.

Industry Groups Sue CFTC on Cross-Border Rule: The Securities Industry and Financial Markets Association, the International Swaps and Derivatives Association and the Institute of International Bankers filed suit against the CFTC in federal court on Wednesday, claiming that the Commission failed to follow appropriate rulemaking requirements when issuing regulations for cross-border trading. The groups allege that the CFTC’s mistakes will cause harm to investors and impede global trading.

EU Regulators Fine Big Banks $2.3B for Rate-Rigging:
Also on Wednesday, European Union antitrust officials fined a group of financial institutions for a combined amount of $1.7 billion euros (USD $2.3 billion) in a settlement for charges that the firms colluded to fix interest rates. The settlement includes Citigroup, JP Morgan Chase, Deutsche Bank, Royal Bank of Scotland and Societe Generale.

Lew Addresses Wall Street Reform Progress: Treasury Secretary Jack Lew spoke at the Pew Charitable Trusts offices on Thursday, touting the progress made so far in the way of Wall Street but underscoring that much remained to be done. Secretary Lew also hinted at what the final version of the Volcker Rule might contain, including “strong compliance requirements.”

Upcoming Meetings and Hearings

Financial Stability Oversight Council Commodities Futures Trading Commission Federal Deposit Insurance Corporation Senate Committee on Banking, Housing & Urban Affairs House Committee on Financial Services