april 17, 2014 the new regulatory landscape: leadership—the key to success samuel p. golden...
TRANSCRIPT
April 17, 2014
THE NEW REGULATORY LANDSCAPE:LEADERSHIP—THE KEY TO SUCCESS
SAMUEL P. GOLDENMANAGING DIRECTOR AND CO-CEOALVAREZ & MARSAL FINANCIAL INDUSTRY ADVISORY SERVICES, LLC
DISCUSSION MATERIALS FOR:
© Copyright 2012. Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.
THE NEW REGULATORY LANDSCAPE
I. New Rules
II. Supervisors under Scrutiny
III. Heightened Expectations for Enterprise Risk Management (ERM)
IV. Consumer Financial Protection Bureau (CFPB) – Finding Its Way
V. An Unprecedented Focus on Compliance
VI. Increased Attention to Anti-Money Laundering (AML) Laws
VII. Summary
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NEW RULES
Dodd-Frank•Financial Stability Oversight Council (“FSOC”) Created
•OTS Eliminated• Increased OCC, FDIC, and Fed Roles
Systemically Important Financial
Institutions (SIFIs)
New CFPB Regulations - (ATR, QM and
QRM)
Fannie & Freddie Conservatorship•Secondary Mortgage Market Reform
•Large Settlements & “Put-backs”
•Securitization Reforms
Scrutiny of Credit Rating Agencies
OTC Derivative Swaps Clearing
& Trading Regulations
Volcker Rule
Significant Increases in
Regulation and Oversight
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SUPERVISORS UNDER SCRUTINY
Money Laundering Enforcement
HSBC, Standard Chartered, etc.
Servicer Reviews
London Whale Case (JPM)
Consumer Compliance (UDAAP, Fair Lending, Debt Collection, Over-Draft Protection, NSF Fees, etc.)
Leadership changes and internal reviews
A diminished role for judgment – Regulators have little incentive to take risk
As the number of appeals fielded by the OCC’s Ombudsman increases, published resolution standards are challenged
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HEIGHTENED EXPECTATIONS FOR ERM
Increased Board Responsibilities
ERM – No true threshold on an institution’s size
Capital Planning, Stress Testing, Recovery and Resolution Plans – Not just for the big banks
Increased reliance on quantitative analysis and stress tests
Risk Identification, Risk Assessments, Risk Tolerance, MIS, Independent/Systematic Testing, Validation and Oversight, and Board Reporting – The Key Ingredients for Effectiveness
Business units must act as the “First Line of Defense”
Document, Document, Document – Tell your story
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CFPB - - FINDING ITS WAY
Guidance and examination procedures
Role of enforcement attorneys
Examination report processing times
Staffing and turnoverMix between bank
and non-bank examinations
Inconsistent levels of expertise and
experience throughout “The
Bureau”
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AN UNPRECEDENTED FOCUS ON COMPLIANCE
Compliance Risk Assessment
Pre-Paid Cards, Overdrafts, NSF Fees, Debt Collection Unfair or Deceptive or Abusive Acts or Practices (UDAAP)
Fair Debt Collection Practices
Residential Lending
Fair Lending – Treatment of Disability Income
HMDA – New Reporting Requirements
CRA – Evolving Consideration of Performance Context
Vendor Management
Customer Complaint Management
Recent Enforcement Actions
Business Units Must be Involved – They are the First Line of Defense
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INCREASED ATTENTION TO AML LAWS
The “Bar Continues to Rise”
Recent Enforcement Actions
Increased Regulatory
Enforcement Scrutiny
BSA Risk Assessment
Wire Transfers
Privately Owned ATMs
Money Service
Businesses
E-Money
BSA/AML Automated
Tools
Bank Issue Agency Fine/Action Date
Saddle River Valley Bank BSA FinCEN $8.2 million Sept 2013
TIAA-CREF Trust Co., FSB BSA OCC Cease & Desist June 2013
Bank of Tokyo-Mitsubishi UFJ AML New York State $250 million June 2013
HSBC Bank USA BSA and AML FinCEN, OCC, Fed Reserve and USDJ
$500mm; $500mm; $165mm and $1.256 billion
Dec 2012
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SUMMARY
1. The “Bar Continues to Rise” – Be Prepared
2. Regulatory burden may be high – But the cost of remediating MRAs is much higher
3. Document, Document, Document – tell your story
4. Plan for examinations by doing examiners’ work for them
5. Pick your battles during and after examinations
6. Regulators have little incentive to take risk
7. Learn from the mistakes of others
8. Communicate, communicate and keep communicating
9. Strengthen and sustain your regulatory relationships – Trust is the key
The Cost of Non-Compliance Has Never Been Higher!
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© Copyright 2013. Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.