april 17, 2014 the new regulatory landscape: leadership—the key to success samuel p. golden...

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April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY ADVISORY SERVICES, LLC DISCUSSION MATERIALS FOR:

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Page 1: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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:

Page 2: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

© 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

Page 3: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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

Page 4: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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

Page 5: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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

Page 6: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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”

Page 7: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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

Page 8: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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

Page 9: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

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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!

Page 10: April 17, 2014 THE NEW REGULATORY LANDSCAPE: LEADERSHIP—THE KEY TO SUCCESS SAMUEL P. GOLDEN MANAGING DIRECTOR AND CO-CEO ALVAREZ & MARSAL FINANCIAL INDUSTRY

www.alvarezandmarsal.com

© Copyright 2013. Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.