REGULATORY DEVELOPMENTS

FEDERAL RESERVE REQUESTS FEEDBACK ON PROPOSED CHANGES TO THE DURBIN AMENDMENT

On May 7, the Federal Reserve issued a Notice of proposed regulations by inviting the public to comment on the proposed changes to Regulation II (Debit Card Exchange and Routing Fees), better known as the Durbin Amendment. The proposal clarifies that debit card issuers should enable and allow merchants to choose from at least two unaffiliated networks (for example, a PIN debit network and a signature debit network) for debit card transactions without card, such as online shopping. In the proposal, the Federal Reserve indicated that it viewed such clarifications as necessary in light of information indicating that often only one network is activated for such transactions. However, banking trade associations warned that the proposal would make it harder for banks to offer low transaction prices to acquirers and consumers and threaten to stifle innovation, including security protections, in the payments system. . Comments must be received within 60 days of posting in the Federal Register.

STAFF STATEMENT OF THE IM DIVISION ON MUTUAL FUNDS INVESTING IN THE FUTURE BITCOIN MARKET

On May 11, staff from the Investment Management Division of the SEC presented their first public statement on funds registered under the Investment Companies Act of 1940 (the 1940 Act) potentially investing in digital assets, including cryptocurrencies or cryptocurrency-related investments since January 2018. In The statement, staff acknowledged that some mutual funds invest or seek to invest in Bitcoin futures and expressed concern about the ability of those funds to invest these futures while complying with substantive legal requirements of 1940, its rules and other federal securities laws. Staff stated that they intended to “closely monitor and assess” this compliance with applicable rules and laws in coordination with staff in the Economic and Risk Analysis Division and the Reviews Division, and it highlighted the specific areas of compliance that staff plan to focus on. . Staff further noted their belief that, at this time, only mutual funds with appropriate strategies that support this type of investment and full disclosure of significant risks should continue investing in the Bitcoin futures market. Staff urged ETFs and other market participants to make additional contributions, particularly contributions focused on efforts to ensure compliance with the 1940 Law and its rules and to promote investor protection. Since closed-end funds don’t provide for daily redemption of their stocks, they don’t have the same kinds of liquidity issues as open-ended funds. Therefore, staff encourage any closed-end fund that seeks to invest in the Bitcoin futures market to consult with staff, before filing a registration statement, about the investment proposed by the fund, for compliance. anticipation of the 1940 Act and its rules, and how it would provide appropriate investor protection. Staff in the Investment Management Division are committed to being transparent about their approach to investing registered funds in the Bitcoin futures market, as well as other types of cryptocurrency and cryptocurrency investing. digital assets.

“By reopening the rules for debit card transactions, the Fed could endanger the convenience, safety and security Americans expect when using their debit cards. We will vigorously oppose any attempt to undermine the payments system at the expense of consumers. “

– Joint statement of the Financial Trade Association on the Federal Government
Reserve decision to review the Durbin amendment

VOICE OF THE SENATE FOR REPEAL OF THE REAL OCC LENDER RULE

On May 11, the US Senate passed, by 52-47 vote, a resolution to repeal the OCC “real lender” rule. The rule, which was finalized in 2020, established a test to determine when a bank is considered the true lender on a loan made in partnership with a non-bank entity. Under the Congressional Review Act, the rule will be repealed if the United States House of Representatives also votes to repeal the rule and the resolution is signed by President Biden, which is very likely. Such a repeal would prohibit the OCC from promulgating a substantially similar rule, eliminating the possibility that a revised rule or compromise would take effect.

MICHAEL J. HSU BECOMES CONTROLLER OF THE MONEY

On May 7, the US Department of the Treasury ad that Michael J. Hsu would become Acting Comptroller of the Currency on May 10, 2021. Prior to joining the OCC, Mr. Hsu served as Associate Director of the Supervisory and Regulatory Division of the Federal Reserve, where he headed the large institution Supervision Coordinating Committee Program, which oversees global systemically important banking companies operating in the United States. He has worked for the International Monetary Fund, the US Department of the Treasury and the SEC, among others.

In his initial statement to OCC employees, Mr. Hsu enumerated the disproportionate impact of the pandemic on vulnerable communities, especially communities of color and rural communities; climate change; technological change and digitization; and complacency with risk-taking as areas of “growing supervisory concern” for the OCC.

FDIC PUBLISHES 2021 RISK REVIEW

On May 10, the FDIC released its 2021 risk review, a comprehensive summary of emerging risks in the US banking system. The 2021 Risk Report summarizes conditions in the U.S. economy, financial markets, and banking industry, and outlines the main credit and market risks for banks. The report focuses on the effects of these risks on community banks in particular, with the FDIC being the primary federal regulator of the majority of community banks in the US banking system.