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    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    January 13, 2022

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers. The final rule makes conforming revisions to the FR 2056 reporting form and will be effective from February 14, 2022. The Federal Deposit Insurance Corporation (FDIC) also issued supplemental instructions for the Call Reports FFIEC 031, FFIEC 041, and FFIEC 051 for the December 31, 2021 reporting date. In another development, FDIC and the Financial Crimes Enforcement Network (FinCEN) announced a tech sprint to develop solutions for financial institutions and regulators to help measure the effectiveness of digital identity proofing—the process used to collect, validate, and verify information about a person.

    Final rule to automate bank stock adjustment. FED had, in April 2021, published a proposal to automate non-merger-related adjustments to member banks' subscriptions to Reserve Bank capital stock. The automated process is expected to eliminate the need for member banks to file applications to adjust their stock subscriptions—except in the context of mergers. FED also proposed to clarify that a surviving member bank must apply to adjust its stock subscription before merging or consolidating with another bank. Finally, FED proposed technical amendments to Regulation I, which governs the issuance and cancellation of capital stock by the Reserve Banks, requires that a member bank apply to adjust its stock subscription at least annually—and sometimes quarterly. FED received no comments on this proposal and is finalizing the proposed amendments with certain technical clarifications. With respect to automation of non-merger related adjustments, the Reserve Banks have developed software that automatically pulls the information needed to calculate member banks' required stock subscriptions from Call Reports. FED is making required amendments to automate the stock adjustment process. 

    Supplemental instructions for Call Reports. In a recent letter to financial institutions, FDIC notes that a new Call Report data item related to the final rule on Standardized Approach for Counterparty Credit Risk (SA-CCR), and titled “Standardized Approach for Counterparty Credit Risk opt-in election,” takes effect in the fourth quarter of 2021 within the FFIEC 031, FFIEC 041, and FFIEC 051 Call Reports and applies to Call Report Schedule RC-R – Regulatory Capital, item 31.b. Also, beginning with the December 31, 2021 report date, institutions that file the FFIEC 051 are expected to report five new data items related to sweep deposits on Schedule RC-E, Deposit Liabilities. These data items are reported semiannually on the June and December FFIEC 051 Call Report form and quarterly by institutions that file the FFIEC 031 and FFIEC 041 Call Report forms; these data items became effective as of September 30, 2021. FDIC also notes that a recent review of reported data identified a significant number of institutions that have a legal entity identifier, or LEI, but are not reporting the LEI on their Call Report. FDIC is reminding institutions that if they already have a LEI, it must be provided on the Call Report. Except for certain institutions with foreign offices, the Call Report must be received by January 30, 2022. An institution with more than one foreign office, other than a “shell” branch or an International Banking Facility, is permitted to electronically file its data to the Central Data Repository no later than February 04, 2022.

    Tech sprint on digital identity proofing. FDIC and FinCEN recently announced a Tech Sprint to develop solutions for financial institutions and regulators to help measure the effectiveness of digital identity proofing. The two entities are requesting participants to focus on this question: “What is a scalable, cost-efficient, risk-based solution to measure the effectiveness of digital identity proofing to ensure that individuals who remotely (that is, not in person) present themselves for financial activities are who they claim to be?” Through the Tech Sprint, the FDIC tech lab FDITECH and FinCEN seek to increase efficiency and account security; to reduce fraud and other forms of identity-related crime, money laundering, and terrorist financing; and to foster customer confidence in the digital banking environment. FDIC and FinCEN tentatively plan to open registration for this Tech Sprint from the end of January 2022 to mid-February 2022. The Tech Sprint will encompass a review of applications, grouping of individuals into teams, and invitations to participate in a virtual “Demo Day” of short team presentations to a panel of experts for evaluation. At the conclusion of the Tech Sprint, FDIC will publish all team presentations and recognize teams based on several criteria detailed in a forthcoming notice.

     

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    Keywords: Americas, US, Banking, Regulation I, Reporting, Mergers and Acquisitions, Call Reports, Basel, SA-CCR, FFIEC 031/041/051, Tech Sprint, FDITECH, FR 2056, Fraud Detection, Regtech, AML/CFT, LEI, FDIC, FED

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