OCC Proposes Rule to Determine True Lender in Loan Transactions
OCC proposed a rule that would determine when a national bank or federal savings association makes a loan and is the “true lender” in the context of a partnership between a bank and a third party, such as a marketplace lender. The proposed rule would resolve this uncertainty by specifying that a bank makes a loan and is the “true lender” if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan. The deadline for comments on the rule is September 03, 2020.
A key objective of this proposal is to provide regulatory clarity and certainty that would enable banks and their partners to lend in a manner consistent with their business objectives and risk appetite and in compliance with the applicable laws and regulations. Identifying the lender would pinpoint key elements of the statutory, regulatory, and supervisory framework applicable to the loan in question. When a bank makes a loan, it is responsible for ensuring that the loan is made both in a safe and sound manner and in accordance with applicable laws and regulations, even if the loan is made in the context of a third-party partnership and even if the bank’s partner is the customer-facing entity. As the bank’s prudential regulator, OCC directly supervises these lending activities and ensures that the bank has instituted appropriate safeguards to manage the risks associated with the partnership.
There are also circumstances in which a bank is not named as the lender in the loan agreement but is still, in the view of OCC, making the loan. To ensure that the OCC rule would capture these circumstances, the agency is proposing a second standard based on which party funded the loan. Under this standard, if a bank funds a loan as of the date of origination, OCC concludes that it has a predominant economic interest in the loan and, therefore, has made the loan—regardless of whether it is the named lender in the loan agreement as of the date of origination. Under the OCC proposal, the determination of which entity made the loan under the above standards would be complete as of the date the loan is originated and would not change, even if the bank were to subsequently transfer the loan.
Related Links
Comment Due Date: September 03, 2020
Keywords: Americas, US, Banking, True Lender Rule, National Banks, Federal Savings Associations, Credit Risk, Bank Lending, OCC
Previous Article
BCBS Consults on Principles for Operational Risk and ResilienceRelated Articles
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
ISSB Standards Shine Spotlight on Comparability of ESG Disclosures
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
BCBS Proposes to Revise Core Principles for Banking Supervision
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
US Proposes Final Basel Rules, Transition Period to Start in July 2025
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
FSB Report Outlines Next Steps for Climate Risk Roadmap
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.
