Policy, Program and Procedures

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  • 1.  Banking Institution and $10B threshold

    This message was posted by a user wishing to remain anonymous
    Posted 02-18-2021 09:14 AM
    This message was posted by a user wishing to remain anonymous


    My bank is beginning the process of assessing the impact of crossing the $10B threshold. Currently we are state chartered and answer to the FDIC and state regulators. It is my understanding that with crossing that threshold we would also fall under CFPB exam. Just reaching out for any feedback from others that have gone through this process and what this would mean for our Vendor Risk Management Dept. Best Practices? Challenges? What changed from the FDIC and CFPB when crossing this line? Thanks.

  • 2.  RE: Banking Institution and $10B threshold

    Posted 02-18-2021 12:28 PM
    Thanks "?",

    I was curious about that. 

    Lots of opinions about the CFPB that conducts on-site consumer examinations to ensure fair practices courtesy of DFAST (or Dodd-Frank Act stress test).

    Resources reviewed...

    • https://www.stlouisfed.org/on-the-economy/2017/april/why-many-bank-regulators 
    • https://independentbanker.org/2017/02/what-happens-when-a-bank-hits-10-billion/
    • https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-outlines-bank-supervision-approach/
    • https://www.consumerfinance.gov/compliance/supervision-examinations/
      • Supervision and Examination Manual
        • https://www.consumerfinance.gov/documents/6370/cfpb_supervision-and-examination-manual.pdf 
    Summary of a quick read through of the above links:

    You asked about best practices. The first two articles has some executives sharing recommendations. For best practices, the fourth link from CFPB has a Part II - Examination procedures and Part III - Examination process templates.  I think both sections provide useful documents especially the product based procedures (part II B) and Part III examination and risk assessment templates.   In Part II B, it lists the procedures required for each product.  Looking at the dates each PDF was updated, it gives you a sense of what areas had to be updated and typically it could because of findings during actual examinations that warranted the change after CFPB reviewed their lessons learned, findings, etc.

    The third link has a quick "next steps" section dated 2011 that addressed their initial goals, status of the Examination manual, and the like.

    I saw one note saying there is "no fast tract to DFAST -- and that it can take a year to two years of effort to prepare".

    With Dodd-Frank came the creation of the Consumer Financial Protection Bureau (CFPB), which conducts on-site consumer examinations to ensure fair practices (see Risks & Rules, starting on page 77) at banks over $10 billion. Regulators may impose fines or penalties if they find an institution has committed "unfair, deceptive, or abusive acts and practices."

    And at $10 billion, the Volcker Rule moves from simplified to the standard level, which bans proprietary trading and participation in most hedge and private equity funds. Banks can also see dramatic drops in debit card interchange, or swipe fees, due to the Durbin Amendment.

    However the examples cited suggested groups like your VRM department go outside and hire examiners as consultants to test your methodologies and assumptions. The same source (the second article linked above) cited its increase in staffing.   

    The "...  'ABC' Bank has implemented a strong enterprise risk-management program by hiring the right talent pool. Seven years ago, only one person was managing risk oversight. Today, there are six people charged with compliance, information security, corporate governance and overall risk oversight."

    Furthermore, the Bank's EVP "advises regional and community banks to estimate the hard dollar costs of crossing the $10 billion threshold, especially in these four areas: higher FDIC assessment costs; foregone debit card fee income due to the Durbin Amendment, which restricts how much banks above $10 billion can collect; the cost of complying with DFAST; and the cost of complying with enhanced supervisory standards and internal audits."

    Good luck.  Congratz on the growth.