The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to alison.bennett@spglobal.com and tim.weatherhead@spglobal.com.
At the White House
President Joe Biden announced a wave of new sanctions on Feb. 24 that include severe restrictions on Russia's largest bank — Sberbank — and its second-largest bank — VTB, The Wall Street Journal reported.
The sanctions also target Russian elites and their families and put in place new prohibitions on exports to Russia of technological goods used in the nation's defense, maritime and aerospace sectors.
Biden said the sanctions will stunt Russia's military growth, limit its ability to compete globally and put restrictions on its largest state-owned enterprises. The Treasury Department said the actions target 80% of all banking assets in Russia, according to the report.
At the Federal Reserve
The Federal Open Market Committee formally adopted new rules for the investment and trading activity of senior officials.
The rules prohibit senior Fed officials from purchasing individual stocks or sector funds; holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies; entering into derivatives contracts; and engaging in short sales or purchasing securities on margin.
Senior Fed officials will also be required to provide 45 days' nonretractable notice for purchases and sales of securities, obtain prior approval for such transactions, and hold investments for at least one year. Officials are also prohibited from buying and selling investments during periods of heightened financial market stress.
The rules will go into effect May 1, except for the requirements for advance notice and pre-clearance of transactions, which will be effective July 1.
At the OCC and CFPB
The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau are investigating Bank of America Corp. for its role in administering government benefits under a California program, American Banker reported Feb. 22, citing people familiar with the matter.
The regulators are scrutinizing the bank's actions as the state's exclusive provider of prepaid debit cards to unemployment, disability and pandemic-relief beneficiaries. The program was reportedly plagued by fraud at the height of the COVID-19 pandemic.
The investigations are in their later stages, and the OCC has hinted at possible enforcement action against the banking giant, according to the report.
Lawsuits against Bank of America allege that it mishandled complaints, failed to respond to cardholders reporting unauthorized transactions that drained their accounts, and that it blocked account access for legitimate beneficiaries in its efforts to root out fraud.
Elsewhere, the OCC issued answers to frequently asked questions to provide general information on the implementation of the final rule to rescind the June 2020 Community Reinvestment Act rule.
The final rule became effective Jan. 1 and replaced the June 2020 rule with provisions largely based on rules adopted jointly by the OCC, the Federal Reserve Board and the Federal Deposit Insurance Corp. in 1995, as revised.
The FAQs address questions related to the impact of the final rule on CRA bank type; qualifying activities and the qualifying activity confirmation request system; the transition period; examination administration; assessment areas; targeted geographic areas; data reporting; changes to public notices and public files; and strategic plans.
At the DOJ
Bank trade groups urged the Justice Department to limit changes it might make to its merger guidance, while left-leaning advocacy groups pushed for greater scrutiny of proposed deals.
The DOJ issued a request for public comment on Dec. 17 seeking feedback on whether and how to revise bank merger review guidelines from 1995.
Two letters, one from the Consumer Bankers Association and a joint one from the Bank Policy Institute and the Mid-Size Bank Coalition of America, told the Justice Department that the merger review process is sufficient as is.
"Most bank mergers do not have adverse competitive effects or result in decreased competition within the United States; to the contrary, typically the greater scale and market coverage resulting from merger transactions increase competition," the Consumer Bankers Association wrote in its letter.
Meanwhile, Better Markets, an advocacy group urging enhanced oversight of financial markets, said financial stability and systemic risks need special scrutiny when assessing deals and that the assessment process should work to improve product and service availability in underserved communities. The group also recommended maintaining existing thresholds for anticompetitive effects.
At the DOL
Federal agencies, including the Labor Department, are probing Wells Fargo & Co.'s 401(k) plan, the San Francisco-based bank disclosed in a regulatory filing. Wells Fargo said the agencies are reviewing certain transactions associated with the employee stock ownership feature of its 401(k) plan, including how certain securities are bought for use in connection with the company's contributions to the plan.
