What is "de-Risking"?

Last month, the Treasury released a report on de-risking. The term “de-risking” means actions taken by a financial institution to terminate, fail to initiate, or restrict a business relationship with a customer, or a category of customers, rather than manage risk associated with that relationship consistent with risk-based supervisory or regulatory requirements. A financial institution may de-risk due to drivers such as profitability, reputational risk, lower risk appetite, regulatory burdens or unclear expectations, or sanctions regimes. The report concludes that a wide range of customers either are unable to secure bank access or face unusual barriers in doing so as a result of de-risking, and that the impacts warrant corrective action.  

CFPB Issues Fines

The CFPB assessed a $9 million fine against a bank for allegedly failing to property manage and respond to customers’ credit card disputes and fraud claims. The complaint stated that the bank failed to: (1) reasonably investigate and appropriately resolve billing error notices and claims of unauthorized use by automatically denying such claims for failure to return a fraud affidavit; (2) credit consumers’ accounts for fees and finance charges when unauthorized use and billing errors occurred; (3) provide consumers with required acknowledgment and denial notices regarding billing error notices; and (4) disclose required credit counseling information to consumers when consumers called the toll-free number designated for such purpose.

FDIC Releases Enforcement Actions

The FDIC released its April enforcement actions which include civil money penalties against members of a bank’s board of directors for not responding to concerns expressed by the FDIC, and a prohibition order and CMP against an ex-bank president for making unauthorized advances on a bank customer’s loan accounts and using the proceeds for personal purposes. 

OCC Issues Enforcement Actions

The OCC updated the Bank Enforcement Actions section of its Policies and Procedures Manual. The Manual outlines the actions that the OCC may take against banks that exhibit persistent weaknesses. Actions include additional requirements and restrictions, such as requirements that a bank improve its capital or liquidity position, as well as restrictions on the bank’s growth, business activities or payments of dividends. The OCC also updated the Safety and Soundness chapter of the Comptroller’s Handbook which provides examiners with guidance on assessing the quantity of a bank’s liquidity risk and quality of liquidity risk management.