Five federal agencies, each of which has a supervisory responsibility vis-à-vis large financial institutions, have signed an agreement as to how their regulatory functions will be carried out under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank.) The five agencies signing the Memorandum of Understanding (MOU) are the Federal Reserve Bank Board of Governors, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of Comptroller of the Currency, collectively referred to as the Prudential Regulators, and the new Consumer Financial Protection Bureau (CFPB).
The five have overlapping examination responsibility for insured depository institutions with more than $10 billion. Under the MOU the agencies will coordinate examinations and other activities and share certain material supervisory information about consumer related activities including compliance with federal consumer financial laws and some laws that regulate consumer financial products and services and consumer compliance risk management programs. Also covered by the MOU are activities such as underwriting, sales, marketing, servicing and collections if they are related to consumer financial products or services.
The objectives of the MOU are to:
- Fulfill the Dodd-Frank requirement that examination schedules must be coordinated and if possible done simultaneously unless the financial institutions prefer otherwise;
- Establish voluntary arrangements for coordination and cooperation between CFPB and the Prudential Regulators
- Minimize regulatory burden on covered institutions;
- Avoid unnecessary duplication of effort;
- Ensure that the CFPB and other regulators carry out their responsibilities effectively and efficiently.
- Decrease the risk of conflicting supervisory directions by the CFPB and Prudential Regulators;
- Increase the potential for synergies and alignment of related activities of the CFPB and Prudential Regulators.
The MOU sets out guidelines for simultaneous and coordinated examinations for the CFPB and the Prudential Regulators including that each designate a point of contact for covered institutions and will consult with the institution and agree on a reasonable timetable for sharing information. Agencies will share with each other information about the scope, dates, estimated staffing and other details of their examinations and the established points of contact will coordinate material changes in that information.
While the agencies will generally carry out examinations in a simultaneous manner, the MOU stresses that nothing is intended to compel agencies to conduct examinations jointly.
Under the agreement the Agencies also agree to share drafts of examinations reports and each will have at least 30 days to comment on the reports of others before the initiating agency issues a financial report. Prior to issuing a final report or taking supervisory action in connection with an examination the agencies shall take into consideration any concerns that are raised in the comments by any other Agency.
The regulators’ monitoring of institutional performance in carrying out responsibilities under the Community Reinvestment Act (CRA) is also covered in the MOU. The Prudential Regulators are expected to routinely share CRA performance evaluations, but the 30-day comment period above does not apply to Reports of CRA Examination.
A joint press release from the five agencies said “These coordination undertakings should lead to greater uniformity and efficiencies in supervision and help to minimize regulatory burden on covered depository institutions.”