FDIC and OCC Issue Operational and Regulatory FAQs for Financial Institutions in Wake of COVID-19
As the impact of the novel coronavirus (COVID-19) pandemic continues to grow, federal regulatory authorities, including the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System, have been working together and with state banking agencies and financial institutions to arrive at reasonable steps for responding to COVID-19. Last week’s joint statement on loan modifications for borrowers impacted by COVID-19 was a significant step in this direction as it encouraged financial institutions to work with customers impacted by COVID-19 (see our related alert here).
As part of the FDIC’s and the OCC’s efforts to help insured depository institutions operate in a safe, sound and fair manner throughout the COVID-19 pandemic, on March 27, 2020 the FDIC [1] and the OCC [2] each released a set of Frequently Asked Questions to provide banks and savings institutions with guidance on certain operational and regulatory concerns related to COVID-19. Topics covered by the FAQs include: (i) additional guidance on payment adjustments and working with borrowers, (ii) operational questions for serving customers, opening branches, cash management, and security, and (iii) regulatory reporting and application filing issues. Although the OCC’s FAQs are specifically addressed to the national banks and federal savings associations that agency supervises, they provide insight for all manner of financial institutions. Below is a list of select FAQs from the FDIC and OCC issuances. To access the complete FAQs, please see the FDIC and OCC COVID-19 resource website pages here and here, respectively.
Regardless of asset size, many banks find themselves in uncharted territory. The Troutman Sanders and Pepper Hamilton Financial Institutions teams are here to help answer your questions about the legal, regulatory, and operational impacts of the COVID-19 pandemic. Please visit our joint COVID-19 Resource Center for COVID-19 news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge.
SELECT FDIC FAQs
1. Alternative Service Options. In an effort to protect employees and customers, can a financial institution limit access to branch offices and require customers to use the drive-up window?
Yes. Financial institutions can consider alternative service options to provide access to financial services. Financial institutions may want to remind customers of the various ways they can access banking services without physically coming to a facility, such as managing their accounts online, performing transactions at an automated teller machine (ATM), using telephone banking, or accessing a mobile banking application. Financial institutions could also provide information about how to use electronic payments, bill pay, and mobile remote deposit capture services.
Providing regularly updated information about the operating status of the bank, branch offices, remote access facilities, and mobile and online services as pandemic conditions evolve could be helpful to customers. Posting this information on the institution’s website, providing recorded information on its customer support lines, and pushing notifications out to customers that have signed up for alerts are just some of the ways institutions could help customers.
2. Filing Applications. Does the FDIC require financial institutions impacted by COVID-19 to file applications for temporary office closures?
No. The FDIC does not require an application to temporarily close a facility due to staffing challenges or to take precautionary measures. For example, some institutions may wish to limit foot traffic within a branch and provide services only through the drive-through lanes. The FDIC supports flexible approaches and encourages financial institutions to maintain a safe environment for their employees, reduce disruptions to their customers, provide alternative service options when practical, and reopen affected facilities when it is safe to do so.
However, financial institutions should check with their state regulator to determine whether state laws and regulations require applications to be filed. While no official application is required by the FDIC, affected financial institutions are encouraged to notify their primary federal and state regulator and their customers of temporary closure of an institution’s facilities and the availability of any alternative service options as soon as practical.
3. First Quarter 2020 Regulatory Report Filings. The effects of COVID-19 may affect the ability of financial institutions to submit timely and accurate regulatory reports for March 31, 2020. These reports include bank Reports Condition and Income (Call Reports). What approach does the FDIC expect to take in situations where institutions affected by COVID-19 expect to encounter difficulty completing their March 31, 2020, regulatory reports?
The FDIC understands that financial institutions may need additional time to submit certain regulatory reports in light of staffing priorities and disruptions caused by COVID-19. The FDIC will not take action against any institution for submitting its March 31, 2020 Reports of Condition and Income (Call Reports) after the respective filing deadline, as long as the report is submitted within 30 days of the official filing date. FDIC-supervised institutions are encouraged to contact the FDIC in advance of the official filing date if they anticipate a delayed submission. See the March 25, 2020 FFIEC release, Financial Regulators Highlight Coordination and Collaboration of Efforts to Address COVID-19.
4. First Quarter 2020 Regulatory Reporting Disclosure. Is there an ability for a financial institution to disclose additional information in its regulatory reports about the consequences of the impacts of COVID-19?
Yes, the FDIC notes that for financial institutions that file Call Reports, the management of such financial institutions may, if it wishes, submit a brief narrative statement on the amounts reported in the Call Report. This optional narrative statement will be made available to the public, along with the publicly available data in the Call Report. This statement has long been available for the use of financial institutions that are required to file a Call Report. Financial institutions may wish to comment on certain financial consequences to their institutions resulting from the effects of COVID-19 in the optional narrative statement. Institutions can refer to the General Instructions to the Call Report for more information.
5. Updated Valuation Information. Do financial institutions need to obtain updated valuation information for real estate-related transactions when granting a short-term loan modification to a borrower affected by COVID-19?
No. There is no regulatory requirement for a financial institution to obtain updated valuation information for real estate related transactions when granting short-term loan modifications to borrowers affected by COVID-19. The 2010 Interagency Appraisal and Evaluation Guidelines note that “A loan modification that entails a decrease in the interest rate or a single extension of a limited or short-term nature would not be viewed as a subsequent transaction.” Conducting a fact-specific review would enable financial institutions to consider whether loan modifications that provide long-term extensions constitute a subsequent transaction, which would require updated valuation information. Financial institutions also may want to obtain updated valuation information to assess and mitigate higher risk real estate-related financial transactions.
6. Bank Secrecy Act. Do financial institutions with reduced staff have to meet the timeframes for processing reports related to the Bank Secrecy Act (BSA)?
On March 16, 2020, the Financial Crimes Enforcement Network (FinCEN) issued a press release encouraging financial institutions affected by COVID-19 to contact FinCEN and their functional regulators as soon as practicable if there were concerns about any potential delays in their ability to file required BSA reports. FinCEN’s Regulatory Support Section will continue to be available to support financial institutions for the duration of the COVID-19 pandemic. Financial institutions supervised by the FDIC should contact their Regional Office to discuss any concerns with filing BSA reports.
7. Other FDIC Resources Available for Banks
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FIL-22-2020: Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus, March 22, 2020
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FIL-19-2020: Joint Statement on CRA Consideration for Activities in Response to COVID-19, March 19, 2020
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FIL-17-2020: FDIC Statement on Financial Institutions Working with Customers Affected by the Coronavirus and Regulatory and Supervisory Assistance; March 13, 2020
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FFIEC Statement on Pandemic Planning, March 6, 2020
SELECT OCC FAQs
1. When should banks look at implementing alternative work schedules such as working from home or staggering work hours?
Banks should function in a manner that continues to meet the essential banking needs of their communities while balancing the safety and needs of their employees. Banks should consider appropriate opportunities for certain employees to work from home to reduce risks. Similarly, staggered shifts, leveraging technologies, and limited branch hours are other considerations.
The Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Administration (OSHA) have developed guidance for businesses and employers on how to best protect their employees and customers. Please refer to their guidance:
2. Many state and local authorities have issued stay-at-home proclamations in response to the COVID-19 outbreak; however, the financial services industry is designated as a critical infrastructure sector by the Department of Homeland Security (DHS). How should banks determine essential staff to continue operations?
On March 22, 2020, Treasury Secretary Steven Mnuchin issued a memorandum stating that the financial services sector is a Critical Infrastructure Sector as identified by the DHS. With this designation, financial services sector employees have a special responsibility to maintain normal work schedules to ensure continuity of functions critical to public health and safety, as well as economic and national security. Employees who are deemed Essential Critical Infrastructure Workers include those who:
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process and maintain systems for processing financial transactions and services
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provide customers access to banking and lending services.
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support financial operations.
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provide core services through key third-party providers.
Please refer to the OSHA guidance, which provides additional guidance on the Essential Critical Infrastructure Workforce and strategies for safeguarding employee health.
3. Can a bank close a branch or temporarily reduce access due to COVID-19?
Yes, in the absence of a Comptroller proclamation or in the case of any emergency or event, bank management has discretion to act prudently and responsibly to ensure the safety of human life and to safeguard banking assets (tangible and intangible). The OCC understands that banks may need to temporarily close branches or otherwise reduce access to a facility because of staffing challenges or to take precautionary measures. The OCC encourages banks to reduce disruptions to their customers, provide alternative service options when practical, reopen affected facilities when safe to do so, and notify customers of such disruptions and alternative services. In the event a state or local official designates a legal holiday for emergency reasons, banks may choose to close or remain open.
4. Is there any relief on the filing of Currency Transaction Reports or Suspicious Activity Reports during the national emergency related to COVID-19?
FinCEN requests financial institutions affected by the pandemic to contact FinCEN and their primary regulator as soon as practicable if an affected bank has concern about potential delays in its ability to file required BSA reports. Financial institutions seeking to contact FinCEN should call FinCEN’s Regulatory Support Section (RSS) at 800-949-2732 and select option 6 or email FRC@fincen.gov. FinCEN’s RSS will be available to support financial institutions for the duration of the COVID-19 pandemic.
5. Can a bank change its cash withdrawal limits? Are any OCC notices required to change withdrawal limits?
Banks should consider their applicable account agreements; Regulations E, CC, and DD; applicable state laws; and safe and sound banking practices when setting or changing any cash withdrawal limits. Banks are not required to submit an OCC notice or obtain approval prior to changing cash withdrawal limits. Banks are encouraged to discuss any significant cash supply issues or general liquidity with the appropriate supervisory office.
6. What if our bank experiences a disruption to our cash supply?
The OCC encourages banks to contact the appropriate Federal Reserve Bank or Branch or work with other depository institutions to manage cash supplies. Banks should be in contact with their third-party courier services to ensure timely delivery of cash and develop contingency plans to limit potential disruptions.
7. Should banks use the Federal Reserve Bank’s “discount window”?
The OCC encourages banks to use the “discount window” to continue supporting households and businesses. The discount window provides short-term loans to banks and plays an important role in supporting the liquidity and stability of the federal banking system.
8. What type of communication is recommended to inform customers of a bank’s response to COVID-19?
Banks are encouraged to communicate with their customers and employees and provide services during this extraordinary situation. Using a variety of communication methods such as email, text messages, automated calls, and website postings may ensure key messages are received by the bank’s customers and employees. Proactive engagement with customers to notify them of when and where bank services are available can assist customers in dealing with this situation.
9. What is the recommendation on signage being posted in branches for customers regarding changes in branch hours and safety precautions?
If a bank needs to temporarily close or otherwise reduce access to a facility, the OCC encourages the bank to communicate changes to normal operations to their customers using a variety of communication methods such as physical signage at branches, email, text messages, automated calls, and website postings.
10. If we need to close a branch because of an infected employee, what is the bank’s responsibility in reporting this to customers?
Banks are encouraged to notify their customers as soon as practical of the need to close a branch, the expected duration of the closing, and locations of the closest alternative branches. Provide customers the ability to contact the bank and seek additional information.
The CDC has developed guidance for businesses and employers related to COVID-19. They have also developed a risk matrix to assess risk and recommend mitigating measures. Please refer to these two pieces of guidance for additional information.
11. Can a bank receive Community Reinvestment Act (CRA) consideration for banking services performed in response to customers affected by COVID-19?
Pursuant to the CRA, the OCC will favorably consider retail banking services and retail lending activities that are responsive to the needs of low- and moderate-income individuals, small businesses, and small farms affected by COVID-19; and that are in a financial institution’s assessment areas and consistent with safe and sound banking practices. OCC examiners will give CRA consideration and will not criticize prudent efforts to modify or ease the terms on new or existing loans for affected low- and moderate-income customers, small businesses, and small farms. Such practices may help customers to recover or maintain their financial capacity and enhance their ability to service their debt.
For additional information, please refer to OCC Bulletin 2020-19, “ Pandemic Planning: Joint Statement on Community Reinvestment Act Consideration for Activities in Response to COVID-19.”
12. Can a bank receive CRA consideration for community development activities in response to COVID-19?
Considering the declaration of a national emergency, banks will receive CRA consideration for community development activities as outlined in the bulletin. The pandemic has had a significant economic impact that may extend beyond banks’ assessment areas. Therefore, the agencies are reminding institutions that favorable consideration will be given to community development activities that 1) are located in a broader statewide or regional area that includes a bank’s CRA assessment area and 2) help to stabilize communities affected by COVID-19, provided that such institutions are responsive to the community development needs and opportunities that exist in their own assessment area(s). CRA consideration for community development activities will be effective through a six-month period after the national emergency declaration is lifted, unless extended by the agencies.
For additional information, please refer to OCC Bulletin 2020-19, “ Pandemic Planning: Joint Statement on Community Reinvestment Act Consideration for Activities in Response to COVID-19.”
13. Are there any plans to cancel upcoming OCC examinations and reschedule them once the COVID-19 outbreak has subsided?
The OCC is evaluating alternative options to conduct our supervisory activities. These include working remotely and maximizing the use of electronic records and communication. We understand the impact this situation is having on bank operations and staff. We encourage banks to discuss the examination schedule with their Examiner-in-Charge.
14. Is there any regulatory relief to support the completion of regulatory-required letters and reporting when a bank is experiencing a staff shortage?
Bank management seeking specific relief should contact their Examiner-in-Charge to discuss regulatory reporting requirements.
[1] FDIC - Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19) – As of March 27, 2020.
[2] OCC - Coronavirus Disease 2019 (COVID-19) Frequently Asked Questions for National Banks and Federal Savings Associations – As of March 27, 2020.