Bankers, FDIC explain new federal regulatory framework

Written by  //  November 28, 2012  //  Banking, Financial District  //  No comments

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Carmen Pagán speaks during a recent seminar.

The Puerto Rico Bankers Association and the Federal Deposit Insurance Corporation will sponsor the sixth edition of the Minority Depository Institution Training Seminar Nov 29-30, to provide participants with an overview of last year’s challenges within the world of regulatory compliance.

The seminar’s educational program includes conferences about regulators’ approach toward compliance risks, practices or activities considered unfair and deceptive under the “post Dodd-Frank Act era,” new consumer rights for international transfers, and other compliance aspects that affect local banking and financial institutions.

“Regulators will provide us with an overview of last year’s challenges within the regulatory compliance world, as well as new insights regarding the regulators’ new approach towards compliance risks and its consequences for banks, particularly in areas such as banking products and services,” said Carmen M. Pagán, president of the Bankers Association’s compliance committee and vice president and director of the compliance department at FirstBank.

As a result of the implementation of the Dodd-Frank Act in 2010, financial institutions are required to establish procedures and processes to prevent and detect potential unfair, deceptive, or abusive acts or practices. The law authorizes the new Consumer Financial Protection Bureau to issue and enforce regulations related to such practices.

“The CFPB supervises financial institutions and service providers to determine their compliance with Federal financial laws. They also help ensure that markets for financial products and services work in a fair and transparent way for consumers,” she said.

“By educating financial institutions about practices that are now considered unfair or deceptive for consumers, under the new regulatory structure, we help them to improve their practices, adopt effective policies and procedures, and implement robust compliance management systems,” she said. “All this results in benefits for consumers.”

The legislation defines the term “abusive” as the interference with a consumer’s understanding of a product’s risks and benefits, or in taking advantages (in an unreasonably manner) of the consumer.

Nonetheless, Pagán explained that there are no specific guidelines established on the law to prevent or manage possible deception. For such reason, the FDIC and regulatory agencies are continuously working with financial institutions to educate their personnel and help them to better understand the risks involved in their products and services and avoid possible violations.

To avoid possible compliance risks, banks must evaluate their products, services, processes, and even their advertising focus, to make sure they do not incur in any of these practices.

“It’s a process through which we help guarantee that local banks’ operations are, not only under strict compliance with federal regulation, but also guided by consumers’ best interests”, said Pagán.

Guidelines to follow
The FDIC compliance seminar will help provide local banks with guidelines on how to manage and implement regulatory changes on such areas as commercial banking products, mortgage transactions, and industry practices. To enable a clearer picture, the FDIC’s staff will provide examples and situations to better illustrate which practices can be considered unfair and/or abusive under today’s new regulatory framework.

The executive added that the topics to be discussed during the seminar are chosen by the industry’s executives to strengthen their knowledge regarding the new federal regulatory framework.

The seminar’s workshops will be hosted by FDIC personnel, and will benefit PRBA’s member and non member financial institutions. The FDIC’s Minority Depository Institution Training Seminar provides its participants the opportunity to establish communication with other compliance professionals in Puerto Rico, and discuss the FDIC’s expectations regarding the management of current situations and the challenges that the local banking industry may face in areas such as compliance with federal and consumer protection laws.

Scott D. Strockoz, Compliance Deputy Regional Director for the FDIC’s New York Regional Office, and who has actively participated in the seminar for the past six years, said that “this educational forum gives the FDIC an excellent opportunity to provide technical support and to educate Puerto Rico’s financial institutions and their banking executives with the latest developments in the regulatory framework in a direct and timely manner.”

“Federal agencies are continually gathering and analyzing information and data from a variety of sources to better assess consumer risk; and this discussion of consumer risk will be the central focus of the training seminar,” he said. “It is important for financial institutions to ensure that the policies and procedures that they adopt are clearly conveyed to employees, fully implemented and  followed in order to address risks to consumers or markets for consumer financial products and services.”

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