Law and regulation

A recap of the informed opinions (and the discussions they generated) on BankThink this week, including the benefits of regulating banks by complexity rather than size and how to make the Fed's stress tests more effective.

Bankers were jolted last month by an updated Office of the Comptroller of the Currency supervision handbook that suggested a major shift in how examiners view overdraft regulation.

Informing banks about the details of stress-test requirements in advance would help mitigate financial institutions' unnecessary costs. And conducting the tests on a quarterly basis would ensure that banks are unable to game the system.

WASHINGTON — Sen. Richard Durbin, D-Ill., renewed his push Thursday to allow bankruptcy judges to cram down private student loan debt, introducing a bill on the issue with 12 other Democrats.

American Banker readers share their views on the most pressing banking topics of the week. Comments are excerpted from reader response sections of AmericanBanker.com articles and from our social media platforms.

Hencorp Becstone Capital in Miami has agreed to pay $3.8 million to settle allegations that it provided inaccurate statements and claims to the Export-Import Bank.

The Justice Department handed down its third bank settlement under Operation Choke Point Thursday, bringing a civil complaint against Plaza Bank of Irvine, Calif., for failing to report a payment processor's relationship with fraudulent merchants.

Commerzbank has been ordered to pay a total of $1.45 billion in penalties, fire employees and install an independent monitor after it cleared transactions for entities in Iran and Sudan and facilitated payments for a Japanese company accused of accounting fraud.

The Justice Department has come under fire in recent months for its efforts to root out consumer fraud through banks, but Operation Choke Point appears to be gaining new momentum.

There is a leadership void in payments innovation. The Fed has the ability and the historic precedent to take up the mantle.

Two foreign-owned banks — Santander and Deutsche Bank — failed the Fed's stress test. Two other foreign banks that failed last year, HSBC and RBS Citizens, passed this year.

Citigroup Chief Executive Michael Corbat will still have a job tomorrow (and probably several days after that). The bank's capital distribution plan was approved by the Federal Reserve on Wednesday, undoubtedly to the delight of shareholders who were surprised by last year's rejection.

JPMorgan Chase, Morgan Stanley and Goldman Sachs were each forced to resubmit their capital plans in order to pass the Fed's CCAR stress test, while Bank of America was publicly faulted for weaknesses in its capital planning process. While some saw that as a bad sign, others contended the banks appear more comfortable in pushing the limits of the stress testing process.

Banks and other financial companies are engaging in disturbing new overdraft practices, violating fair lending laws related to mortgages and being too aggressive in how they collect student loan debt, the Consumer Financial Protection Bureau said Wednesday.

Policymakers should stop assuming that homeownership is always better than renting and recognize the economic circumstances that young people will live with for the foreseeable future.

Small-business lending will be crucial to the future of the American economy. But community banks' ability to make loans to friends and neighbors they know depends in part on a supportive regulatory environment.

Fannie Mae selected a chief internal auditor with an "inherent conflict of interest" and the mortgage giant's process for filling the position was faulty, according to a watchdog report to be released Wednesday.

The finance industry faces a steep, uphill battle in trying to convince the Consumer Financial Protection Bureau that the long-standing use of arbitration agreements is beneficial for consumers.

WASHINGTON — President Obama has directed the Department of Education and other agencies to institute changes meant to improve student loan servicing in an initiative the White House calls "a student aid bill of rights."

The Department of Justice announced a $4.9 million settlement Tuesday with CommerceWest Bank of Irvine, Calif., over charges that the bank knowingly worked with a third-party processor making illegal withdrawals from consumer bank accounts.