In this Issue. The Board of Governors of the Federal Reserve System (Federal Reserve) adopted a final rule amending the operational risk management requirements for designated financial market utilities; the Consumer Financial Protection Bureau (CFPB) solicited input on closing fees in the mortgage market; and the Securities and Exchange Commission (SEC) adopted final rules on climate-related disclosures. These and other developments are discussed in more detail below.
Regulatory Developments
Federal Reserve Announces Final Rule Updating Risk Management Requirements for Certain Systemically Important Financial Market Utilities
On March 8, the Federal Reserve adopted a final rule amending the operational risk management requirements in Regulation HH for designated financial market utilities (DFMUs), which provide essential infrastructure to clear and settle payments and other financial transactions. The amendments represent the first substantive updates to the regulation since 2014 and apply to the two DFMUs subject to supervision by the Federal Reserve: the Clearing House Payments Company, LLC (on the basis of its role as operator of the Clearing House Interbank Payments System (CHIPS)) and CLS Bank International. The amendments provide additional clarity on requirements for incident management and notification; business continuity management and planning; third-party risk management; and review and testing of operational risk management measures.
CFPB Solicits Input on Closing Fees in the Mortgage Market
On March 8, on the premise that closing costs “all too often are full of junk fees,” the CFPB requested input from borrowers on how closing costs have affected them, including with respect to title insurance, credit report, appraisal, and origination fees that have an outsized impact on low-income borrowers, since they generally do not vary with the size of a mortgage. The CFPB characterizes certain closing costs as fees that a consumer cannot avoid in closing on a home loan, for services that benefit the lender more than the consumer, and for which the consumer has no or little choice in the provider of the services. The CFPB hints at the possibility of future rules or guidance on closing costs following public input and the CFPB's closing cost analysis over the coming months.
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The Coming Storm: Preparing for the SEC's Final Climate-Related Disclosure Rules
On March 6, the SEC adopted final rules that will require expansive new climate-related disclosures in Form 10-K and Form 20-F annual reports and most registration statements. The disclosure requirements and the initial compliance dates will vary, based on the specific climate-related practices and disclosure content and the company's filer status. The first disclosures by large accelerated filers will be required in Form 10-K reports for the fiscal year ending December 31, 2025, which must be filed by Monday, March 2, 2026. Additional disclosure by large accelerated filers, and initial disclosures by accelerated filers, will be required one year later, with other disclosures and other filers phasing in over a prescribed timeline. To read more the SEC's final climate-related disclosure rules, click here.
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