Proposed Rule Implementing the Financial Data Transparency Act
On August 22, 2024, the OCC, Federal Reserve Board, FDIC, NCUA, CFPB, FHFA, CFTC, SEC, and Treasury issued a joint notice of proposed rulemaking to implement the Financial Data Transparency Act of 2022 ("FDTA"). The FDTA was bipartisan legislation passed at the end of 2022 to standardize data and information submitted to and managed by the various financial regulators to increase accessibility and transparency of this information among these agencies and the public. While community banks may ultimately be subject to some additional regulatory compliance (including registration with the global LEI system), any final rule will not go into effect before 2026. Chief data or compliance officers, however, should consider how they would comply with the proposal, including identification of any potential compliance issues.
The proposed rule establishes requirements for common identifiers for certain information including legal entities, financial instruments, dates, U.S. states, countries, and currencies. Perhaps, most importantly, is the adoption of the global Legal Entity Identifier ("LEI") system to standardize identification of legal entities that engage in financial transactions and are regulated by any of these agencies. Established in the wake of the 2008 financial crisis, an LEI is a 20-character alphanumeric code used globally to identify unique legal entities, relationship information, and direct/ultimate parents of such entities. Incorporation of this LEI standard would require registration and continual renewal of an entity's LEI with the Global Legal Entity Identifier Foundation or accredited local organizations tasked with registration/renewal duties. Currently, U.S. banks are not required to obtain LEIs, but in 2017 the LEI field was added to the Call Report and if a bank has an LEI, it must be included on the Call Report.
Additionally, the rule sets forth a list of principles that agencies must abide by for data transmission formats that ensure reported data is fully searchable, machine-readable, and contains appropriate identifying metadata. Statements by the OCC and FDIC indicate that implementation of the rule would not have a significant impact on small banking organizations (defined as commercial banks and savings institutions with total assets of $850 million or less). We also note that the transmission and schema formats for the Call Report already satisfy these principles and would be compliant with the proposed rule.
Comments to the proposed rule may be submitted for 60 days (through October 21, 2024) to FDIC or any of the agencies above via agency website, email, fax, or mail. The rule is anticipated to by finalized by the end of 2024 at which time the agencies will have two years to implement the joint rule via their specific agency rulemaking. The OCC Bulletin can be found here and a pdf of the published rule in the Federal Register can be found at the link in FootNote1.
[1] https://occ.gov/news-issuances/federal-register/2024/89fr67890.pdf