The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to email@example.com, firstname.lastname@example.org and email@example.com.
On Capitol Hill
While the majority of lawmakers spent the first week of the August recess in their respective states and districts, high-profile members of the Senate Banking Committee and House Financial Services Committee put Capital One Financial Corp. on notice for its massive data breach.
Presidential hopeful Sen. Elizabeth Warren, D-Mass., sent a five-page letter to Capital One Chairman, President and CEO Richard Fairbank, asking him to disclose details of the breach, how the company will fix the vulnerability and what relief it will provide for affected consumers.
"The public deserves to know exactly what the company plans to do to ensure that consumers' accounts and application information are protected from the consequences of Capital One's security failures," the senator wrote in the Aug. 8 letter.
On July 29, the company announced that the FBI had apprehended a suspect for allegedly accessing about 106 million U.S. and Canadian consumers' personal information. The breach jeopardized about 140,000 Social Security numbers of the company's credit card customers and about 80,000 linked bank account numbers of its secured credit card customers. The hacker allegedly exploited a vulnerability through third-party data service provider Amazon.com Inc. to access the information.
Warren asked the company to answer roughly 50 questions about the breach by Aug. 19, including "how, if at all, any executives at Capital One or Amazon Web Services, the company hosting the breached database, are being held accountable for the security failures." She took the question a step further, asking if any Capital One executive had been fired or "otherwise penalized" as a result the breach.
Rep. Patrick McHenry, R-N.C. and ranking member of the House committee, sent his own letter to the Federal Reserve on Aug. 5 asking if any suspicious activity was detected during regular bank exams at Capital One before the breach.
The letter, directed to Fed Vice Chairman for Supervision Randal Quarles, also asked the regulator to share what, if any, dubious activity was found during an inspection in April of an Amazon facility in Virginia.
At the Fed
The Federal Reserve announced Aug. 5 that it will launch a real-time payments platform called FedNow in 2023 or 2024, a move that will put it in competition with an existing faster payments service from the private sector.
The Clearing House, a private company owned by many of the country's largest banks, has been offering a real-time payments network since 2017. But the Fed decided it will launch a publicly run alternative, saying the private sector is unlikely to reach some of the thousands of community banks across the country necessary to ensure all consumers can move funds instantaneously.
Quarles dissented on the Fed's move, saying he does not see "strong justification for the Federal Reserve to move into this area and crowd out innovation when viable private-sector alternatives are available."
At the SEC
Wall Street may have a little bit longer to comply with Europe's sweeping market-reform package known as MiFID II.
Under the European Union's reforms, brokers would have to separately charge their clients for research and other services, such as trading execution costs. The rules were designed to curb conflicts of interest by providing investors with additional clarity about the fees they are charged by banks and other financial services institutions. But MiFID II has also created a tension spanning across the Atlantic Ocean. U.S. securities laws mandate that brokers register as investment advisers if they receive direct payment for research, which could elevate certain regulatory requirements and costs for those companies.
At the end of 2017, the SEC said brokers would have until mid-2020 to comply with MiFID II. But the regulator is now reportedly considering extending that relief by another 30 months, according to Reuters, which cited an Aug. 7 speech from SEC Commissioner Hester Peirce.
"We're trying to come up with a permanent solution, but it's not that easy," Peirce reportedly said during a speech in Japan.