November 15, 2017


 
Contents:
Bipartisan Reg Relief Deal
Relationship Lending Model at Risk?
Asset Thresholds Insufficient to Identify SIFIs
Dollar Thresholds in Regs Z and M for Exempt Transactions
Bills Would Restrict Crop Insurance Subsidies
Guidance on CRA Applications
Fed Fees Expected to Rise
Self Exam Manual revised



 
































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Numerous regulatory relief proposals are included in a bipartisan deal agreed to by Senate Banking Committee, according to committee Chairman Mike Crapo (R- Idaho). The compromise legislative package is supported by nine Republicans and nine Democrats - led by Banking Committee members Joe Donnelly (D-Ind.), Heidi Heitkamp (D-N.D.), Jon Tester (D-Mont.) and Mark Warner (D-Va.) - providing enough votes to clear procedural hurdles on the Senate floor.  
 
Among many other provisions, the bill would designate all mortgages held in portfolio as Qualified Mortgages for banks with less than $10 billion in assets, raise the threshold for designation as a systemically important financial institutions from $50 billion to $250 billion in assets, end stress tests entirely for banks with under $100 billion in assets, simplify capital calculations for community banks, provide relief from appraisal requirements for smaller mortgages, institute longer exam cycles for community banks and provide charter flexibility for federal thrifts with less than $15 billion in assets.   
CSBS is concerned that a proposed CFPB rule could erode the relationship lending model that community banks use with small business. That's the view recently relayed through a formal comment letter to the Bureau.
 
To implement one part of Dodd-Frank, the CFPB would begin collecting data from lenders on small-business loans, with the acknowledgment that more kinds of data might be required down the road. The concern of state regulators: if banks responded to CFPB scrutiny by making loan decisions based on an ever-expanding checklist, then the relationship lending model community banks have long used would begin to wither. And some loans that are made today to small businesses would not be made in the future. 
 
In many states, state regulators are responsible for promoting local economic development in addition to protecting consumers and the safety and soundness of financial institutions. Among state-chartered banks, 93 percent are community banks who are responsible for more than 45 percent of small loans to business. And long-term relationships are the core of a community bank's lending model to small business owners, as reflected in the 2017 survey from CSBS and the Federal Reserve.
 
The U.S. Department of Treasury has voiced concerns about the proposed CFPB rule, and called for Congress to repeal the relevant section of Dodd-Frank. CSBS has asked the CFPB to delay implementation of its proposed rule until Congress has an opportunity to respond.
 
Size alone is not sufficient to identify systemically important banks, according to a report issued by the Treasury Department's Office of Financial Research. The report recommended that all but the largest global systemically important banks - currently eight in the United States - be assessed for systemic risk with a modified version of a multifactor approach used in Europe.
 
 The report found that size is not always an effective proxy for systemic importance, noting that some banks with large asset figures have substantially lower multifactor systemic risk scores than others with relatively smaller asset sizes. "[F]or large banks that are not G-SIBs, asset-size thresholds are too simplistic to assess systemic importance," it said.   
 
The Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau (CFPB) have announced the dollar thresholds in Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) that will apply for determining exempt consumer credit and lease transactions in 2018. These thresholds are set pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amendments to the Truth in Lending Act and the Consumer Leasing Act that require adjusting these thresholds annually based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the Federal Reserve Board and the CFPB will not adjust this exemption threshold from the prior year. However, in years following a year in which the exemption threshold was not adjusted, the threshold is calculated by applying the annual percentage change in CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. Transactions at or below the thresholds are subject to the protections of the regulations.
 
Based on the annual percentage increase in the CPI-W as of June 1, 2017, the protections of the Truth in Lending Act and the Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of $55,800 or less in 2018. However, private education loans and loans secured by real property (such as mortgages) are subject to the Truth in Lending Act regardless of the amount of the loan.
 
 
Bills Would Restrict Crop Insurance Subsidies   
Sens. Jeff Flake (R-Ariz.) and Jeanne Shaheen (D-N.H.) reintroduced legislation to eliminate subsidies for Harvest Price Option crop insurance policies, and a companion bill was introduced in the House by Rep. John Duncan (R-Tenn.).

The Harvest Price Subsidy Prohibition Act would eliminate taxpayer-funded subsidies for HPOs, which the lawmakers argue can pay out more than the insured planting price. The legislation would not affect traditional crop insurance plans.

The bill would reduce the cost of crop insurance program by $21.1 billion and is supported by groups including Americans for Prosperity and the National Taxpayers Union, Flake said. ICBA opposes cuts to crop insurance, which is a key risk management tool that enables producers to repay production loans.   
 
Crop insurance will likely come under attack during House and Senate floor debates on the farm bill.

The current farm bill expires Sept. 30, 2018. 
OCC Issues Guidance on CRA Applications   
The Office of the Comptroller of the Currency issued guidance on its framework for evaluating certain types of licensing applications when applicant banks have less than satisfactory Community Reinvestment Act ratings. Application types requiring consideration of a bank's CRA performance rating in the agency's review include: branch establishment, branch relocation, main or home office relocation, a Bank Merger Act (BMA) filing involving two insured depository institutions, conversion from state to federal charter, and conversion between federal charters.

This guidance applies to all national banks, federal savings associations, and federal branches of foreign banks that are subject to CRA.
 
Fed Fees Expected to Rise      
The Federal Reserve System's 2018 fee schedules for priced services that go into effect Jan. 1 are expected to be 1.4 percent higher on average than in 2017, and the system projects that it will recover 100 percent of its priced services costs.
 
FedACH fees will rise by 3.6 percent due to costs from an ongoing technology upgrade. Check fees will rise by 0.4 percent on average. Meanwhile, fees for Fedwire Funds will decrease by 1.2 percent. FedLine prices will rise by 4.3 percent, and Fedwire Securities and National Settlement Service prices will remain unchanged .   
Self Exam Manual Revised   
The most recent version of the Arkansas State Bank Department's Self Exam Manual has been released and is available for downloading.
 
 
 
ACB 2018 CFO Conference  -  Wednesday, April 4, 2018