May 22, 2019
 
Community Bank Services


 
 
 
Argent Money
 
 
CFT 
 

 
 




S. 2155 Rule Changes to Completed by Year-End

The heads of the banking agencies told lawmakers that they expect to have regulatory changes from the S. 2155 regulatory reform law implemented by year-end. Testifying before the House Financial Services Committee, Federal Reserve Vice Chairman for Supervision Randal Quarles said that the agencies are "on track to complete the implementing actions for S. 2155," adding that they would "have the bulk of the implementing actions completed by the third quarter of this year, and all of them completed by the end of this year."

 

Items still outstanding include a final rule on the treatment of high-volatility commercial real estate, a framework for applying enhanced prudential standards to banks with more than $100 billion in assets, an appraisal exemption for certain rural real-estate transactions and the finalization of the community bank leverage ratio.

 

Regulators also faced questions from several lawmakers who raised concerns about the current expected credit loss standard and its effect on credit availability. When asked about the extent to which the agencies themselves have evaluated the implications of CECL, FDIC Chairman Jelena McWilliams acknowledged that "it's difficult, because there are so many different ways of implementing CECL." As implementation moves forward, "our hope is that. . . we will be able to get the information from the first tranche of banks that are complying," she said.

 

Comptroller of the Currency Joseph Otting added that regulators will be closely monitoring the regulatory capital effects of CECL over the three-year phase-in period, noting that "there's no magic to that number-if there are other issues, we'll be happy to consider that." Added Quarles: "As we see the consequences of CECL during the phase-in period, we have the tools to respond on the capital side."


Fintech Charter Decision Slows Applications

This month's court decision allowing New York's financial regulator to proceed with its legal challenge to the OCC's special-purpose fintech charter is inhibiting applications for the charter, agency chief Joseph Otting told American Banker.

In an interview with the publication, Otting said he no longer expects to have a fintech firm formally apply during the second quarter of this year.

On May 2, U.S. District Court Judge Victor Marrero said the OCC failed to rebut the state agency's claim that the charter poses a threat to its ability to establish its own laws and regulations. A separate lawsuit against the OCC by the Conference of State Bank Supervisors is also pending.

ICBA remains concerned that the charter would create an unlevel regulatory playing field and believes the OCC should not issue any fintech charters absent specific congressional authorization.
 

Fannie, Freddie Conservatorship "Urgent Problem"

President Donald Trump said the conservatorship of Fannie Mae and Freddie Mac is a "pretty urgent problem." Speaking to the National Association of Realtors in Washington, Trump said taxpayers remain on the hook in case of another crisis and his administration remains committed to reforming the housing-finance system.

 

Trump said his administration is working closely with Congress to develop a system that welcomes the private sector and competition, protects taxpayers, and preserves homeownership for future generations.

 

Trump's remarks follow an appearance earlier in the week from new Federal Housing Finance Agency Director Mark Calabria, who said he is working with the Treasury and Housing and Urban Development departments to develop concrete plans for Fannie and Freddie by mid-summer.

Financial Stability Risks of Corporate Debt?

While corporate debt is at near-record levels and recent growth has been concentrated in riskier segments, "business debt does not appear to present notable risks to financial stability," Federal Reserve Chairman Jerome Powell remarked in his speech at the 24th Annual Financial Markets Conference. Business debt does not seem to pose a similar risk as subprime mortgage debt did prior to the financial crisis, in large part because "banks at the core of the financial system are fundamentally stronger and more resilient," he explained.  Like other top regulators in recent remarks, Powell highlighted leveraged lending as an area of concern, noting that the riskier class of debt is "funded principally by nonbank lenders."

 

Powell added that the regulators are working together through the Financial Stability Oversight Council and with foreign peers through the Financial Stability Board to deepen understanding of the CLO sector. "Through the FSB, we are focused on determining the size of the global leveraged loan market and the holders of the loans as an important step toward a better understanding of the underlying risks," he said.


Congressional Pressure for Postal Banking Opposed

ICBA told the House that it has serious concerns with congressional efforts to pressure the U.S. Postal Services to offer traditional banking services. In a letter to House members, it was noted that postal banking is an ill-advised idea fraught with unintended consequences.

Also noted ere USPS's serious fiscal problems, the lack of postal service focus on restoring its own viability rather than entering a complex industry that would put taxpayers at risk, the risk of safeguarding consumer financial data and its potential for inserting a government-sponsored competitive threat into the banking marketplace.

"In trying to address one problem, let's not create another," ICBA President and CEO Rebeca Romero Rainey wrote. "Instead, Congress should pursue policies to strengthen community banks and encourage de novo banks."
 
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