NewsWatch! Arkansas Community Bankers Association

November 14, 2018

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Formal End to Choke Point Initiative Sought

Republican members of the Senate Banking Committee called on the FDIC to send a message that the culture of Operation Choke Point is over. In a join

t letter to Chairman Jelena McWilliams, the 13 senators said the agency should communicate with examiners, other FDIC officials, and financial institutions to ensure lawful businesses may continue operating without fear of politically motivated restrictions.

Community bankers strongly opposed the Operation Choke Point initiative, which discouraged financial institutions from providing payments and deposit services to legal but politically disfavored industries. ICBA repeatedly called for a suspension of Operation Choke Point during the previous administration and endorsed repeated congressional efforts to overturn the Justice Department and FDIC initiative.

Joint Letter >>

Proposal to Reduce Call Report Burden on Small Banks

The financial regulatory agencies proposed changes that would expand the

number of banks eligible to file a more streamlined version of the Call Report, as directed by S. 2155, the new regulatory reform law. Under the proposal, non-complex institutions with less than $5 billion in assets would be permitted to file the FFIEC 051 Call Report.

Banks filing the FFIEC 051 Call Report would also see a reduction of the number of data items required in their first and third quarter filings, the agencies said. Comments on the proposal are due 60 days after publication in the Federal Register.

Proposal >>

Fed Rates Hold Steady

The Federal Open Market Committee (FOMC) unanimously voted to maintain the target range for the federal funds rate at 2.0 to 2.25 percent. The

committee's statement was similar to that of September, once again noting "that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term."

The committee's statement described economic activity as rising at a "strong rate," while the labor market has strengthened further. Risks to the economic outlook were stated to be "roughly balanced." The committee next meets on December 18-19.

The Statement >>

Report Illustrates Industry Health

The Federal Reserve released a report on its regulatory and supervisory

activities for banking companies demonstrating the health and soundness of the banking industry. Figures in the report show that industry profitability ratios are at their highest levels since 2007. The report comes as Fed Vice Chairman for Supervision Randal Quarles prepares to testify this week on Capitol Hill.

Nonperforming loans have reached their lowest point since the run-up to the financial crisis, and capital levels are substantially higher, the report noted. The share of institutions not well-capitalized is lower than at any point since 2006. The report also showed that the 10 largest banking firms' concentration of outstanding loans and leases continues to shrink.

The report also outlined upcoming supervisory priorities for firms in different Fed supervisory portfolios. For the largest firms, the Fed is focusing on several aspects of capital, liquidity, governance and controls and recovery and resolution planning, while at other large U.S. and foreign banks, the focus is on more tailored topics within those categories. For regional and community banks, the Fed is looking at credit risk, operational risk, sales incentives, liquidity risk and Bank Secrecy Act compliance.

The Report >>

Consumers Say They'll Bail After Breach

Consumers increasingly say they are willing to walk away from businesse

s if they suffer negative consequences from a security breach or hack, the Financial Services Information Sharing and Analysis Center says in its latest risk summary.

The report for community financial institutions cites a recent poll in which 62 percent of respondents said they would stop shopping at a business for several months after an incident, while 21 percent said they'd walk away permanently.

Distribution of Bank Branches

The map below shows the 2018 distribution of the top 10 banks branch locations (ranked by assets) versus all of the other banks in the system. The top 10 banks (in orange) are heavily focused in urban/metropolitan areas, while the other 5,541 banks (in green), mostly community banks, often provide the only coverage in less dense/more rural areas outside of major cities.

In fact, almost one out of every five U.S. counties have no other physical banking offices except those operated by community banks, according to the FDIC Community Bank Study. (Note: the FDIC definition of community banks is different from the "all banks under the top 10" classification used in this analysis).

Out of 5,551 banks in Q2 2018, the top 10 held 50.7 percent of all assets, while the remaining 5,541 held less than half of all assets in the nation (or 49.3 percent).

Branch data for this analysis is taken from the FDIC Summary of Deposits data.

GAO Says Regs Have Little Lending Impact

The Government Accountability Office (GAO) says banking regulations implemented since the financial crisis affect community bank small-business

lending and could limit access to credit. However, the government agency downplayed the effect of regulatory burdens on lending between 2001 and 2017, instead claiming that the economic environment and competition better explain lending trends.

Further, the report says the lending data that community banks report to federal regulators is "incomplete." The GAO recommends that regulators evaluate how they collect data on small-business loans within the quarterly call report.

The Report >>