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2024 CFO Conference

May 15, 2024

Little Rock

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Bank Term Funding Program ends loan extensions

Since the launch of the Bank Term Funding Program (BTFP) in March 2023, 1,804 depository institutions have tapped the emergency lending facility, of which 1,706, or 95%, were small institutions with total assets below $10 billion, the Federal Reserve disclosed its semi-annual Financial Stability Report. The BTFP, which was created to help financial institutions cope with liquidity concerns following the last year’s bank failures, ceased extending new loans on March 11.

The Bank Term Funding Program saw 1,804 of over 9,000 eligible institutions participate, with 95% of these having assets under $10 billion.

Source: Federal Reserve

Regulators explore new liquidity rule

In a speech earlier this month, Federal Reserve Governor Michelle Bowman said there are operational issues the agency needs to address with its discount window, and it also needs to work to reduce the stigma that tapping the liquidity option could make a bank appear weak and exacerbate a run.

One solution to "validate the use of discount window lending in our regulatory framework" is to give banks credit for their discount window borrowing capacity in their liquidity coverage ratios, she said.

Bowman cautioned against mandating that banks must pre-pledge collateral to the window and occasionally borrow from it as another way to reduce the stigma.

In January, acting Comptroller of the Currency Michael Hsu also called for changes to the Fed's discount window that could reduce the stigma associated with the liquidity source. Unlike Bowman, he believes adding discount window capacity to the liquidity coverage ratio "would be dangerous." Instead, he wants to add discount window borrowing to banks' liquidity requirements.

"I believe it is more appropriate and prudent to take a narrower approach and limit discount window credit to covering only acute, ultra-short-term outflows — up to, say, five days — through a new, targeted liquidity requirement," Hsu said.

Source: S&P Global Market Intelligence

Whitepaper examines trends in fair lending and redlining practices

A new ICBA whitepaper provides an in-depth look at current trends in fair lending and the scrutiny of redlining practices. The whitepaper explores critical concepts such as disparate impact, disparate treatment, traditional and reverse redlining, and emphasizes the importance of understanding market demographics.

Offering practical guidance, the whitepaper suggests proactive measures to help banks increase lending in underserved areas, helping to prevent inadvertent exclusion based on national or ethnic characteristics and avoid redlining violations before they occur. Read the whitepaper.

Source: ICBA

House Committee passes resolutions on climate disclosure and credit card late fees 

The House Financial Services Committee advanced two Congressional Review Act resolutions, to the full House for consideration. H.J. Res. 127 and H.J. Res. 122, both passed by a 28-22 vote along party lines.

H.J. Res. 122 seeks to nullify the Consumer Financial Protection Bureau's final rule to cut credit card late fees, which ICBA has argued could lead to increased late payments and additional interest charges for consumers. H.J. Res. 127 opposes the Securities and Exchange Commission's mandate for climate disclosures by publicly held banks. In its 2022 comment letter, ICBA said the rule would drive many SEC-registered community banks away from the public capital markets.

A Congressional Review Act resolution disapproving of the SEC climate disclosure rule was introduced in the Senate Wednesday by Banking Committee Ranking Member Tim Scott (R-S.C.), with the support of 34 senators, including Sen. Joe Manchin (D-W.Va).

Source: ICBA

Banks urged to increase vigilance to uncover fake IDs

The Financial Crimes Enforcement Network urged financial institutions to increase vigilance in identifying and reporting counterfeit U.S. passport cards used for identity theft and fraud schemes. Since 2018, these frauds have resulted in approximately $10 million in losses and $8 million in attempted losses across over 4,000 victims.

FinCEN's notice aims to assist institutions in recognizing fraud typologies and reinforces the importance of compliance with the Bank Secrecy Act's reporting requirements to uncover potentially greater losses associated with these activities.

Source: FinCen

$27B in elder financial exploitation

Financial institutions reported $27 billion in suspicious activities linked to elder financial exploitation from 2022 to 2023, according to the Financial Crimes Enforcement Network.

FinCEN's report underscores the growing issue of financial crimes against older adults, involving illegal or improper use of their funds, property, or assets. The majority of reports were filed by banks, with elder scams—where money is transferred under false pretenses—making up about 80% of the cases. The remaining 20% involved elder theft by trusted individuals, often family members.

ICBA offers a customizable news release and blog post to educate customers about elder financial abuse on its Tell Your Story marketing and communications toolkit.

Source: FinCen; ICBA

Fannie Mae clarifies treatment of realtor commissions in selling guide update

Following a proposed settlement agreement by the National Association of REALTORS in the Burnett et al and Moehrl et al cases, Fannie Mae said it will not make immediate changes to its selling guide policies but will continue to monitor these cases and evaluate potential implications to the industry and its policies.

Selling Guide B3-4.1-02, allows interested parties to make contributions to the borrower’s closing costs subject to maximum limits ranging between 2% and 9% of the property value. Typical fees or closing costs paid by a seller are not subject to the IPC limits and are not required to be counted towards the IPC limits for the transaction.

Source: Fannie Mae

Financial Stability Report highlights key risks

Persistent inflation and tighter monetary policy are the primary risks to the U.S. financial system, according to the Federal Reserve’s semiannual Financial Stability Report.

The report also notes significant concerns over policy uncertainty, heightened by geopolitical tensions and the upcoming U.S. elections, cited by 60% of respondents. Other risks include cyberattacks, US-China tensions, and ongoing Middle East conflicts.

Commercial real estate concerns and banking sector stress have decreased as stability risks compared to previous surveys. However, leverage at hedge funds has reached record levels, and funding pressures continue for some banks due to issues like uninsured deposits.

Source: FDIC

Banks step up branch deals, with 9 deals so far in 2024

Bank branch deals continued to surge, with four transactions announced in March alone.

Year to date as of March 21, banks had announced nine branch deals, inching closer to the 13 deals announced in 2023, according to S&P Global Market Intelligence data.

While the 2024 deal count is still short of last year's total, more branches are already set to be sold at 36, versus 20 in all of 2023, and more deposits are being transferred at $1.59 billion, compared with $656.3 million in the prior year.

Banks' sales of branches have been rebounding as buyers search for funding and sellers hope to improve profitability by cutting their footprints and expenses. Meanwhile, certain other types of bank M&A, such as whole-bank deals, have been slow this year following a historically low year for deal announcements.

Source: S&P Global Market Intelligence

State regulators, FHFA to share info on nonbank mortgage companies

The Conference of State Bank Supervisors and Federal Housing Finance Agency announced a formal agreement designed to facilitate information sharing on nonbank mortgage companies.

The memorandum of understanding establishes information-sharing protocols between state financial regulators and the FHFA to help the agencies coordinate on market developments and identify and mitigate risks to the nation’s housing finance system.

State financial regulators are the primary regulators of nonbank mortgage companies, while the FHFA is the regulator and conservator of Fannie Mae and Freddie Mac, the industry’s largest counterparties.

Source: CSBS; FHFA

New FDIC inclusion plan cites historically low unbanked rate

The number of unbanked households has reached the lowest level since the FDIC began collecting such data in 2008, according to the agency’s latest Economic Inclusion Strategic Plan.

The FDIC updated its latest strategic plan to promote economic inclusion given changes to the market for financial services. It now targets four Economic Inclusion Opportunity Areas related to developing foundational banking relationships, building household financial stability, achieving a secure financial future, and living in strong and healthy communities.

Announcing the release of the strategic plan, FDIC Chairman Martin Gruenberg said that over the decade ending in 2021, the unbanked rate fell by nearly half, from 8.2% to 4.5%. And the decrease among populations that have historically had higher unbanked rates was pronounced, he said.

Source: FDIC