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2024 CFO Conference

May 15, 2024

Little Rock

See Agenda and Register

Rep. French Hill thanks community bankers for advocacy

At the 2024 ICBA Capital Summit, Rep. French Hill (R-Ark.) commended community bankers for their efforts to challenge misguided regulatory initiatives in support of local communities. ACB leadership bankers participated in the Summit and delivered the community bank message to the Arkansas Delegation and staff during a luncheon held at the U.S. Capitol. See photos.

Speaking to community bankers ahead of Capitol Hill meetings with members of Congress, the House Financial Services Committee vice chairman:

• Thanked ICBA for supporting the Small LENDER Act, which would expand community bank and small-business exemptions from the Consumer Financial Protection Bureau’s 1071 data collection and reporting rule.
• Rejected the CFPB’s characterization of overdraft and credit card late fees as “junk fees,” noting that they instead provide a service that consumers demand.
• Said Congress opposes the formation of a U.S. central bank digital currency.

Source: ICBA; ACB

2024

CFO - Financial Officers Conference!

This event, scheduled for May 15, is an invaluable opportunity for financial officers, bank executives, and those interested in gaining a better understanding of the opportunities that awaits our industry.

Our impressive lineup of speakers will cover key topics such as:



• Small Business Boost Program - FHLB
• Portfolio Management Opportunities in 2024
• Where are we as an Industry?
• Leveraging CDFI Certification and Programs
• Enhance Safety, Soundness, and Profitability Going Forward 

See Agenda Reserve Your Seat - Register Today!

Source: ACB

ICBA lays out legislative priorities

ICBA has released its legislative and regulatory policy objectives for 2024.

Developed and approved by community bankers, ICBA’s policy resolutions are based on the principles of:

• Promoting a balanced and competitive financial services landscape for American consumers and businesses.
• Advocating common-sense and appropriately tailored laws and regulations for community banks.
• Championing fair and equitable access to the financial system.
• Advancing responsible innovation.
• Protecting the safety and soundness of the financial system.



Source: ICBA

Opposition to SBA direct lending

Financial services trade groups joined congressional Republicans in opposing the Small Business Administration's plan of making direct loans under its flagship 7(a) program, American Banker reported, citing letters from the groups.

Sen. Tim Scott (R-SC) and Sen. John Kennedy (R-La.) led Republicans in the Senate in introducing a bill to block SBA from becoming a direct lender. The fiscal 2025 budget includes a proposed increase in SBIC funding to $7 billion, up from $5 billion in the current 2024 fiscal year.

America's Credit Unions President/CEO Jim Nussle wrote to the Senate and House Small Business Committees that “direct lending by the SBA would drive up program costs and disincentivize 7(a) authorization within financial institutions….," while Rebeca Rainey, Independent Community Bankers of America president and CEO, wrote separately that "SBA direct lending is a poor and costly alternative to private sector…"

Source: S&P Global Market Intelligence; American Banker

Guide on third-party relationships

The federal banking regulators released a guide for community banks on managing risk in third-party relationships.

The 23-page guide:

• Focuses on third-party relationships related to technology, risk management, human capital, and more.
• Includes sections on planning, due diligence, and contracts as well as an appendix that lists government resources.
• Says third-party relationships present varied risks that community banks are expected to appropriately identify, assess, monitor, and control.

The guide follows the release last summer of final interagency guidance on managing risk in third-party relationships. That guidance signaled the release of additional resources on third-party risks for community banks.

Following the release of the interagency guidance last year, ICBA commended Federal Reserve Governor Michelle Bowman for not supporting the guidance because it did not provide the necessary clarity or supplemental tools to facilitate community bank implementation.



In a 2021 comment letter, ICBA advocated consolidating third-party risk management guidance, more fully recognizing the potential benefits of community bank-fintech partnerships, and structuring the guidance so it can be further tailored.

Source: Federal Bank Regulators; ICBA

Too much risk? ….Too much pay

The Federal Deposit Insurance Corp. is preparing a proposed rule that would require banks to claw back pay from executives who take too much risk, Bloomberg News reported, citing people familiar with the matter. The FDIC's proposal would make clawbacks, along with other discretionary measures, mandatory instead of such actions being optional for banks, the unnamed sources told the news outlet. The proposed rule will be announced soon, according to the report.

Source: S&P Global Market Intelligence; Bloomberg

Senate, House Ag committees issue farm bill outlines

The Senate and House Agriculture committees’ majority members released broad outlines of their policies and priorities for the 2024 farm bill.

The outlines from House Chairman Glenn "GT" Thompson (R-Pa.) and Senate Chairwoman Debbie Stabenow (D-Mich.) offer section-by-section breakdowns for each committee, with legislative text expected from the Chairman Thompson soon. While Thompson said his panel will hold a markup on May 23, Stabenow said she would like to negotiate with Thompson and Senate Ranking Member John Boozman (R-Ark.) before her committee schedules a markup.

ICBA and state community banking associations last month urged lawmakers to advance a new farm bill with key recommendations, including:

• Raising USDA guaranteed loan limits.
• Including legislation reflecting the bipartisan USDA Express Loan Act (H.R. 5877) to speed up approval times for USDA loans.
• Excluding proposals to expand Farm Credit System nonfarm business lending authority.
• Blocking any FCS carve-out from the Consumer Financial Protection Bureau’s 1071 rule or allowing it to apply equally to community banks.

Some ICBA proposals are reflected in the documents, though lawmakers are considering FCS expansion. ICBA continues urging community bankers to use its Be Heard grassroots action center to call their members of Congress and urge passage of the farm bill with these policy priorities.

Source: ICBA

Banking-as-a-service players at crossroads

Banks that carry consent orders regarding their fintech partnerships are facing tough dynamics striking a balance between the benefit of growth and the rising compliance costs associated with it.

In recent months, an increasing number of consent orders have been issued to community banks that provide deposit accounts, loans and payment services to fintech companies' end customers. Even as banks face regulatory challenges, fintechs' interest in banking is only growing and becoming even more granular. The business case for banking-as-a-service (BAAS) remains strong, but banks should be wary of a fintech partner pursuing aggressive growth at the bank's sacrifice, industry experts said.

Weak negotiations, vague language in contracts and lack of visibility into fintechs' growth plans could lead to serious compliance and operational issues for the bank, and the recent enforcement actions have reiterated regulators' message that the responsibility of compliance ultimately falls on the bank.

Resolving compliance issues under consent orders often means significant investments in personnel and procedures, a shift of priority to compliance, and in some cases, limitations on growth. It could erase the advantage of the BaaS business model, which attracted many community banks to drive fee income and deposit growth.

In 2023, the median return on average assets in a group of 59 BaaS banks was 0.85%, 10 percentage points lower than the median of traditional community banks, according to an S&P Global Market Intelligence analysis. The median of their net interest margins was slightly lower than that of traditional community banks, and the efficiency ratio was significantly higher.

It is increasingly clear that only the well-managed fintech-bank partnerships will last, but the marketplace is demanding more clarity as to what regulators would consider well managed.

The American Fintech Council, an industry group representing fintechs and BaaS banks, has endorsed a bipartisan bill that seeks to provide greater transparency in bank exams, dubbed the FAIR Exams Act. It would establish a new appeals process for banks to resolve disagreements between their regulators. Rep. French Hill (R-Ark.) and Rep. David Scott (D-Ga.) introduced a bipartisan bill on April 18 in the House. A companion bill was introduced in the Senate in December 2023 by Jerry Moran (R-Kan.) and Joe Manchin (D-W.Va.)

"Federal regulatory agencies shouldn't be regulating via enforcement. They should create uniform, guidance and structures to enable banks and fintechs who want to operate within the confines of a fair system to have the ability to do stuff," said Phil Goldfeder, CEO of the American Fintech Council.

Source: S&P Global Market Intelligence