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Megabanks Plead Guilty, Fined for Market Manipulation

May 27, 2015

Six major banking organizations were fined nearly $6 billion for rigging foreign currency exchange markets and Libor interest rates. Citicorp, JPMorgan Chase, Barclays and The Royal Bank of Scotland agreed to plead guilty to felony charges of manipulating the price of U.S. dollars and euros, while Bank of America was included in Federal Reserve fines for the FX charges. Additionally, UBS agreed to plead guilty to and pay fines for Libor manipulation.

The guilty pleas to felony charges, criminal fines, and Cease and Desist orders reinforce the need to downsize these financial behemoths. Too-big-to-fail is one of CBAI’s top priorities in the 2015 congressional session. The mega banks have repeatedly proven, at great cost to American taxpayers, our financial system and the economy, that they are clearly too-big-to-behave and must be downsized. Read Federal Reserve Statement. Read Justice Department Release. Read CBAI’s 2015 Federal Policy Priorities.

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CBAI Urges Consensus on Senate Regulatory Relief Bill

May 20, 2015

The Community Bankers Association of Illinois has joined a coalition of ICBA affiliate state community bank associations to urge all members of the U.S. Senate Banking Committee to work to reach a consensus on meaningful community bank regulatory relief ahead of Thursday's (May 21st) markup of the Financial Regulatory Improvement Act of 2015. This legislation includes several provisions from ICBA’s Plan for Prosperity and offers much needed relief for community banks.

CBAI also communicated separately with Senate Banking Committee member Mark Kirk and Minority Whip Richard Durbin regarding this legislation, stating it provides an important opportunity to ease the regulatory burden on Illinois community banks. CBAI urged a broad bipartisan consensus on meaningful community bank regulatory relief which can quickly be enacted into law. Such relief must not be delayed, is too long overdue, and is critical to the economic vitality of Illinois community banks and the customers and communities they serve. Read Coalition Letter.

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CBAI Urges Federal Regulators to Ease Regulatory Burden

The Community Bankers Association of Illinois called on federal banking regulators to address outdated, unnecessary, and unduly burdensome regulations of community banks.  In a May 14, 2015 comment letter on the review required by the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), CBAI highlighted the need for tiered regulation, urged regulators to comply with the law and equally pursue Prompt Corrective Actions (PCAs) against too-big-to-fail banks, and recommended an increase in the Community Reinvestment Act's (CRA) asset thresholds for small and intermediate-small institutions. Read CBAI Comment Letter.

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Basel III - AOCI Regulatory Capital Opt-Out Due with March 31st Call Report

Community banks will need to make a one-time, irrevocable election regarding the inclusion of accumulated other comprehensive income (AOCI) in common equity tier 1 capital when they file their first quarter 2015 Call Report in April.

With the filing of the March 31, 2015 Call Report community banks will have two options for the treatment of AOCI in common equity tier 1 capital. One option is to choose to include AOCI. The other option is to choose not include AOCI. Once an option is made it is irrevocable. Community banks need to understand that each option has its own set of merits and consequences. Once a community bank weighs the impact of the options, it needs to make its selection on the Call Report.

This CBAI and ICBA-advocated provision was included in the Basel III final rules that took effect on January 1, 2015. The banking agencies yesterday released materials for the Call Report due April 30, 2015.

The FDIC recently released a Financial Institution Letter on the AOCI opt-out election, which must be made on Schedule RC-R of the Call Report. More information on the Basel III rules, including an ICBA summary and audio conference recording, is available on ICBA’s Basel III Resource Center.

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CBAI Comments on CFPB’s Proposed QM Amendments

This week CBAI submitted comment letters to the Consumer Financial Protection Bureau (CFPB) regarding proposed amendments to revise the definitions of “small creditor” and “rural” and “undeserved” areas which provide exemptions to the ability to repay (ATR) Qualified Mortgage (QM) underwriting requirements and escrow requirements for higher priced mortgage loans (HPML).

CBAI recommended that all community bank and thrift loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, should receive automatic QM status and an automatic exemption from escrow requirements for HPMLs. Community banks and thrifts that hold loans in their portfolio have 100% of the credit risk and have every incentive to ensure these loans are properly underwritten, well documented, affordable to the consumers, and properly serviced throughout the life of the loans.

If the CFPB chooses not to implement these recommendations, then CBAI supports (with qualifications) the proposed increase in the “small creditor” exemption, supports the expanded definition of “rural” areas, and again calls on the Bureau to expand the definition of “underserved” areas to include economically challenged areas. Read First Comment Letter. Read Second Comment Letter.