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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The Community Bankers Association of Illinois called on federal banking regulators to address outdated, unnecessary, and unduly burdensome regulations of community banks.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.

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CBAI Member Devon Bank Hosts Iraqi Delegation

March 4, 2015

CBAI member Devon Bank in Chicago hosted an Iraqi delegation to discuss the legal responsibilities of American banks to detect, prevent, and report fraudulent and suspicious activity. The Iraqi delegation was visiting Chicago through the U.S. State Department’s International Visitor Leadership Program to explore best practices in government transparency and accountability and to learn strategies for addressing corruption. The 13 member delegation included representatives from the Central Bank of Iraq, Iraqi Kurdistan Parliament, Independent High Electoral Commission, Commissions on Integrity, Council of Ministers Secretariat, Supreme Board of Auditing, Arab Political Council, Baghdad Provincial Council, and the University of Basrah.

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Devon Bank’s Chairman, President & CEO, David Loundy, welcomed the group and provided opening remarks, introductions, and discussed fraud monitoring at the Bank as a whole. Loundy was joined by several officers and managers (Assistant Vice President and Bank Secrecy Act Officer, Jennifer Wiedemann; Assistant Vice President and Bank Secrecy Act Administrator, Dianne Wilk; Personal Banker, Hazan Marben; and Residential Financing Specialist, Saed Alsaadi) who presented the Bank’s policies, procedures, controls and audits regarding account opening, data verification, monitoring account usage, money laundering and reporting suspicious activity (SARs). CBAI’s Vice President Federal Governmental Relations, David Schroeder, informed the delegation about how the Association supports its members in complying with laws and regulations through effective advocacy with legislators and regulators, quality education/training, and products and services.

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CBAI Urged Fed to Implement Rules to Improve Community Bank and Thrift Access to Capital

In separate comment letters to the Board of Governors of the Federal Reserve System, CBAI urged the prompt implementation of H.R. 3329 (“Act”) which would increase the Small Bank Holding Company Policy Statement asset threshold from $500 million to $1 billion, expand the scope to include previously excluded small savings and loan holding companies, and make the appropriate technical changes to regulatory capital-reporting requirements.

CBAI appreciates the Board’s recognition that these small holding companies have less access to capital than larger ones. We have consistently advocated for an increase in the Policy Statement asset threshold and supported a threshold increase in the Act. The current proposed increase to $1 billion will include 600 more bank and savings and loan holding companies under the Policy Statement and is a significant step in the right direction to make it easier for these holding companies to issue debt or equity and reduce their regulatory-reporting burden. Read First Comment Letter. Read Second Comment Letter.