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CBAI Meets with FDIC’s New Deputy Regional Director

On October 24, 2016, CBAI’s Vice President of Federal Governmental Relations, David Schroeder, met with Christopher Newbury, the Federal Deposit Insurance Corporation’s new Deputy Regional Director – Chicago Region, Division of Risk Management Supervision. The purpose of the meeting was to introduce Newbury to CBAI and to learn more about his background and experience.

Shcroeder Newbury

Newbury was named Deputy Regional Director for Risk Management Supervision (RMS) in September 2016. He oversees the risk management supervision of FDIC-insured financial institutions in the states of Illinois, Indiana, Kentucky, Michigan, Ohio, and Wisconsin.

Newbury joined the FDIC in 1989. Prior to moving to Chicago, his most recent assignment was as Associate Director for Risk Management Examinations in the RMS Washington Office. In this role, he led a group overseeing problem bank supervision, recommending enforcement actions, processing applications, and coordinating offsite monitoring. From 2007 through 2013, he was Associate Director for Risk Analysis in the Division of Insurance and Research (DIR), leading economists and financial analysts who assessed conditions and risks in the economy and the banking industry. He oversaw production of the FDIC’s Quarterly Banking Profiles and was a primary contributor to the FDIC’s 2012 Community Banking Study. He previously served for three years as a Section Chief in DIR. Earlier, he worked in the RMS Washington Office as a review examiner, as an examination specialist working on policy matters, and as a senior capital markets specialist. He began his FDIC career as an examiner in the Tulsa, Oklahoma and Atlanta, Georgia field offices.

During this introductory meeting, Schroeder highlighted the importance of CBAI’s exclusive representation of Illinois community banks and delivered a copy CBAI's 2016 Federal Policy Priorities, which prominently include the continuing need to address too-big-to-fail and support for tiered regulation for community banks. Schroeder discussed with Newbury the following three current issues of importance to Illinois community banks:

Wells Fargo fraud and scandal

    Schroeder expressed concern that the criminal behavior at the second largest bank in the country will stall current and well-deserved regulatory relief for community banks and discourage future relief measures.

Call Report regulatory relief

    Schroeder communicated the increased regulatory burden with the preparation of the Call Report and how CBAI, in a recent comment letter to the regulators, urged a streamlined version for well-capitalized and highly-rated community banks in the first and third quarters.

Payday and Vehicle Title lending

    Schroeder stated CBAI’s concerns, which were detailed in a recent comment letter to the CFPB, that if the Bureau implements its proposed small-dollar consumer credit rules, community banks will likely be forced to stop making these types of loans, which will harm community banks and the consumers the CFPB is tasked with protecting.

Additional topics discussed included the increased importance of succession planning at community banks and incentive compensation plans at banks of all asset sizes that are properly aligned with the long-term success of the bank.

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CBAI Urges Regulators to Provide Additional Call Report Regulatory Relief

In a detailed comment letter, CBAI urged the regulators to provide additional Call Report regulatory relief by allowing well-capitalized and highly-rated community banks to file short-form versions of the Call Report in the first and third quarters and by increasing the asset threshold for community banks to file a streamlined version of the Call Report from $1 billion to a minimum of $10 billion.

CBAI was initially encouraged when the regulators announced proposed streamlined Call Report revisions that would be available for use by 90% of all filers and would reduce the number of data items by 40%. CBAI said it “will be carefully reviewing the 57-page proposal and provide our observations for recommendations for improvement.” However, after a thorough review CBAI has concluded that the current proposal will not result in meaningful regulatory relief for community banks. CBAI specifically noted that merely reducing the number of pages by removing data points for activities that are applicable only to large banks and schedules that are generally not applicable to community banks (such as securitization activities, loans to foreign governments, and other non-existing lines of business) does little to relieve regulatory burden.

The increased time spent completing Call Reports was consistently raised by community bankers as a significant regulatory burden at the EGRPRA hearings around the country. The regulators stated that, if they go through the decennial EGRPRA review process and do not make substantive changes to the regulatory burden, then the regulators will have failed. CBAI stated that Call Report regulatory relief is a litmus test to determine if regulators are indeed taking community banker concerns seriously and whether the EGRPRA process will be a success or a failure. Unfortunately, the proposed Call Report relief measures failed to provide meaningful regulatory relief for community banks. CBAI encouraged the regulators to go further by allowing a short-form version of the Call Report to be filed in the first and third quarters and by increasing the asset threshold for the streamlined version. Read CBAI Comment Letter to FFIEC.

October 17, 2016

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CBAI Urges CFPB to Broadly Exempt Community Banks from Payday Lending Rules

The Community Bankers Association of Illinois (CBAI) urged the Consumer Financial Protection Bureau (CFPB) to broadly exempt community banks from their proposed payday lending rules. In a Comment Letter to the CFPB, CBAI recommended the proposed rules be directed at the unfair and abusive practices of other lenders and not community banks that treat their customers and communities fairly and with respect. CBAI expressed concern that the rules, as proposed, would harm community bank small-dollar consumer lending and provided the Bureau with numerous recommendations to mitigate the harmful impact of the proposed rules on community banks.

A statement submitted to the CFPB by an Illinois community banker captures the sentiment of many others.

    “We do these [small-dollar consumer] loans to take care of our customers that have an emergency need – for no other reason. That’s just what community bankers do. But if this new rule is implemented as proposed we would have to stop offering this kind of help to our customers. The increased operating costs (both in time and money) and the harsh penalties for inadvertently violating the new rules would preclude this type of lending for us going forward – plain and simple.”

CBAI specifically urged the Bureau to:

  • Modify the proposal to more accurately target those that abuse consumers;
  • Broadly exempt community banks so they can continue to meet the small-dollar lending needs that they currently satisfy, and provide meaningful encouragement to community banks to expand their small-dollar consumer lending;
  • Establish at least a minimum $10 billion asset exemption threshold for community banks in the proposal.

CBAI also urged the Bureau to:

  • Not so prescriptively mandate the loan structure and terms to remove this flexibility from community banks;
  • Modify the proposed loan information system requirements so it does not create a new expense and regulatory burden on community banks;
  • Address community banker questions and concerns about the additional costs and regulatory burden which will be created by a new consumer Registered Information System prior to finalizing the new reporting system;
  • Maintain community banks’ ability to continue to exercise their legal right of offset;
  • Make it clear to community bank prudential regulators and the Department of Justice that a decision to not make small-dollar consumer loans, as a result of the harmful impact of the proposed rules, is a legitimate business decision and that decision should not result in either a downgrade in CRA ratings or the initiation of fair lending actions;
  • Unequivocally state to the prudential regulators that community bank exemptions in the final rules are solid barriers and must not be contravened by trickle-down regulation;
  • Do all that the Bureau is able to do internally and to urge Congress, the Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency, and the Federal Reserve System to provide additional encouragement to community banks to maintain and expand small-dollar consumer lending through new legal safe-harbors, Community Reinvestment Act (CRA) credit, examination consideration and forbearance while innovating/testing new programs, and tax incentives/credits (for community banks only since credit unions already enjoy tax-exempt status).

CBAI looks forward to reviewing the revisions to the final rules and will closely monitor its implementation to minimize any negative impact on community banks. Read CBAI’s Comment Letter to the CFPB.

October 5, 2016

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CBAI Concerned That Wells Fargo Fraud Will Increase Regulatory Burden on Community Banks

This week's U.S. House hearing for John Stumpf, Chairman and CEO of Wells Fargo (the second largest bank in the nation), was as disastrous as his U. S. Senate hearing the previous week. House Financial Services Committee Chairman Jeb Hensarling (R-TX-05) stated in his opening remarks, “Fraud is fraud and theft is theft. What happened at Wells Fargo over the course of many years cannot be described any other way.” On the other side of the aisle, Ranking Member Maxine Waters (D-CA-43) provided Stumpf with no quarter when she stated in her opening remarks, “So, let’s call this what it really is: some of the most egregious fraud we have seen since the foreclosure crisis.”

CBAI is extremely concerned that the massive fraud committed by Wells Fargo will result in additional banking regulations which will likely apply directly or trickle down to innocent community banks.

    Committee member Roger Williams (R-TX-25) confirmed our suspicion when he stated, “Because of your actions, it’s really making it extremely difficult for me to advocate for Main Street or community banks. So I’ve got one simple question for you. When are you going to resign?”

    Committee member Burce Poliquin (R-ME-02) echoed William’s statement when he stated, “The probability will be high that your organization and the actions of you—this systemic pattern of misbehavior and gross mismanagement … is going to find its way to the community banks and the folks that rely on them.” “You ought to be ashamed of yourself.”

These sentiments were shared by other members of the Committee. The prolonged criminal actions of Wells Fargo undermine the free enterprise system and make it exceedingly difficult to argue for reliance on the market discipline that virtually self-regulates the behavior of community banks.

CBAI will be closely monitoring the legislative and regulatory reaction to the Wells Fargo debacle to make sure Main Street community banks are not once again paying for the sins of the Wall Street mega banks with additional, excessive, costly, and inappropriate regulations.

October 5, 2016

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Community Bank Message to Congress: "We Are Not Wells!"

CBAI was compelled to write to the Illinois Congressional Delegation regarding the disturbing revelations about the massive wrongdoing at Wells Fargo Bank which resulted in a multi-million dollar fine against yet another mega bank. Well Fargo’s misdeeds adds to a tragically long list of violations (often criminal) by the nation’s largest banks as evidenced by billions of dollars in fines and settlements, enforcement actions, and deferred prosecution agreements (conditional amnesty). These mega banks have again proven that they are Too-Big-To-Manage, Too-Big-To-Regulate, Too-Big-to-Behave, Too-Big-To-Prosecute, and are apparently Too-Big-To-Jail.

The bi-partisan reaction to the Wells Fargo debacle in Congress was swift and justifiably damning.

    House Financial Services Committee Chairman Jeb Hensarling (R-TX-05) said “potentially millions of customers have been ripped off by Wells-Fargo”, and “It is beyond belief that this could go on and somebody up the food chain didn’t know about it.”, and finally “This was basic theft. This was basic fraud.”

    Senate Banking Committee Chairman Richard Shelby (R-AL) stated during a Senate Banking Committee hearing when Stumpf tried to dodge the question about clawing-back executive compensation, “Are you the Chairman? Are you the CEO of the company [right]?”, “The buck stops here”.

    And at the same hearing, Senator Elizabeth Warren (D-MA) accused Stumpf of “gutless leadership” and said, "You should resign. You should give back the money that you took while this scam was going on and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission."

CBAI strongly urged the Illinois Delegation to not let the sins of Wells Fargo, and the nation’s megabanks, stall the passage of meaningful regulatory relief for well deserving community banks that treat their customers and communities with honesty and respect. Read CBAI Letter to the Illinois Congressional Delegation.

September 27, 2016