CBAI Meets with IDFPR and its New Chicago District Manager for Bank & Thrift Supervision

On Monday, November 7, 2016, CBAI member and ICBA leadership banker Greg Ohlendorf – President and CEO of First Community Bank and Trust in Beecher, and CBAI Vice President of Federal Governmental Relations – David Schroeder, met with the Illinois Department of Financial and Professional Regulation’s Secretary – Bryan Schneider, Director of Division of Banking (via teleconference) – Kerri Doll, and the Department’s new Chicago District Manager for Bank & Thrift Supervision – Paul Ward, to discuss a variety of issues of importance to Illinois community banks.

Ohlendorf began the meeting by discussing his bank’s experience with a recent state examination and recommended several areas of improvement to reduce future examination burden. Director Schneider discussed the Department’s efforts to hire additional personnel and more efficiently utilize the resources they currently have. There was also a discussion on Director Schneider’s involvement with the Conference of State Bank Supervisors and a recent article he wrote on fintech regulation.

Schroeder welcomed this opportunity to discuss CBAI’s federal government relations activities. He highlighted the importance of the Associations exclusive representation of Illinois community banks and also CBAI being the only state banking trade association to have someone exclusively dedicated to the federal agenda. Schroeder stated that he travels to Washington, D.C. on a quarterly basis and visits with every office of the Illinois Congressional Delegation as well as our national association (ICBA) and various federal regulators.

There were a wide range of issues discussed at this meeting.

    CBAI is concerns that the scope, severity and duration of the fraud and scandal at Wells Fargo, the second largest bank in the country, will negatively impact the prospects for regulatory relief for well-deserving community banks. Schroeder encouraged the Department to do it is able to help prevent this from occurring.

    Ohlendorf and ICBA’s Vice President of Accounting and Capital Policy, James Kendrick held a CBAI Convention Breakout Session on advocacy success with FASB’s CECL proposal. Ohlendorf urged the Department to thoughtfully implement the new accounting rules with the hard-won community bank concessions in mind.

    CBAI encouraged the CFPB, in a recent comment letter, to exempt community banks under $10 billion in assets from the proposed payday and vehicle title lending rules. These proposed rules will impact community bank small-dollar consumer lending. The proposed exemption requirements are ridiculously complicated, and the penalty for noncompliance is so punitive (unfair and deceptive practice), that community banks will be forced to stop making these types of consumer loans in the communities.

    CBAI encouraged the federal regulators, in a recent comment letter, to provide broad community bank Call Report regulatory relief for well capitalized and highly rated community banks by only requiring a very limited number of schedules to be reported during the first and third quarters.

    Also, CBAI urged the Department of Treasury/IRS, in a recent comment letter, to withdraw a proposal that would increase estate taxes and further consolidation among family-owned community banks by disallowing valuation discounts for minority and non-marketable interests.

CBAI appreciated this opportunity to be introduced to Paul Ward and to share with the IDFPR our position on important federal issues and challenges facing Illinois community banks.


CBAI Urges Treasury/IRS to Withdraw Proposed Estate Tax Increase

The Community Bankers Association of Illinois urged the United States Department of Treasury and the Internal Revenue Service to withdraw their flawed and ill-conceived proposed regulations to increase taxes on the transfer of family-owned community banks, and other family-owned business entities, from one generation to the next. The proposed rulemaking, under Section 2704 of the IRS Code, would disallow valuation discounts for minority interests or interests that are not marketable. This would increase the tax on many estates by more than 30 percent, resulting in forced sales and bank consolidation. Read CBAI’s Comment Letter.

November 2, 2016


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.


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


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