FDIC Relents on Highly Restrictive De Novo Requirements

The FDIC announced today that it is [finally] concerned about the dearth of de novo charters and is planning to revise its deposit insurance application process. FDIC Chairman Martin Gruenberg made this announcement at the FDIC Community Banking Conference and indicated their new initiatives would include an application handbook, regional points of contact for applicants, and outreach meetings with the banking industry.

The FDIC also rescinded its FIL 50-2009, Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions which among other measures extends the ‘de novo’ period from 3 to 7 years for examinations, capital maintenance and other requirements. CBAI welcomes this long overdue change in attitude and policy and encourages the FDIC to swiftly move forward to implement the new de novo initiatives and approve deposit insurance applications for qualified applicants.

CBAI vigorously disagrees with the FDIC’s inhibiting de novo community bank formation during the financial crisis as potential investors were directed to existing ‘problem’ banks versus new opportunities. Even in the depths of the S&L crisis (1984-1992), when 1,800 banks and savings institutions failed, an average of 196 de novos were formed annually. The FDIC approved only a handful of de novo bank charters since 2010, compared to an average of 170 new charters a year during the previous two decades.

In October of 2015, CBAI’s Vice President Federal Governmental Relations, David Schroeder, attended the Chicago’s Economic Growth and Recovery Paperwork Reduction Act (EGRRA) outreach meeting which was attended by senior banking regulators including FDIC Chairman Gruenberg. During the public comment period Schroeder stated the need for de novo bank formation to maintain a strong, growing, evolving and vibrant banking profession. CBAI fully understands the importance of prudently approving de novo charter applications but it is completely inappropriate for regulators to be practically demanding that de novo banks be failure-proof, particularly while they permit mega banks to take huge risks that are backstopped by American taxpayers. Read FDIC Press Release.

April 6, 2016


FASB Revises CECL to Address Community Banker Concerns

The Financial Accounting Standards Board (FASB) has agreed to address community banker concerns and will revise its upcoming Current Expected Credit Loss (CECL) proposal. This important news was reported by ICBA’s Vice Chairman Timothy Zimmerman after a recent meeting of FASB’s Transition Resource Group on CECL. The revised CECL proposal will be more flexible and scalable for community banks by allowing them to evaluate and adjust the loan loss amounts using qualitative factors, historic losses, and their current systems such as spreadsheets and narratives. The revised CECL proposal is expected to be released mid-year. Community bankers must remain vigilant to ensure that the regulators and auditors who will be implementing CECL recognize the full extent of the significant concessions FASB has agreed to make. Read ICBA Release.

April 5, 2016


CBAI Urges Community Bank Regulatory Relief in Final EGRPRA Letter

CBAI urged broad regulatory relief for community banks in its final Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) comment letter. The EGRPRA Act of 1996 requires that banking regulations be reviewed by the agencies at least once every 10 years. The purpose of this review is to identify outdated, unnecessary, or unduly burdensome regulations and consider how to reduce regulatory burden on insured depository institutions. CBAI urged regulators to act swiftly to identify and implement changes in regulations that will help ease the regulatory burden which threatens the survival of many community banks.

CBAI made a number of specific recommendations including: increasing CTR threshold and greater FinCEN transparency and accountability, increasing CRA examination thresholds and applying the CRA to credit unions, greater recognition of managements’ efforts in repeat examination findings to accurately reflect effort and progress, including reciprocal deposits as core deposits for Call Report purposes and exempting them from restrictions for less than well capitalized banks, and eliminating the requirement to consistently file an FY Y-8 when a bank holding company is limited in its activity so as to have no covered transactions. Read CBAI Comment Letter.

March 21, 2016


Overwhelming Majority of U.S. House Calls on CFPB to Exempt Small Banks

An overwhelming majority of the United States House of Representatives (329 members) have called on the Consumer Financial Protection Bureau (CFPB) to exempt small community banks from CFPB rules. House members said in a letter to CFPB that the Bureau needs to routinely distinguish between community banks and the very large financial institutions/nonbank lenders, and account for the burden associated with compliance particularly for small institutions.

The letter notes that the Dodd-Frank Act specifically recognizes the need to tailor regulations to fit the diversity of the marketplace and gives the CFPB authority to adapt regulations by allowing it to exempt “any class” of entity from its rulemaking. The letter concluded by urging the Bureau to ensure that regulations do not have the unintended consequences of limiting services and increasing costs. Read House Letter.

CBAI thanks the following Illinois members of the U.S. House for signing the letter to the CFPB:

Mike Bost (R-12)
Cheri Bustos (D-17)
Rodney Davis (R-13)
Robert Dold (R-10)
Bill Foster (D-11) - Member of House Financial Services Committee
Randy Hultgren (R-14) - Member of House Financial Services Committee
Adam Kinzinger (R-16)
Robin Kelly (D-02)
Darin LaHood (R-18)
Daniel Lipinski (D-03)
Mike Quigley (D-05)
Peter Roskam (R-06)
Bobby Rush (D-01)
John Shimkus (R-15)

March 14, 2016


Senator Kirk Urges Meaningful Regulatory Relief for Community Banks

Illinois’ Mark Kirk joined a group of bipartisan Senators in signing a member letter to regulators urging meaningful regulatory relief for community banks as part of the review process mandated by the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) process.

The member letter highlighted the “ever increasing regulatory burden” on community banks, and notes that the nation is “losing small banks” and the “regulatory framework is discouraging the creation of new ones.” The letter also highlighted the criticisms leveled at the regulators during the 2006 EGRPRA review “because the regulators subsequently failed to repeal or eliminate many substantive regulations.”

The letter concludes by stating, “To ensure that the current review has a more successful outcome, it is critical that the regulators not only gather the necessary feedback, identify the most burdensome regulations, but take meaningful steps to create a regulatory environment in which traditional lending can thrive in all communities.”, and finally - “we must not squander an opportunity to make a lasting impact on our regulatory landscape.”

CBAI thanks Senator Kirk for signing this important bipartisan member letter to banking regulators. Read Member Letter.

March 16, 2016