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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                     January 8, 2014

Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Mega Banks Are Still Too Big To Jail
  • ICBA to Congress: Financial Concentration Dangerous to Nation’s Economy
  • FDIC Updates Community Bank Study
  • ICBA Community Banking Live 2014 Convention -- Plan Now to Attend!
  • CFPB Provides Qualified Mortgage (QM) Compliance Resources
  • Eight More Illinois Banks Begin Reducing Regulatory Burden
  • Half of Banks Reissuing Cards Due to Target Breach
  • Yellen Confirmed as Federal Reserve Board Chairman
  • FDIC Releases Technical Assistance Videos
  • FEMA: “Help Us Help You”
  • Banking Predictions for 2014
  • Baker Market Update
  • Rural Mainstreet Economy Healthy for December
  • Internal Fraud: The Silent Thief
  • OCC’s New Third Party Guidance: Avoiding Potential Pitfalls
  • "Branch Manager Groups" To Be Held January 9 & 31
  • "Community Bank Directors’ College" Scheduled for January 15-16, 2014
  • "Analyzing Tax Returns Seminar" Scheduled for January 29 & 30
  • "2nd Quarterly Community Bankers for Compliance" Set for February 4 & 5

  • Mega Banks Are Still Too Big To Jail

    JPM Again Escapes Criminal Prosecution in Madoff Case

    This week JPMorgan Chase again agreed to pay $2.3 billion in fines to settle government claims that it facilitated Benrard Madoff’s Ponzi scheme. That brings total fines for wrongdoing to $20 billion over the past year, and yet not one JPM executive has been found personally accountable. Despite the fines, the bank is expected to earn $23 billion in profit this year, and JPM stock has climbed 28%. Apparently, prosecutors are saying, “Crime does pay!”
    See Bloomberg Article.

    Research Groups Say Justice Department Should Explain Reasons for Double Standard

    A year has passed since the Department of Justice decided not to indict HSBC, a London-based mega bank, despite the fact that the bank willfully failed to comply with anti-money laundering laws. Instead, DOJ agreed not to prosecute the bank in exchange for HSBC acknowledging wrongdoing, paying a fine and agreeing to cooperate with the government. DOJ has yet to explain its policy and practice concerning the prosecution (or refusal to prosecute) mega banks.

    Representative of the Cato Institute and Public Citizen are now calling on policymakers to address this unresolved issue of mega banks receiving preferential treatment under the law based on their complexity and size. CBAI fully concurs that “equality under the law” demands that banks be treated the same, regardless of size. See CNN Article.

    In a Los Angeles Times article, reporter Michael Hiltzik described the settlement as “… a scandal and an affront to the principle of equal and fair justice that the federal prosecutors handling this case named no individuals as bearing criminal responsibility…”. Furthermore, U.S. Judge Jed Rakoff recently railed against the policy of prosecuting companies rather than individuals for white-collar wrongdoing. He wrote, “Companies do not commit crimes; only their agents do… So wht not prosecute the agent who actually committed the crime?” See LA Times Article.

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    ICBA to Congress: Financial Concentration Dangerous to Nation’s Economy

    In a statement released today, ICBA told Congress that subsidies for the mega banks increased systemic risk and threaten the economy and taxpayers. ICBA emphasized that mega bank abuses have resulted in rules that unfairly sweep in community banks, and tiered regulations should be implemented that include exemptions for community banks. ICBA also urged adoption of several regulatory relief measures pending in Congress that are part of ICBA’s Plan for Prosperity which CBAI fully supports.
    See ICBA Release.

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    FDIC Updates Community Bank Study

    Finds Positive Outlook for Community Banks

    The FDIC has updated its Community Banking Study released last year to include 2012 information. The update found that community banks experienced little structural change during the year, but showed continued improvement in performance as problem loans and failures declined. In 2012 community bank assets increased by $47 billion and net loans and leases grew by 1.6%. The Study also found that economies of scale among community banks were mostly realized at a relatively modest asset size of $100 million to $300 million.
    See FDIC Study Update.

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    ICBA Community Banking Live 2014 Convention -- Plan Now to Attend!

    Make Plans Now to Attend! ICBA Community Banking Live 2014® will be like no community banking conference you’ve attended. We are again setting the standard, raising the bar and creating a masterpiece that will be the community banking event of the year and you’re invited!

    Why Attend?

      1. Access to DYNAMIC industry leaders

      2. Connect with community bankers from all over the country who share your zest for our DISTINCT profession

      3. Choices of dozens of INTERACTIVE educational workshops and roundtables

      4. Wake up each day in a place so MAGICAL that you might just find yourself smiling just listening to the waves lap against the sand

      5. Participate in the world’s largest most COMPREHENSIVE gathering of community bankers in the world

      6. Explore hundreds of products and services ESSENTIAL for your bank
    Learn More and Register Today!

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    CFPB Provides Qualified Mortgage (QM) Compliance Resources

    The Consumer Financial Protection Bureau (CFPB) has provided community banks with additional compliance resources ahead of the January 10, 2014 effective date for the Ability-to-Repay Qualified Mortgage Rules.
    See Letter. Read Basic Guide. See CFPB Regulatory Implementation Guide.

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    Eight More Illinois Banks Begin Reducing Regulatory Burden

    Eight CBAI member banks have recently joined the growing number of Illinois banks that are partnering with Continuity Control to reduce the cost, time and risk of regulatory compliance.

      "We already had too much on our plate managing regulatory compliance and it was about to be worse – something different had to be done. Before I saw Continuity Control, I didn't know it was possible to automate compliance and scale it in a way that suited our growth plans. It was an easy decision after getting glowing reviews from Continuity clients."
      Steve Owens, Executive VP
      State Bank of Whittington ($114M)
    Read More.

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    Half of Banks Reissuing Cards Due to Target Breach

    Thus far, nearly half of all U.S. banks have decided to reissue cards as a result of the Target data breach. Others will reissue only if suspicious account activity is detected.
    See AB Article.

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    Yellen Confirmed as Federal Reserve Board Chairman

    By a vote of 56-26 on January 6th, the U.S. Senate approved Janet Yellen as the next Chairman of the Federal Reserve Board. She will succeed Ben Bernanke whose term will expire on January 31st. She will become the first woman to chair the Fed in its 100-year history.

    ICBA congratulated Dr. Yellen on her confirmation, stating, “As one of the nation’s most accomplished economists, she also appreciates how community banks support economic growth and stability in communities across the nation.”
    See ICBA Release. See Fox Business Report.

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    FDIC Releases Technical Assistance Videos

    The FDIC last week released four new videos in its third installment of technical assistance for bank directors, officers and employees on regulatory issues and proposed regulatory changes. The newest videos provide information on municipal securities, ALLL, troubled debt restructuring, and fair lending.
    See FDIC Release.

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    FEMA: “Help Us Help You”

    The Federal Emergency Management Agency (FEMA) announced last week that, if you’re a survivor of the November 17th tornadoes, you deserve every eligible penny in federal disaster assistance. FEMA urges taking the necessary steps to help FEMA insure that you don’t leave possible FEMA grants and SBA disaster loans on the table.
    See FEMA Release.

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    Banking Predictions for 2014

    According to My Bank Tracker, 2014 will be about giving a sense of independence and autonomy to bank customers, many of whom have learned to manage their accounts efficiently on their own. To see five predictions on such topics as the bank branch, mobile wallets, and interest rates,
    Click Here.

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    Baker Market Update

    With the dawn of a New Year, the burning question for some is, "What do Ben Bernanke and the BCS have in common?" Well, as of this month, both of their terms expire. Will the actions of their successors produce more satisfying results?
    See Baker Market Update.

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    Rural Mainstreet Economy Healthy for December

    The overall December index for the Rural Mainstreet Economy, a survey of bank CEOs in a 10-state region, indicated that the areas dependent on agriculture and energy continue to expand at a healthy pace.
    See Mainstreet Economy Report.

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    Internal Fraud: The Silent Thief
    Community BancInsurance Services, Powered by Nicoud

    Most banks are not keen to discuss the issue of internal fraud. Too often, it is the trusted and valued employee who commits bank fraud. When frauds are discovered, there is often shock and disbelief that the perpetrator, often viewed as "the person next door," could have committed such an act. Many frauds occur because the opportunity exists and the perpetrator does not believe he/she will be caught.
    Read More.

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    OCC’s New Third Party Guidance: Avoiding Potential Pitfalls

    On October 30, 2013, the Office of the Comptroller of the Currency (“OCC”) released
    OCC Bulletin 2013-29, “Third-Party Relationships: Risk Management Guidance” (“Third-Party Guidance”). Whether your bank is regulated by the OCC or not, a detailed review of the Third Party Guidance is highly recommended to all financial institutions and third-party vendors. More importantly, the Third-Party Guidance demonstrates the OCC’s intent to seek enforcement actions relating to deficiencies in a financial institution’s vendor management program.

    In the following article, BankOnIT, CBAI’s Preferred Provider for cloud based services, points out a little-discussed but potentially significant requirement that, if ignored, could lead to non-compliance with the new Guidance. See BankOnIT Article.

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    "Branch Manager Groups" To Be Held January 9 & 31

    CBAI is pleased to offer “
    Branch Manager Groups.” Group A will be conducted on January 9 at CBAI Headquarters in Springfield, and Group B will meet on January 31 at Grizzly Jack’s Grand Bear Resort in Utica. CBAI organizes the groups based on bank size and market to ensure that branch managers have as much in common as possible without being competitors. The groups remain small (no more than 12 participants), and meet quarterly at dates and locations determined by group members. CBAI has selected Heather Powell, manager at BKD, LLP, Decatur, to facilitate the Branch Manager Group in Springfield, and Kathy Enbom, manager with Wipfli LLP, to facilitate the Utica Group.

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    "Community Bank Directors’ College" Scheduled for January 15-16, 2014

    Community Bank Directors’ College has been developed in close conjunction with state and federal regulators, and it's designed to teach individuals how to become more effective, capable, and supportive board members. The goal is to graduate directors who return to the bank more active, more knowledgeable, and more decisive. The Directors’ College is offered once every two years and provides a thorough understanding of bank operations and bank directors’ responsibilities. The College is recommended for both new and seasoned bank directors. It is structured as two, two-day sessions offered on an annual basis. The second session, which may be attended as a stand-alone course, is being held at the Northfield Center in Springfield, Illinois, on January 15-16, 2014. Topics covered in the second session include financial management of community banks, regulatory exams, C.A.M.E.L.S., enforcement actions, and understanding shareholder value. It also examines community bank risk, strategic planning, community bank compensation, and an exam workshop with representatives from the FDIC, Comptroller of the Currency, Illinois Department of Financial and Professional Regulation, and the Federal Reserve Bank of Chicago.

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    "Analyzing Tax Returns Seminar" Scheduled for January 29 & 30

    Underwriting loans to self-employed and small business borrowers can be tricky due to the variety of sources of income – both business and personal – that affect cash flow and repayment ability. Further, the primary resource used by community bankers to make the cash-flow analysis is tax returns. Several of the tax schedules and forms are confusing since they are designed to report taxable income, not true cash flow. This
    program covers how to analyze both personal and business tax returns provided by self-employed borrowers and guarantors. Using case exercises, attendees will compute personal cash flow, real estate cash flow and global (combined business and personal) cash flow. Richard Hamm provides consulting and training to banks and businesses as owner of Advantage Consulting & Training in Huntsville, AL, and leads this program.

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    "2nd Quarterly Community Bankers for Compliance" Set for February 4 & 5

    CBAI is pleased to offer “
    The Loan Estimate and Closing Disclosures,” the second quarter of the Community Bankers for Compliance (CBC) program, in two locations this February. This seminar will begin the training process for the new combined Early TIL and Good Faith Estimate (Loan Estimate) and the new combined Final TIL and HUD-1. The manual for this training session will be designed to break each section of the form down into its component parts, and each field will be considered in the course of our training. The new forms are far superior to the existing forms, and will allow your staff to give your customers a better understanding of the costs of mortgage credit. However, the forms are very different, which creates “learning curve” issues for everyone. The goal is to create a framework of understanding for compliance and senior management. The CFPB document developed to explain these new forms is 1,888 pages. The manual is in the “creation” stage, and it appears that the new forms can be covered in a single presentation. However, it is possible that the discussion will continue into next quarter’s CBC. Every attempt will be made to cover both new forms in this quarter; however, speed is not as important as clarity and understanding. As has been the case recently, this quarter’s presentation will be almost all lending related. Leading this seminar is Bill Elliott, CRCM, senior consultant and manager of compliance at Young & Associates, Inc., Kent, OH.

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