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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    January 17, 2018

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • CBAI Action Alert: Urge Congress to Advance Regulatory-Relief Legislation
  • Cohn: Congress Should Pass Regulatory Overhaul Soon
  • Minneapolis Federal Reserve Proposes Community Bank Relief in TBTF Report
  • CBAI Immediate Past Chairman Marantz: Seize Bipartisan Opportunity for Local Growth
  • FASB Addressing Community Bank Tax Concerns
  • CBAI GR Team Meets with IDFPR Secretary and Banking Director
  • CSBS: The Role of State Financial Regulation
  • Justice Department Rescinds Guidelines to Limit Marijuana Prosecutions
  • CBAI Meets with Chicago Federal Reserve Bank President and Senior Staff
  • Investment News from THE BAKER GROUP
  • Fed Survey Shows Rural Firms Trust Small Banks
  • Visa Makes Signature Optional for EMV Merchants
  • Banks’ Concerns with Compliance, Risk Management on the Rise
  • The 2018 CBAI Compensation Survey Is Now Online!
  • When Credit-Risk Ratings Don’t Match Expectations: What Next?
  • Former Federal Reserve Manager Joins BankOnIT
  • CBAI LEGAL: GSEs’ Transfer Tax Exemption Not Enforceable by Transferee
  • CBIS: Insurance Fraud Impacts All of Us
  • Midwest Office Introduces Midwest Select!
  • Mark Your Calendar Today for CBAI’s 2018 Spring Group Meetings
  • Ag Lenders’ Conference Scheduled for January 29
  • Outsourced Third-Party Relationship Management Set for January 29
  • CBC Program: Reg E and Reg DD Seminar Slated for January 30 & 31
  • Preparing for Your Next IT Exam to be Held January 30


  • CBAI Action Alert: Urge Congress to Advance Regulatory-Relief Legislation

    The most promising community bank regulatory-relief legislation in many years is moving through the U.S. Senate. The Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) has assembled 23 bi-partisan cosponsors; it has passed the Senate Banking Committee, and is now headed to the full Senate for consideration and a vote.

    CBAI’s Senior Vice President Federal Governmental Relations, David Schroeder, is meeting with Illinois Members of Congress and Federal regulators in Washington D.C. this week. The number-one priority Schroeder will highlight is passing long-overdue, well-deserved and meaningful regulatory relief for community banks. The time for Congress to act is now!

    This Action Alert urges your Members of Congress to support the passage of S. 2155 and will reinforce Schroeder’s message to the entire Illinois delegation about the importance of passing this bi-partisan community-bank regulatory-relief bill. Please Take Action Now!

    Please share this Action Alert with your board members and senior management. We need a strong response from all Illinois community bankers. Thank you for responding!

    House Reg Relief Markup Today

    The House Financial Services Committee is scheduled today to mark up several bills inspired by ICBA’s Plan for Prosperity regulatory relief platform that would exempt community banks from prospective Consumer Financial Protection Bureau rules, provide for short-form call reports, establish a Qualified Mortgage safe harbor for all loans held in portfolio, exempt community banks under $10 billion in assets from the Volcker Rule, create a new national charter option for federal savings associations, and raise the consolidated assets threshold under the Small Bank Holding Company Policy Statement. See Committee Schedule.

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    Cohn: Congress Should Pass Regulatory Overhaul Soon

    White House chief economic adviser Gary Cohn recently predicted that Congress could pass a bipartisan bill to exempt dozens of banks from post-crisis financial rules within the next three months.

    Cohn said on Bloomberg News recently that the Senate bill to roll back the Dodd-Frank Act would "hopefully" see floor time in January and pass the House “in the first quarter of this year.”

    “We are making enormous progress on a bipartisan basis on bank deregulation,” Cohn said. “We’ve got a bill in the Senate that has bipartisan support to really change the regulatory environment for the vast majority of banks in the United States.” Read More.

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    Minneapolis Federal Reserve Proposes Community Bank Relief in TBTF Report

    The Federal Reserve Bank of Minneapolis released its final plan to end too-big-to-fail by raising capital requirements for the largest banks while reducing capital and regulatory burdens on the smallest. The final plan would establish a separate supervisory and capital regime for community banks. It recommends community bank capital guidelines that largely mirror the Basel I standards as well as examination, appraisal, call report, and accounting relief advocated by CBAI and ICBA. The plan also would dramatically raise capital requirements for institutions exceeding $250 billion in assets, require the Treasury Department to individually certify that these institutions are no longer systemically important or else subject them to even greater standards, and tax the borrowings of shadow banks with more than $50 billion in assets. CBAI commends the FRB of Minneapolis for its diligent and reasoned approach to resolving the terrible double standard of too-big-to-fail mega banks. Read the Minneapolis Fed Plan.

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    CRISIS MANAGEMENT TRAINING — PROTECT YOUR GOOD NAME
    Strong security deters attacks, protects your staff and reduces risk to your reputation. SHAZAM’s experienced crisis management consultants will travel to your location and train your team to decrease vulnerabilities and put protective measures in place before a crisis. Schedule training with your client executive and stay safe!




    CBAI Immediate Past Chairman Marantz: Seize Bipartisan Opportunity for Local Growth

    Partisanship has taken hold of our political lives from Washington to right here in Springfield, contributing to gridlock in the nation’s capital and more than a few awkward holiday meals with family and friends. Despite all the political ill will, there appears to be one issue that Republicans and Democrats can agree on in the new year — promoting local economic growth through our nation’s community banks. Read More.

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    FASB Addressing Community Bank Tax Concerns

    The Federal Accounting Standards Board (FASB) said it plans to address concerns expressed by ICBA about community bank accounting complications that have arisen following passage of the Tax Cuts and Jobs Act.

    Following an ICBA comment letter last week, FASB said at a board meeting that it will soon issue an exposure draft on classifying deferred tax assets related to accumulated other comprehensive income. The draft will address amounts in AOCI that become trapped when a change in tax rate occurs.

    CBAI and ICBA are concerned about the financial statement impact of tax reform, particularly for banks whose fourth-quarter reported earnings will be significantly affected by the law. ICBA asked FASB and federal regulators to ensure that tax reform doesn’t distort earnings and regulatory capital, unnecessarily harming community banks. Read Comment Letter.

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    CBAI GR Team Meets with IDFPR Secretary and Banking Director

    CBAI Governmental Relations Senior Vice President Jerry Peck and Vice President Megan Peck recently met with the Illinois Department of Financial and Professional Regulation (IDFPR) Secretary Bryan Schneider, Director of Banking Kerri Doll and IDFPR legislative staff to discuss legislative initiatives for the 2018 session. CBAI’s legislative agenda was well received. For their part, IDFPR plans to focus on business friendly proposals that will be beneficial to community banks throughout Illinois.

    Over the past several years CBAI has urged the Department to hire more bank examiners. CBAI is happy to report that seven new bank examiners will be starting soon, making 15 new examiners hired since last April. There are currently about 80-85 state bank examiners, with plans to continue hiring more.

    Director Doll also gave encouraging news about the financial health of the banking profession in Illinois. The Department reports that 95% of banks have CAMEL ratings of 1 or 2. Given the overall financial health of the industry, IDFPR plans to shift their focus to internal controls saying internal fraud is currently the greatest risk factor for bank failure.

    CBAI thanks Secretary and Director for meeting to discuss legislation and issues important to community banking and looks forward to working with them during the upcoming session.

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    CSBS: The Role of State Financial Regulation

    In 2017, The Conference of State Bank Regulators (CSBS) produced a brief video explaining the value and role of state financial regulators. To learn more about the value of state financial regulators and the dual regulatory system supported by CBAI since our inception in 1974, Click Here.

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    Justice Department Rescinds Guidelines to Limit Marijuana Prosecutions

    The United States Department of Justice has withdrawn Obama-era federal guidelines which had limited marijuana prosecutions. Attorney General Jeff Sessions stated in a memo that rescinding the prior guidelines now directs all a U.S. Attorneys “to follow the well-established principals when pursuing prosecutions related to marijuana activities,” and that previously established guidelines “provide them with all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across the country.” The Financial Crimes Enforcement Network’s 2014 guidance on Bank Secrecy Act expectations for servicing marijuana-related businesses remains in place for now, though questions remain about what the move will mean for this guidance. Read DOJ Announcement and Memo. Read FinCEN Guidance.

    It is important to note that federal law prohibits the Justice Department from using funds to interfere with the implementation of state medical marijuana laws and the State of Illinois only permits the sale and use marijuana for medical purposes.

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    CBAI Meets with Chicago Federal Reserve Bank President and Senior Staff

    CBAI member and ICBA leadership banker Greg Ohlendorf, President and CEO of First Community Bank and Trust in Beecher, and David Schroeder, CBAI Senior Vice President of Federal Governmental Relations, met with Federal Reserve Bank of Chicago’s President and CEO Charlie Evans and other senior management to discuss a variety of issues important to Illinois community banks. The wide-ranging topics for this meeting included an update on the electronic delivery of loan files to streamline examinations, the impact of fintechs on community banks and the financial system, the opportunities and perils of consumer data sharing, and the evolution of payment systems. CBAI appreciated the opportunity to meet with the Chicago Fed and welcomes their understanding and support for Illinois community banks. Read Article.

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    Investment News from THE BAKER GROUP

    Baker Market Update

    Mark Twain once famously told a newspaperman that “the reports of my death have been greatly exaggerated.” Recently, famed bond-fund manager Bill Gross proclaimed that the bull market in Treasury bonds was also dead and the time had come to short the market. Mr. Gross may have forgotten that he made a similar declaration way back in February of 2011. Back then, the Ten Year’s yield was about 3.50%. So, Billy, an obvious question comes to mind; how’d that work out for ya’? See Baker Market Update.

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    Fed Survey Shows Rural Firms Trust Small Banks

    Small, rurally located businesses are more likely to seek credit from similarly small financial institutions, according to a recent survey released by the Federal Reserve Banks of Richmond and Atlanta. The report indicated that employer firms, defined as businesses with at least one employee other than the owner, that are small and based in rural parts of the country are more stable than their urban counterparts, have fewer financial challenges and rely more heavily on small banks. Read More.

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    Visa Makes Signature Optional for EMV Merchants

    Last week, Visa announced that effective April 1, 2018, per its new operating regulations, merchants that have deployed EMV will have the choice to obtain a customer signature at checkout. Review the Rule Change.

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    Banks’ Concerns with Compliance, Risk Management on the Rise

    Wolters Kluwer has announced results of its annual Regulatory and Risk Management Indicator survey of U.S. banks and credit unions, showing that regulatory compliance and risk management concerns have inched up three percent over 2016 results. While concerns over several specific challenges such as fair lending exam scrutiny and new Home Mortgage Disclosure Act rules remained high, other compliance-related factors—including the ability to track, maintain and report to regulators—remained steady or declined slightly. Read Press Release. See Indicator Results. Read More on Regulatory and Risk Management Indicator.

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    The 2018 CBAI Compensation Survey Is Now Online!

    Results Are FREE for Members That Participate

    And You’re Not Going to Believe How Easy It Is to Complete!
    Is your bank competing effectively with your peers to attract, reward and retain the top talent in today’s job market? What is your strategy to win the race for qualified leadership and employees?

    Complete the 2018 CBAI Compensation Survey now and receive the results at no cost. BalancedComp, a national compensation expert, is partnered with CBAI to:

    1. ease the process of participating - possible to complete in under 30 minutes
    2. increase the survey's relevance to today’s banking environment
    3. enhance the resulting data's usability

    Survey results remain confidential and free to CBAI member participants, thanks to sponsor IZALE Financial Group.

    Click Here to Begin the Survey!

    Click Here for a .pdf of the survey to use as a worksheet.

    Click Here for a .pdf of the list of Benchmark Positions.

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    When Credit-Risk Ratings Don’t Match Expectations: What Next?

    Consistency in risk ratings is critical for commercial lenders. There are plenty of best practices to follow when choosing your risk rating factors to ensure an effective and consistent risk rating process. Risk rating becomes a craft: the more you do it, the better you become at it. When you’re going in and rating a loan, you usually have a gut feeling of what your rating is going to come out at, based on your experience. However, sometimes you complete the scorecard and see a score you didn’t expect – what do you do you next? Read More.

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    Former Federal Reserve Manager Joins BankOnIT

    Sara Nielsen has joined BankOnIT (BOIT) as senior vice president. Nielsen, previously with the Federal Reserve Bank of Kansas City for more than 13 years, is also a former commercial banker. Nielsen worked for the Federal Reserve Bank of Kansas City as a manager in the financial institution Examinations and Inspections Department. Most recently, she was responsible for the Reserve Bank's information technology examination program. Nielsen also worked on several national IT projects for the Federal Reserve System Board relating to community bank supervision. BOIT is a preferred service provider of Community BancService Corporation (CBSC).

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    CBAI LEGAL: GSEs’ Transfer Tax Exemption Not Enforceable by Transferee

    In the case of Federal National Mortgage Association, et al. v. City of Chicago, the issue was whether a local real estate transfer tax from which Fannie Mae was exempt due to federal preemption extended to private individuals or businesses that purchased the same real estate from Fannie Mae. By now, if you read the headline of this column above, you know that the answer is “No.” See Most Recent CBAI LEGAL.

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    CBIS: Insurance Fraud Impacts All of Us

    In 2015, the insurance industry collected more than $1.1 trillion in premiums, according to the U.S. Treasury Department. The sheer size of that number – seven percent of the country’s GDP—explains, in part, the extent of insurance fraud perpetrated across industry—the FBI estimates the cost of insurance fraud is $40 billion annually.

    But tracking an exact figure is difficult—after all, not all occurrences of fraud are exposed. See Most Recent CBIS Report.

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    Midwest Office Introduces Midwest Select!

    Midwest Select allows you to optimize profitability by consolidating your orders into a single-source, and simplifying your procurement in the process. Click Here to find out more and read what CBSC President Mike Kelley thinks about the program.

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    Mark Your Calendar Today for CBAI’s 2018 Spring Group Meetings

    CBAI leaders and executive staff are visiting 11 locations on the 2018 Group Meeting tour this spring. Bankers from nearly 200 banks participate in these enjoyable and informative events each year. Consisting of an optional golf outing and a dinner meeting, Group Meetings also provide an excellent opportunity to get the latest information on key banking issues and catch up with friends and peers. (Note: The Group 1& 2 Meeting will follow a different format).

    The opening portion of each Group Meeting focuses on critical legislative and association issues. CBAI President Kraig Lounsberry will provide updates on Association projects and community banking in general; and Senior Vice President of Governmental Relations Jerry Peck will offer an up-to-the-minute report of banking-related legislative activities. See the schedule of Group Meetings that follows and make plans now to attend!

    Please note, at the CBAI Annual Convention last September, the membership voted for changes in the structure of CBAI Groups. For efficiency, the former Groups 2 and 3 were combined, which occasioned changes in the numbering of all CBAI Groups with the exceptions of 1 and 2. Please refer to the document below for your bank’s current Group number. See Schedule.

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    Ag Lenders’ Conference Scheduled for January 29

    This jammed-packed day looks at a variety of issues facing agricultural lenders. Attend CBAI’s 2018 Ag Lenders’ Conference to develop the skills and tools to better understand the issues affecting your farm and agribusiness customers and to meet their credit needs. A mini-expo featuring the latest in products and services for ag lenders also highlights the day. Speakers and topics include “Bullish on Agriculture - 2018 & Beyond” with Tyne Morgan, Host, U.S. Farm Report & Farm Journal Broadcast, South Bend, IN; “Estate Planning Trends for Family Farms” with Curt W. Ferguson, The Farmers' Estate Planning Attorney, Salem, IL; “Weather Outlook & Forecasting for 2018” with Eric Snodgrass, Director of Undergraduate Studies Department of Atmospheric Science, University of Illinois, Champaign; “Forces Shaping Future Farmland Markets” with Dr. Bruce J. Sherrick Ph.D., Marjorie and Jerry Fruin Professor of Land Economics & Director of the TIAA Center for Farmland Research in the Department of Agricultural and Consumer Economics at the University of Illinois, Champaign; and “The Joys of Stress” with David Okerlund, professional speaker.

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    Outsourced Third-Party Relationship Management Set for January 29

    The regulators have raised the bar for your Outsourced Third-Party Relationship Management Program (Vendor Management) in recent years. Requirements are more stringent, and expectations are high. Financial institution reliance on outsourced services continues to increase and the regulators are concerned that your internal procedures and risk-management process may not be keeping pace with the level of risk and complexity of those relationships. Risk management of your outsourced third parties is a key element of your overall information and cybersecurity program and a hot topic for examinations. Outsourcing places confidential customer information in someone else's hands along with control for the security of that information, but you still retain the responsibility for ensuring the integrity, confidentiality, and security of the information. The risk-management process must remain in effect throughout the life cycle of the relationship. Leading this seminar is Susan Orr, founder of Susan Orr Consulting, Ltd., who is a leading financial services expert with vast regulatory, risk management, and security best practice knowledge and expertise.

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    CBC Program: Reg E and Reg DD Seminar Slated for January 30 & 31

    The Regulation E presentation will be limited to Subpart A, which is the portion of the regulation that discusses electronic issues such as distribution of electronic cards, error resolution, disclosures, and similar subjects. Included in this portion of the presentation will be all of the April 1, 2018 changes. While the changes are not critical, bankers should know what they are. If the changes do not impact your bank right now, they may in the future, and having the appropriate knowledge base will assist your bank with any current or future decisions regarding new electronic products. We will cover Regulation DD in its entirety. Note that both regulations cover overdrafts, and we will include the new proposed forms for overdraft programs in the presentation. The subjects for the regulatory update will be determined by circumstances and releases from the various agencies. Leading this seminar is Bill Elliott, CRCM, senior consultant and manager of compliance with Young & Associates, Inc., Kent, OH.

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    Preparing for Your Next IT Exam to be Held January 30

    Want to be better prepared for your IT examination? How about learning more about the recent FFIEC and interagency guidance and handbooks that will most definitely be a focus in your upcoming IT examination? In addition, the FDIC, Federal Reserve Bank, and State Banking Agencies (CSBS) have developed a new Information Technology Risk Examination (INTREX) that is now in use; and the OCC has updated their work program to include updated procedures for Outsourced Third-Party Risk Management (Vendor Management). While there are items unique to each agency, the overall concept and focus is basically the same. In this full day, information-packed seminar you will be provided with an overview of the current examination changes, revised FFIEC IT Examination Booklets and “hot spots” to watch out for. This program will be updated with the most current information and “hot spots” relevant at the time of the program. Leading this seminar is Susan Orr, founder of Susan Orr Consulting, Ltd., who is a leading financial services expert with vast regulatory, risk management, and security best practice knowledge and expertise.

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