Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois Community Bankers Association of Illinois
 
     A Bi-Weekly News Bulletin for CBAI Members                     June 30, 2010 Graphic
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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois


  • House Vote on Financial Reform Bill Scheduled This Afternoon
  • FAQs on New FDIC Assessment Method
  • Senate Nears Final Vote on Small Business Lending Fund Legislation
  • Regulators Issue Final Guidance on Incentive Compensation
  • Banking Agencies Issue Host State Loan-to-Deposit Ratios
  • ICBA Informs Consumers of Latest Overdraft Rules
  • Baker Market Update
  • Rural Mainstreet Index Above Growth Neutral
  • FOMC Holds Rates at Historic Lows
  • OCC Reports Strong First Quarter Trading Revenues and Declining Derivatives Credit Exposures
  • CBAI Presents Scholarship Money to Statewide Winner
  • Keep Your Privacy Safe Harbor - New Requirements Call for Updates!
  • ATTEND ICBA BANCARD CONFERENCE 9/26-28/10 in St. Louis
  • CBAI Quarterly Compliance Meeting: Privacy, Risk-Based Pricing Disclosures, and BSA Exam Manual Scheduled for 8/3 & 8/4
  • CBAI Banking Essentials Series Set for 8/11 & 8/12


  • House Vote on Financial Reform Bill Scheduled This Afternoon

    The U.S. House has scheduled a final vote on the Conference Report on Financial Reform for later this evening. After careful consideration of its contents and the political climate surrounding this monumental legislation, CBAI has concluded that adoption of this Report is preferable to no legislation and returning to the bargaining table.

    Soon after the financial meltdown occurred more than two years ago, the primary objectives of the community banking lobby, led by ICBA and supported by CBAI, were to curb Wall Street’s excesses by curtailing too-big-to-fail, regulating the shadow banking industry, and gaining parity with the large banks. The Conference Report largely accomplishes those objectives. Wall Street firms are desperately working to kill the bill. Collectively, they have spent $150 million on a lobbying campaign in just the past few months alone.

    Most observers have concluded that community banks are the winners while the big banks are the losers.
    See Washington Post article. See American Banker article. Notably, community banks have gained a permanent increase in deposit insurance coverage to $250,000; a statutory change in the FDIC assessment method that establishes greater parity for community banks; and systemic risk provisions that have real teeth. See ICBA’s Comprehensive Summary.

    Without question the bill offers a mixed bag of provisions, but in our assessment the good outweigh the bad for community banks. ICBA and CBAI are committed to fixing the bad elements through the regulatory rule-writing process and subsequent legislation down the road. Meanwhile, The Conference of State Bank Supervisors (CSBS), a strong advocate for the dual banking system and state’s rights and often a community banking ally, has expressed general satisfaction with the bill’s contents. See CSBS Report.

    If the Report is rejected, CBAI believes that, by returning to the negotiating table, community banks can expect the following to happen: 1) loss of the increased deposit insurance coverage, 2) loss of the new FDIC assessment method, 3) weakening of the dual banking system, 4) loss of curbs on Wall Street firms, 5) credit unions will get greater commercial lending powers, and 6) no community bank exemptions from the Consumer Financial Protection Bureau.

    Community Banks Exempted from Additional FDIC Assessments

    As a result of opposition by giant Wall Street firms, the conference committee on financial reform reconvened unexpectedly yesterday to remove a provision in the bill that would have imposed a special “pay-for” fee on banks, insurance companies and investment banks with more than $50 billion in assets, and hedge funds with more than $10 billion in assets. The fee was intended to cover the $19 billion cost of the financial reform legislation to the government. Instead, lawmakers approved increasing the DIF minimum reserve ratio from 1.15 percent to 1.35 percent. ICBA successfully lobbied for an exemption for banks with less than $10 billion in assets. Therefore, the 104 largest banks in the nation will be subject to higher assessments, while approximately 7,600 banks will be spared.

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    FAQs on New FDIC Assessment Method

    The Dodd-Frank Act contains the CBAI/ICBA advocated provision to base FDIC assessments on total assets minus tangible capital rather than domestic deposits, which will save community banks billions of dollars. An estimated 98% of all banks will benefit from this measure.
    See FAQs and Scenarios.

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    Senate Nears Final Vote on Small Business Lending Fund Legislation

    ICBA and CBAI are urging the U.S. Senate to approve House-passed legislation to create a $30 billion Small Business Lending Fund that will enable the largest number of community banks to participate. CBAI participated in a press conference earlier this year with Senator Durbin to encourage passage of the measure.
    See Press Conference Report. Yesterday the Senate voted 66-33 to bring the plan to a final vote which could occur this week.

    The House measure includes a provision to allow community banks to amortize commercial real estate loan losses over a period of up to 10 years which has been advocated by CBAI for nearly a year. CBAI will continue to seek its inclusion in a final jobs bill. See ICBA Letter.

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    Regulators Issue Final Guidance on Incentive Compensation

    The Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Federal Deposit Insurance Corporation (FDIC) issued final
    guidance to ensure that incentive compensation arrangements at financial organizations take into account risk and are consistent with safe and sound practices.

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    Banking Agencies Issue Host State Loan-to-Deposit Ratios

    The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have issued the
    host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.

    In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production. Section 109 provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank’s statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.

    A second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches. A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.

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    ICBA Informs Consumers of Latest Overdraft Rules

    ICBA is alerting consumers to new rules that will go into effect this summer governing overdraft coverage and fees. In a national news release that community bankers can customize for their local communities, ICBA noted that the rules prohibit financial institutions from charging overdraft fees on ATM withdrawals and debit card purchases unless the consumer has opted into the overdraft coverage service. The new rules take effect July 1 for new accounts and Aug. 15 for existing accounts.

    Under the new rules, consumers must be given an explanation of their bank's overdraft payment services, including any relevant fees. Customers will only receive overdraft coverage if they actively choose to opt in, and they are free to change their minds and opt out even after signing up for the service. ICBA offered tips in the news release to help consumers avoid overdrafts, such as monitoring their account balances and discussing overdraft options with their community bank. Read ICBA Release. Local Release.

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    Baker Market Update

    Little in the way of good news came the way of financial markets this week as bonds rallied and equities fell. The 32.7% plunge in New Home Sales made the 2.2% decline in Existing Home Sales look tame as residential real estate suffered through an even larger nosedive than expected.
    More.

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    Rural Mainstreet Index Above Growth Neutral

    For the first time in more than two years the overall index for the Rural Mainstreet economy was above growth neutral for two consecutive months, based on recent surveys of bank CEOs in the Midwest.
    See Detailed Release.

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    FOMC Holds Rates at Historic Lows

    The Federal Open Market Committee voted 9-1 to hold the target range for the federal funds rate at zero to 0.25 percent and again said it anticipates economic conditions will warrant exceptionally low rates for an extended period. The FOMC said that information it has received since its April meeting suggests that the economic recovery is proceeding and that the labor market is improving gradually.

    The panel said household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit. While business spending on equipment and software has risen significantly, investment in nonresidential structures are weak. Meanwhile the panel said employers are reluctant to add to payrolls, housing starts remain at a depressed level and bank lending has continued to contract in recent months. Kansas City Federal Reserve President Thomas Hoenig was the dissenting vote.
    Read More from Fed.

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    OCC Reports Strong First Quarter Trading Revenues and Declining Derivatives Credit Exposures

    Bank trading revenues in the first quarter rebounded from seasonally lower fourth quarter levels, and credit exposure from derivatives continued to decline, the Office of the Comptroller of the Currency reported today in the
    OCC's Quarterly Report on Bank Trading and Derivatives Activities. U.S. commercial banks reported trading revenues of $8.3 billion in the first quarter of 2010, substantially higher than in 2009’s fourth quarter.

    The report also noted that:
      • Banks hold collateral to cover 67 percent of their NCCE. The quality of the collateral is very high, as 83 percent is cash (U.S. dollar and non-dollar).
      • Derivatives contracts are concentrated in a small number of institutions. The five largest banks hold 97 percent of the total notional amount of derivatives, while the 25 largest banks hold nearly 100 percent.
      • Credit default swaps are the dominant product in the credit derivatives market, representing 97 percent of total credit derivatives.
      • The number of commercial banks holding derivatives increased by 20 in the quarter to 1,050.

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    CBAI Presents Scholarship Money to Statewide Winner

    Peter Prindiville, sponsored by Golden Eagle Community Bank in Woodstock, was the 2010 CBAI Foundation for Community Banking statewide winner. CBAI Group 3 Director Jeff Rolczynski, American National Bank of DeKalb County, Sycamore, presented Prindiville with his first $1,000 check at the CBAI Groups 1, 2, and 3 Meeting June 15 in Winfield. Prindiville will receive a $1,000 check for each of the next three years, pending his performance at Georgetown University. More information will be contained in the July issue of Banknotes magazine. In all, CBAI presented $12,000 in scholarship money this year to 12 Illinois high school seniors. There is no cost to CBAI member banks to participate.
    Click here for a picture of Peter and Jeff.

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    Keep your Privacy Safe Harbor - New Requirements Call for Updates!

    Financial Institutions interested in maintaining their Privacy Safe Harbor will need to take action by December 31. Wolters Kluwer Financial Services can make the transition simple and pain free.
    Click here for more details.

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    ATTEND ICBA BANCARD CONFERENCE 9/26-28/10 in St. Louis

    Attend ICBA Bancard’s Card Conference and Expo September 26-28, 2010 in St. Louis, MO. and hear from industry leaders on payments issues affecting your business. Whether you’re looking to jumpstart a stagnant portfolio, introduce a new service or offering, or expand your existing footprint, this is the conference for you!

    Visit www.icbabancard.org/passport to learn more.

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    CBAI Quarterly Compliance Meeting: Privacy, Risk-Based Pricing Disclosures, and BSA Exam Manual Scheduled for 8/3 & 8/4

    The CBC meeting for the next quarter is filled with changes. Change is inevitable, but compliance officers are still feeling tremendous pressure to adapt to a fast changing regulatory environment. The
    CBC program remains committed to keeping bankers aware and prepared. Privacy and Risk-Based Pricing Disclosures (two of the subjects of the next CBC) have changes that will begin January 1, 2011. The BSA Exam Manual changes are already in place. The Privacy changes include a new privacy notice that will be required beginning January 1, 2011 to maintain a “safe harbor.” Those who have tried to decipher the instructions have discovered, that what seems to be a simple process, is not really all that simple. In addition, we will be covering the final section of the FACT Act which is effective on January 1, 2011. This new regulation has numerous features that require executive decisions within the bank well in advance of year end 2010. The federal regulators published the long awaited revised BSA examination manual on April 29, 2010, filled with changes. The focus of our presentation will be solely on these changes and how the changes may impact your operations.

    This seminar is conducted by Bill Elliott, Senior Consultant and Manager of Compliance at Young & Associates, Inc. of Kent, OH, a nationally recognized compliance consulting firm specializing in community banks.

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    CBAI Banking Essentials Series Set for 8/11 & 8/12

    The Community Bankers Association of Illinois is pleased to present
    “Banking Essentials,” four, one-day seminars offered in Springfield. A must for the newer community bank employee, this series is designed to provide a complete knowledge of banking principles and operations. It is also geared toward veteran employees as a refresher course. Offered in one location, the four quarters are structured as two, two-day sessions, to cut down on travel for your convenience. As such, quarters one and two are offered on consecutive days in August and quarters three and four are offered on consecutive days in February. All seminars are held at the CBAI Headquarters in Springfield. While it is recommended that the individual attend all four quarters of the series to receive an entire overview of banking, each quarter's material stands alone; one quarter is not a prerequisite for another.

    Leading the first session, “Analyzing the Bank and the Banking System,” is Jim Kleinfelter, president of Young & Associates, Inc. Ann M. Brode of Brode Financial Services, a bank consulting firm located in Ravenna, OH, leads the second session, “What Is a Bank?”

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    CBAI's PROFESSIONAL DEVELOPMENT PROGRAMS THROUGH 08/15/2010



    TELEPHONE/WEBCASTS THROUGH 08/31/2010




    Other CBAI Events Thru 10/2

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    CBAI’s 36th Annual Convention & Exposition (9/30-10/2; Galt House, Louisville, KY)
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