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State Associations Urge Passage of Regulatory Relief Legislation

CBAI joined a coalition of forty-three state banking associations to urge swift passage of the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155). This crucial legislation was introduced last November by Senate Banking Committee Chairman Mike Crapo (R-ID) and enjoys 25 bi-partisan cosponsors, including an equal number of Republicans and Democrats and the one Independent Senator. The bill passed the Senate Banking Committee on December 5th (by a vote of 16-7) and is now headed to the full Senate for consideration.

This legislation contains many provisions from the ICBA Plan for Prosperity including:

  • Granting “Qualified Mortgage” (QM) status for portfolio mortgage loans by community banks (less than $10 billion in assets);
  • Exempting certain community bank loans from escrow requirements (less than $10 billion in assets);
  • Increasing exemption thresholds for Home Mortgage Disclosure Act (HMDA) reporting (500 open-end and 500 closed-end loans);
  • Simplifying community bank capital requirements (less than $10 billion in assets);
  • Increasing eligibility for a short-form Call Report to restore proportionality to community bank quarterly reporting (less than $5 billion in assets);
  • Expanding eligibility for the 18-month regulatory examination cycle for community banks (less than $3 billion in assets);
  • Easing appraisal requirements to facilitate mortgage credit in local communities;
  • Exempting community banks from the Volcker Rule (less than $10 billion in assets);
  • Expanding community access to the Federal Reserve’s Small Bank Holding Company Policy Statement to help build capital (less than $3 billion in assets); and
  • Improving regulatory treatment of reciprocal deposits and certain municipal securities.
Recent reports have cautioned that the large banks are seeking to gain relaxed oversight once the legislation passes the Senate and moves to the House of Representatives, where they are hoping for a more sympathetic ear. Unlike the previous Senate regulatory relief bill in the 114th Congress, Senator Crapo’s bill contains no concessions to the largest banks and financial firms.

In Capital Hill meetings the week of January 15th, David Schroeder, CBAI’s Senior Vice President Federal Governmental Relations, urged every member of the Illinois Congressional Delegation to support S. 2155. The Senate’s carefully constructed bi-partisan effort has brought more and significant regulatory relief for community banks closer to realization that at any point in well over a decade. The reason this legislation has earned such strong bi-partisan support is that it is narrowly focused to provide relief to community banks. Any attempt to relax large bank supervision and regulation will jeopardize the current strong bi-partisan support and likely derail much-needed, long-overdue and well-deserved community bank regulatory relief. Read Joint State Banking Association Letter.

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Jerome Powell Takes the Helm at the Federal Reserve Board

CBAI looks forward to working with Jerome H. Powell as the new Chairman of the Federal Reserve Board. President Trump nominated Powell on November 2, 2017, and he was sworn into office by the Fed’s Vice Chairman for Supervision, Randy Quarles, on February 5, 2018.

Powell has been a member of the Federal Reserve Board since May of 2012 when he was appointed to fill an unexpired term. He was reappointed in 2014 for a term ending in January of 2028. Powell succeeded Janet Yellen who served as Fed’s chair since 2014 and previously as vice chair. Powell brings to the position a wealth of experience in banking, finance and regulation with the Bipartisan Policy Center (D.C.), The Carlyle Group, and as Assistant Secretary and Undersecretary of the Department of Treasury (under President George H.W. Bush).

Mr. Powell holds an AB in politics from Princeton University and earned a law degree from Georgetown University. Read Fed’s Press Release. Read Powell’s Biography.

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United States Senator Orrin Hatch Questions Credit Union Expansion of Powers and Tax Exemption

The Community Bankers Association of Illinois (CBAI) thanks Senator Orrin Hatch (R-UT), Chairman of the Senate Finance Committee, for questioning credit union expansion of powers and tax exemption in a letter to the National Credit Union Administration (NCUA). The three-page letter highlighted the limited reasons for Congress granting credit unions federal tax exemption (i.e., serving individuals of modest means and with a common bond), estimated the value of the tax exemption for 2017 at $2.9 billion, and stated that the loss of tax revenue requires close government oversight to ensure the limited purpose is being properly fulfilled. The letter specifically questions actions taken by NCUA that have relaxed field of membership requirements and lifted limits on other activity including business lending and other services that seem to go beyond the scope of their original mission. Read Senator Hatch’s Letter to the NCUA.

The letter concluded with a request for information and data, to assist Congressional committees in understanding the NCUA’s oversight of credit unions. CBAI looks forward to the NUCA promptly responding to Senator Hatch’s request for this important information to guide increased Congressional scrutiny of the unwarranted tax-exemption for credit unions.

February 6, 2018

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Efforts Continue to Reign-in CFPB’s HMDA Overreach

CBAI applauds the continued legislative and regulatory efforts to reign-in the Consumer Financial Protection Bureau’s (CFPB) overreach on Home Mortgage Disclosure Act (HMDA) reporting. While the Dodd-Frank Act mandated additional data to be collected and reported, the CFPB used its discretionary authority to materially increase the number of data fields beyond what was required. Those additional data fields are unnecessary and clear regulatory overreach. They also present legitimate consumer privacy concerns and will impose a significant additional regulatory burden on community banks by diverting bankers’ resources towards unnecessary regulatory compliance rather than serving their customers and communities.

On the legislative front, Illinois Congressman Randy Hultgren (R-14th) introduced the Home Mortgage Reporting Relief Act (H.R. 4648). This legislation provides a one year safe harbor for financial institutions from having to comply with the data collection and reporting requirements issued under the CFPB amendments to the HMDA. In addition the legislation restricts the CFPB’s ability to make any of the new data publicly available because its release raises a number of privacy concerns.

Also on the legislative front, the bi-partisan Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) recently passed the U.S. Senate Banking Committee. This legislation contains an exemption for [community] banks that offer fewer than 500 closed-end mortgage loans and fewer than 500 open-end lines of credit from collecting the new Dodd-Frank Act data fields.

On the regulatory front, the CFPB’s new Acting Director, Mick Mulvaney, is delaying for one year the enforcement of the rule amending HMDA that implements the new data fields. In addition, Mulvaney stated that he would revisit the prior decision of the Bureau to go beyond the HMDA reporting requirements that were mandated under the Dodd-Frank Act.

CBAI has consistently expressed concern about the increased regulatory burden and privacy threats regarding additional HMDA reporting. Read CBAI’s October, 2014 Comment Letter. Read CBAI’s May, 2017 Comment Letter. Read CBAI’s July, 2017 Comment Letter.

These recent legislative and regulatory developments clearly indicate that the voices of community bankers and their associations are being heard by Congress and the new leadership of the CFPB. CBAI will continue to urge lawmakers and regulators to provide meaningful HMDA relief for community banks.

December 28, 2017

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CBAI Urges Additional Capital Regulatory Relief

In a December 21, 2017 comment letter to the Federal Reserve, FDIC, and the OCC, CBAI urged the regulators to provide additional, long-overdue and well-deserved capital regulatory relief for community banks. The comment letter was in response to the Agencies’ Notice of Proposed Rulemaking (NPR) regarding the simplification of capital rules pursuant to the 2016 EGRPRA decennial review.

A majority of the NPR’s provisions would apply to community banking organizations that are not subject to the “advanced approaches”. CBAI appreciates simplification of the criteria for HVCRE loans but remain concerned about the 130% risk weighting for all ADC loans. CBAI recommended that properly underwritten ADC loans receive 100% risk weighting without limitation on the the borrower's investment or debt service coverage ratios associated with the loan.

CBAI also remains concerned that the individual deduction thresholds for mortgage servicing assets (MSAs), certain deferred tax assets (DTAs), and the investments in the capital of unconsolidated institutions (including Trust Preferred Securities (TruPS) are not high enough. CBAI recommends raising the individual cap on these assets to 50% of Common Equity Tier 1 Capital for community banks with less than $50 billion in assets and urged that the risk weight assigned to these assets, when they are not deducted, should be reduced to 100%.

Unfortunately, the proposal did not address equality in the application of Prompt Corrective Action (PCA) between community banks and the largest banks, an exemption for community banks from Basel III, and including the entirety of a community bank’s ALLL in regulatory Capital. CBAI urged the Agencies to address these important issues as well. Read CBAI Comment Letter.