CBAI Attends Banking Digital Currency Seminar

CBAI’s David Schroeder, vice president federal governmental relations, attended the Banking Digital Currency Seminar in Chicago on June 5, 2017. The Seminar was a joint initiative by the Illinois Department of Commerce and Economic Opportunity and the Department of Financial and Professional Regulation (both members of the Illinois Blockchain Initiative), together with Coin Center, and the Digital Currency Group.

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The Illinois Blockchain Initiative represents the first of its kind governmental collaboration aimed at understanding digital currencies and distributive ledger technology. The members of the Initiative believe that it is critical that banks and regulators understand the business models and the products and services in this space. The seminar was in part an opportunity for a wide-ranging discussion of the opportunities and challenges of engaging with these companies as a banking partner. The need for this engagement was highlighted by a recent study of the cryptocurrency industry indicating that sustainable banking relationships were one of the most consistent pain points for all industry participants.

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Presenters explained the various digital currency business types which include: wallets, exchanges, payment processing, special service providers, mining, and blockchain. Recommendations for bankers at this stage included: consideration of an early adopted advantage, gaining an appreciation for the nuances of the virtual currency ecosystem, critically assessing the nature of de-risking, and developing or drawing upon internal resources.

CBAI member, Michael Busch, President of Burling Bank in Chicago, was a presenter on a panel of bankers who together explained their decision making process and the operating methodology they employed in the banking digital currency companies (which included early and consistent engagement with their respective regulators).

Chicago is developing as an emerging fintech hub. It is a financial services epicenter that has a deep and talented workforce pool. The goal of the Illinois Blockchain Initiative is to foster financial innovation through early engagement, risk-based analysis, experimentation and global collaboration with engagement and assistance, education and training, and modernizing regulation. 

Given the market capitalization of Bitcoin at $43 billion (USD), and with an estimated 2.8 to 5.0 million users of Bitcoin (globally), banking digital currency is an emerging issue which provides community bankers with challenges but opportunities.

June 5, 2017


CBAI Supports Law Suit Against the NCUA

The Community Bankers Association of Illinois (CBAI), joined with a coalition of state affiliates and the Independent Community Bankers of America to file a friend-of-the-court brief strongly supporting a lawsuit against the National Credit Union Administration (NCUA) which challenges its field of membership rule. Read Amicus Brief.

The NCUA’s October of 2016 final rule greatly expanded the service areas within which credit unions can operate. The rule renders meaningless the existing statutory standard that limits these institutions to serving a well-defined local community, neighborhood or rural district. The brief says the agency’s deliberate violation of statutory restraints to enlarge credit unions’ geographic reach is part of its ongoing campaign to promote the credit union industry. It urges the court to grant the motion for summary judgment [against the NCUA].

In a February 5, 2016 comment letter, CBAI responded forcefully to the NCUA’s proposed expansion of its field of membership rule and urged its immediate withdrawal. The proposed rule was then being framed by the NCUA as “regulatory relief” - versus the wholesale charter enhancement that it really was. The sweeping changes in this proposal would dramatically extend the credit union tax-advantaged status over taxpaying community banks. Read CBAI Comment Letter.

At that time, the NCUA stated their proposed rule was the most sweeping change in membership in the NCUA’s 45 years history. The reason for the proposal was clearly identified by the NCUA’s Vice Chairman by the comment, “Congress is deadlocked” on these issues. Apparently this was the reason why quasi-legislative actions could be justified by unelected NCUA bureaucrats. The proposed rule was a clear and intentional end-around Congress and disregarded congressionally imposed and established rules to assure that credit unions adhere to their original mission.

If credit unions want to weaken (so as to virtually eliminate) the common bond requirement and operate like banks, they should be taxed like banks and should be required to meet all of the same regulatory requirements as banks. They can't have it both ways.

Credit unions were never meant to be tax-exempt community banks!

June 8, 2017


CBAI Attends the FDIC Community Banking De Novo Outreach Meeting

The Community Bankers Association of Illinois (CBAI) Vice President Federal Governmental Relations, David Schroeder, attended the Federal Deposit Insurance Corporation (FDIC) Community Banking De Novo Outreach Meeting in Chicago on May 31, 2017. Approximately 50 interested individuals attended this meeting, which was the fifth of six outreach meetings across the country, to learn about the various FDIC initiatives to encourage newly chartered (de novo) bank formation.


CBAI has consistently stated that de novo community banks are vitally important to maintaining a strong, growing, evolving and vibrant banking profession. While CBAI is disappointed by the declining number of community banks and the lack of new banking charters, recent remarks by FDIC’s Chairman Martin Gruenberg, and these outreach meetings, are encouraging signs that the FDIC will favorably act on applications for deposit insurance for de novo charters.


The day-long outreach meeting included opening remarks by the FDIC’s Anthony Lowe (Regional Director), Doreen Eberley (Director, Risk Management Supervision) and James Watkins (Senior Deputy Director, Risk Management Supervision). An Application Process Panel included representatives from the Federal Reserve Bank of Chicago, Illinois Department of Financial and Professional Regulation, Office of Comptroller of the Currency and the FDIC. Presentations on the Business Plan Development Process, Management/Board Selection, Community Reinvestment Act (CRA) and Compliance Management Systems (CMS) were made by the FDIC. Also included was a banker panel which included CBAI member Steven Van Drunen who is the President and CEO of Providence Bank & Trust of South Holland. The panel members spoke about their insightful experiences with the application process and the organization of their community banks.

CBAI looks forward to seeing rapid and tangible results from these initiatives and a resumption of many de novo charters being approved by the FDIC.

June 5, 2017


CBAI Urges the CFPB to Ease Community Bank HMDA Requirements

In a May 25, 2017 comment letter to the Consumer Financial Protection Bureau (CFPB), CBAI urged the Bureau to ease the HMDA requirements for community banks. The CFPB finalized the new HMDA rules in October of 2015, but has proposed technical corrections to clarify certain requirements.

In addition to several new recommendations, CBAI also renewed its prior recommendations for the Bureau to scale back the number of additional data fields and not go beyond the Dodd-Frank requirements. CBAI also recommended that the Bureau at least double the error thresholds given the greater number of data fields and the resulting increased likelihood that unintentional errors will occur; and urged an increase in the loan-volume threshold for HMDA reporting to 1,000 closed-end mortgages and 2,000 open-end lines of credit.

Other recommendations included adopting guidance similar to the CFPB’s TRID implementation whereby examiners initially should not find fault in compliance so long as the bank is making a good faith effort to comply with the new regulations; urging the Bureau to be especially mindful of the Government Monitoring Information challenges for community banks and apply the good faith effort standard in determining the initial compliance for community banks; and increasing the implementation period by one year for those banks that require extra time for implementation, but those banks that are fully prepared and implement sooner should be permitted to do so without fear of penalty for earlier compliance if errors occur after good faith efforts to comply. Read CBAI Comment Letter.


CBAI Urges NCUA Not to Proceed with Alternative Capital Rulemaking

In a comment letter to the National Credit Union Administration (NCUA), CBAI urged a halt to their rulemaking regarding supplemental capital for credit unions. Read Comment Letter.


CBAI found fault with the reasoning that because of a lack of specific statutory authority the NCUA is permitted to promulgate capital rules and authorize alternative capital instruments for credit unions. Congress should decide whether the actions contained in the NCUA’s proposal are permissible, but this authority has not been given. Absent such authority, the proposed rulemaking represents an abuse of the NCUA’s authority, a blatant expansion of powers, and a costly and unfair increase in the credit union industry tax subsidy.


In the comment letter, CBAI urged the NCUA to focus on the founding mission of credit unions: enabling people of modest means and with a common bond to pool their resources to meet their basic deposit, savings and borrowing needs through a mutual ownership structure. Yet, CBAI noted that credit unions have long since strayed from their founding mission and the supplemental capital proposal would result in credit unions having an ownership structure similar to most taxpaying banks with a category of investors whose interests are inconsistent with those of its mutual owners.


CBAI recommended the credit union industry’s tax subsidy should be eliminated and credit unions should pay their fair share of income taxes. Read Comment Letter.