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FASB Revises the Current Expected Credit Loss (CECL) Model

On June 16, 2016 the Financial Accounting Standards Board (FASB) released its long-awaited Current Expected Credit Loss (CECL) model. The final version of CECL is more workable as a result of the consistent advocacy efforts of community banks. While these advocacy efforts began a number of years ago it was not until very recently that FASB responded to our concerns and many important concessions were achieved. Read About CBAI’s Recent Advocacy Efforts.

On the heels of the release of FASB’s CECL model the banking regulators published their Joint Statement on the New Standard on Financial Instruments – Credit Losses. In this seven page document CBAI identified 12 separate statements that are clear concessions or accommodations to community banks – actually very transparent nods to our aggressive advocacy on this important matter.

We are encouraged to read in this Statement, “The agencies support an implementation of the FASB’s new accounting standard that is both reasonable and practical, taking into consideration the size, complexity, and risk profile of each institution.” This enlightened regulatory position was the result of the diligent efforts of community banker, the Independent Community Bankers o America (ICBA), and CBAI. The Agencies' statement also contains steps to take now to assure a successful transition to the new accounting standard. Read the Joint Statement.

ICBA has posted answers to frequently asked questions on the new accounting standard. The FAQs cover key changes to allowances for credit losses, measurement requirements for loss protection, effective dates and more. Read ICBA’s FAQs.

June 17, 2016

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CBAI Urges Improvements to the Consumer Compliance Rating System

In a June 30, 2016 comment letter to the Federal Financial Institutions Examination Council (Agencies) CBAI urged the Agencies to make certain changes to its revision of the Uniform Interagency Consumer Compliance Rating System (CC Rating System) prior to final implementation.

CBAI took exception to the Agencies' claim that the system imposes no higher supervisory expectations or additional regulatory burden. To suggest that a comprehensive revision of the CC Rating System and examination process will not set new or higher supervisory expectations or will not create an additional regulatory burden has not been proven in the first instance and is completely untrue in the second.

While CBAI appreciates the Agencies' effort to modernize the CC Rating System, we believe the Agencies are discounting the resources community banks devote to assessing the impact of regulations and meeting supervisory expectations. CBAI recommended that the Agencies undertake a new and thorough analysis of the burden that this proposal will impose.

In addition, CBAI recommended that a higher legal standard of accountability be set for the Agencies and their examiner in the scoping and conducting of risk-based compliance examinations. We also recommended that it be made clear in the guidance that consumer harm can only be caused by a violation of the law to avoid a misinterpretation or misapplication of the guidance. Read CBAI Comment Letter.

June 30, 2016

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Hensarling Announces Bold Plan for Regulatory Relief

Banks of all sizes would be able to “off-ramp” from certain Dodd-Frank Act and Basel III risk-based capital rules if they meet certain standards, under a plan released by the chairman of the House Financial Services Committee.

Representative Jeb Hensarling’s (R-Texas) Financial CHOICE Act would provide the “off-ramp” option for institutions with a simple leverage ratio of at least 10 percent and a composite CAMELS rating of 1 or 2. It also offers relief from numerous other regulatory burdens.

ICBA, which has worked closely with Hensarling on the plan, said it is a welcome opportunity for advancing community bank relief. CBAI fully concurs. “Chairman Hensarling’s common-sense reforms will free up resources that can be used to make loans, promote economic growth and create jobs in local communities nationwide,” ICBA President and CEO Cam Fine said.

While Hensarling’s proposal does not yet include legislative language, it would incorporate several bills inspired by ICBA’s Plan for Prosperity platform. CBAI is in full support of the Plan for Prosperity. These provisions would reform the Consumer Financial Protection Bureau, ease mortgage rules on portfolio loans, require tailored banking regulations, create a workable exam appeals process, and more. Read Hensarling Release. Read ICBA Release. See Plan for Prosperity.

June 8, 2016

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House Financial Services Committee Chairman Unveils Regulatory Relief Plan

House Financial Services Committee Chairman Jeb Hensarling (R-TX-05) today unveiled the Financial CHOICE Act, a bold regulatory relief plan. The proposed plan offers what Hensarling has called an “off ramp” option for banks, a separate regulatory framework, in return for maintaining higher capital levels. The bold plan also offers relief from numerous other regulatory burdens.

The CHOICE Act contains many provisions inspired by the Independent Community Bankers of America (ICBA) Plan for Prosperity. These provisions would reform the Consumer Financial Protection Bureau, ease mortgage rules on portfolio loans, require tailored banking regulations, and create a workable exam appeals process. ICBA and CBAI agree that this plan provides a welcome opportunity to advance community bank regulatory relief. Read More from Chairman Hensarling.

June 7, 2016

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Congressman Hultgren Introduces a Bill to Study Privacy Concerns of New HMDA Data

CBAI thanks Illinois Congressman Randy Hultgren (R-14) for introducing the Homeowner Information Privacy Protection Act (H.R. 4993). This bi-partisan legislation protects mortgage borrowers from exposure of their sensitive personal and financial information as a result of the new HMDA mortgage application data collection and reporting requirements. The publication of these new data fields together with real estate sales records and other publicly available information could be used to identify individual borrowers and connect them with the reported information including their credit scores and loan balances.RandyHultgren

This legislation requires the Comptroller General of the United States to conduct a study to determine if the new requirements increase the probability of exposing the identity of the mortgage applicant, identity theft, and the marketing of abusive financial products. There is also a requirement for the Comptroller General to recommend legislation or regulation to enhance consumer privacy in addition to suspending publication of the new data fields.

The Consumer Financial Protection Bureau’s new HMDA Rule, issued on October 15, 2015, will increase the number of data fields that are required to be reported on mortgage loan applications from 23 to 48. Of the 25 new fields, approximately half were added at the CFPB’s discretion. Collection of the new data begins on January 1, 2018, with reporting of the data beginning in 2019.

Community bankers take very seriously their role as guardians of their customers’ sensitive personal and financial information. CBAI believes it is bad public policy for a government agency to expose that information to computer hackers and other data thieves.

CBAI strongly supports H.R. 4993.

May 20, 2016