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FHFA Responds to the Powerful Voice of Community Banks

The Federal Housing Finance Agency (FHFA) has made a significant concession to community banks in its final rule regarding membership in Federal Home Loan Banks. The FHFA will not require members to maintain an ongoing minimum level of specified residential mortgages as a condition of eligibility for membership in Federal Home Loan Banks. This positive development was the direct result of the FHFA receiving more than 1,300 comment letters from primarily community banks (and their associations), all but a small handful urging the FHFA to not implement the harmful proposed rule.

CBAI advocated strongly on behalf of Illinois community banks in a January of 2015 comment letter to the FHFA stating, “It is clear that if the Proposed Rule is adopted it would have a profound impact on the FHLB system (“System”), FHLBanks and Members including but not limited to: increased regulatory burden and difficulties in Member balance sheet management; the stability of the System and its continued reliability as a funding partner particularly in times of economic stress; uncertainty about continuing Member access to liquidity; the future value of FHLBank membership and the implications for membership decisions; and the impact on housing and community development throughout the System.” CBAI concluded the letter by stating, “This harmful proposal does not need to be further delayed or studied but needs to be completely abandoned.” Read CBAI Comment Letter.

CBAI thanks the many Illinois community bankers who responded to our Action Alert to weigh-in with the FHFA regarding this important issue. This clear victory is further evidence that when community bankers respond in large numbers, together we can favorably impact regulation that affects community banks. 

January 14, 2016

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FASB Responds to Community Banker Concerns

FASB’s Chairman, Russell Golden, responded to community banker concerns about his disturbing comments regarding the cause of the financial crisis and the proposed Current Expected Credit Loss (CECL) model. Golden has requested a meeting during the first quarter of 2016 to discuss those concerns.

In letters to FASB, CBAI and ICBA criticized Golden’s apparent lack of understanding of the role community banks paid in the financial crisis and the CECL model’s applicability to community banks. CBAI stated in its letter. “In the span of four sentences you cite community bank failure statistics followed by your conclusion that ‘Clearly community banks have been a major part of the problem’ and that this is the reason why ‘all lending institutions should be included in the new guidance.’ This flawed reasoning is comparable to citing elder financial abuse statistics and then blaming senior citizens for that abuse.”

Golden’s response letter stated “My remarks are neither intended to address the cause of the financial crisis nor suggest that community banks had a role in the crisis.” CBAI welcomes Golden’s admission that community banks were not the cause of the financial crisis which is why CBAI strongly believes community banks should not be ensnared in a regulatory solution (complete with an added burden) to a problem they did not cause. 

CBAI letter stated, "Too-big-to-fail (TBTF) banks, not community banks, caused the financial crisis. The banking system and economy was threatened with massive destruction by the greed and excess of these mega banks not community banks." CBAI’s letter continues, “What is not needed in FASB’s response to the financial crisis is a one-size-fits-all CECL model being imposed on community banks. What is needed is an exemption from the proposed CECL model for banks under $10 billion in assets. An exemption would alleviate the concerns of community banks regarding inappropriate and expensive provisioning that does not fairly present the risk profile of their assets.” CBAI then detailed the parameters of a simple and straightforward alternate approach.

CBAI thanks the many Illinois community bankers who responding to the recent Action Alert to encourage FASB reconsider their proposed CECL model. CBAI also looks forward to a continued dialogue with FASB, the goal of which will be to shield Illinois community banks from the harmful effects of this inappropriate accounting standard. Read CBAI Letter to FASB. Read ICBA Letter to FASB. Read FASB Response.

January 5, 2016

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Omnibus Funding and Tax Extenders Signed into Law

Congress passed and President Obama signed into law a $1.1 trillion omnibus spending bill and a $680 billion package of tax extenders, wrapping-up the 2015 congressional session. While CBAI was disappointed that no additional regulatory relief for community banks was included in this legislation, the year-end package did include CBAI and ICBA-supported provisions to:

  • pass the Cybersecurity Information Sharing Act, which encourages the public and private sectors to voluntarily share critical cyber-threat information,
  • require regulators to study and report to Congress the effect of the Basel III capital requirements on mortgage-servicing assets,
  • increase by $3 billion funding for the Small Business Administration’s 7(a) guaranteed loan program,
  • reauthorize SBA’s expired 504 refinance program,
  • continue SBA fee waivers for loans to veterans,
  • make permanent a five-year S-Corp recognition period for built-in gains,
  • permanently extend the S-Corp stock basis adjustment for charitable contributions of property, and
  • cement a $500,000 Section 179 expensing limit for new and used equipment including off-the-shelf-software.

Following December’s passage of the CBAI and ICBA-backed regulatory relief measures in the highway and transportation funding bill, both Associations worked diligently to include additional regulatory relief in the funding and tax legislation. CBAI and ICBA will continue working with lawmakers to expand regulatory relief for community banks in 2016. CBAI thanks the many members of the Illinois Congressional delegation for their overwhelming and bi-partisan support for this important legislation. December 21, 2015

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THE VOTES ARE IN! Patty Clarke Elected to St. Louis Fed Board

The Community Bankers Association of Illinois is pleased to announce the election of Patty Clarke, President and CEO of the First National Bank of Raymond, to the Board of Directors of the Federal Reserve Bank of St. Louis. 

CBAI’s Board of Directors unanimously supported Clarke’s bid for election and congratulates her on this important accomplishment. CBAI appreciates the many members who took the time to vote in this election. With Clark’s election, community banks are assured of continued strong representation on the St Louis Fed Board for many years to come. Read Press Release.

December 18, 2015

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CBAI Responds to FASB’s Misguided Comments About Community Banks and the Proposed Current Expected Credit Loss (CECL) Model

CBAI responded to disturbing comments by FASB’s Chairman Russell Golden about the role community banks played in the financial crisis and presented an alternate approach to the Current Expected Loss (CECL) model. In his remarks, Golden enumerated “troubling misconceptions” including “The credit crisis involved only large banks.” He cited community bank bank failure statistics followed by his conclusion that “Clearly community banks have been a major part of the problem” and that this is the reason why “all lending institutions should be included in the new guidance.” This flawed reasoning is comparable to citing elder financial abuse statistics and then concluding that senior citizens have been a major part of the problem.

What is not needed in FASB’s response to the financial crisis is a one-size-fits-all CECL model being imposed on community banks. What is needed is an exemption from CECL for banks under $10 billion in assets. An exemption would alleviate the concerns of community banks regarding inappropriate and expensive provisioning that does not fairly present the risk profile of their assets. Read CBAI Letter to Golden.

December 21, 2015