CBAI Thanks Senator Kirk for Urging CFPB Regulatory Relief for Community Banks

The Community Bankers Association of Illinois thanks Senator Mark Kirk for joining with 69 other members of the U. S. Senate in signing a letter to Director Richard Cordray of the Consumer Financial Protection Bureau (CFPB) asking the Bureau to consider the impact of its rule-making on smaller financial institutions and consumers. The 70-member-strong bi-partisan letter was led by Senate Banking Committee members Joe Donnelly (D-Indiana) and Ben Sasse (R-Nebraska).

The Senate members acknowledged that community banks “serve as pillars of their communities, providing the capital access to credit that families and small businesses need to grow”. The letter continued, “Community banks should be treated differently from the largest financial institutions and non-bank lenders”, and the CFPB must ensure that community banks “are not unduly burdened by compliance, but rather have the ability to maintain their close relationships and continue to offer a wide range of consumer financial products and services.” The letter concluded by stating that “Dodd-Frank explicitly granted the CFPB the authority [later “robust authority”] to tailor regulations”, and the Bureau to act accordingly to prevent unintended consequences that impact community banks’ ability to serve their communities.

CBAI has consistently called on all banking regulators to tier [tailor] regulations of community banks, because a one-size-fits-all approach does not recognize the disproportionate burden of banking regulations on community banks. Read Senate Letter.

July 19, 2016


CBAI Urges Regulators to Provide Additional Relief to Community Banks in Proposed Incentive-Based Compensation Rule

In a comment letter dated July 22, 2016, CBAI addressed the Agencies' proposed implementation of the Dodd-Frank Act rule regarding incentive-based compensation arrangements. The Act requires regulators to prohibit any types of incentive-based compensation arrangements that encourage inappropriate risks by covered financial institutions (i.e., depository institutions or holding companies that have $1 billion in assets or more).

While CBAI appreciates the Agencies’ efforts to tier regulation in this proposal, they did not go far enough to properly exempt community banks from the regulatory burden imposed by this proposed rule and should concentrate greater efforts in addressing the significant risks posed by the largest banks to the financial system and economy while providing maximum regulatory relief for all community banks.

CBAI specifically urged the Agencies to reinforce the existing $1 billion threshold exemption so that regulations intended for the largest banks do not ‘trickle down’ to community banks; modify the categories to exempt banks with less than $50 billion in assets from the rule; and eliminate the Agencies’ ‘reservation of authority’ which allows the regulators of institutions greater than $10 billion but less than $50 billion to require compliance with some or all of the requirements of the proposed rule at the option of the regulators. Read CBAI Comment Letter.

July 22, 2016


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


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


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