In This Issue

• Blanton: Banker Involvement Is Essential for Industry Success
• ABA's Rob Nichols to Host 2016 Outlook Webinar
• Agencies Update CRA Asset-Size Thresholds
• Agencies Warn About Rising Risks in CRE Lending
• ABA Provides Clarity on New Annual Privacy Notice Exception
• Happy Holidays from the SDBA

Blanton: Banker Involvement Is Essential for Industry Success

In an email to ABA member CEOs on Tuesday, ABA Chairman Dan Blanton highlighted a number of positive changes the industry brought about during 2015, and called on bankers to increase their advocacy efforts in order to become a “more formidable political force” in the coming year.

“ABA staff can talk all day long to regulators and congressional staff,” Blanton said in the email. “But without bankers’ insight into how policies play out in the real world back home--and without banker constituents to deliver those insights--those conversations would fall on deaf ears. You are ABA’s secret sauce,” Blanton added. “The more you are involved in the business of advocacy, the more we achieve."

Blanton pointed to a number of successes the industry has seen throughout the year that were a direct result of banker involvement, including the passage of several regulatory relief provisions; the postponement of TRID and the expansion of QM standards; the long overdue hearing on the Farm Credit System; improved accounting standards; and a greater level of accountability from retailers and the card industry with respect to cybersecurity and data breaches.

While broad-sweeping regulatory reform ultimately eluded the industry during this legislative cycle, Blanton echoed the call made by ABA’s new CEO Rob Nichols for unity going into the new year. “We face plenty of challenges, but so did our predecessors,” Blanton said. “And just as they worked through them together, so will we.” Read the email.

ABA's Rob Nichols to Host 2016 Outlook Webinar

 
ABA's new president and CEO Rob Nichols will host a free webinar for members on Tuesday, Jan. 12 at 1 p.m. CT, giving an overview of the issues, challenges and opportunities for banks in 2016 and beyond.

Among other things, Rob will detail the political lessons learned from the industry's campaign for regulatory relief and what bankers must do differently in the new year to persuade policymakers. He'll also discuss the industry's future challenges and how ABA is organizing around them and field questions from participants. Register for the webinar.

Agencies Update CRA Asset-Size Thresholds

The federal regulators on Tuesday announced the annual adjustment to the asset-size thresholds they will use to differentiate small and intermediate banks and savings associations under the Community Reinvestment Act.

A “small bank” or “small savings association” will be defined as an institution that, as of Dec. 31 of either of the prior two calendar years, had assets of less than $1.216 billion.

An “intermediate small bank” or “intermediate small savings association” will be defined as a small institution with assets of at least $304 million as of Dec. 31 of both of the prior two calendar years and less than $1.216 billion as of Dec. 31 of either of the two prior calendar years.

These adjustments will be effective Jan. 1, 2016. Read more.

Agencies Warn About Rising Risks in CRE Lending

 
The federal banking agencies last Friday issued a statement warning about eased commercial real estate loan underwriting and CRE risk management practices that cause “concern.” They added that supervisors will “continue to pay special attention” to CRE lending in exams in 2016 and reiterated existing interagency guidance on CRE concentration risk.

CRE markets are growing rapidly, the agencies noted, and banks’ CRE concentration levels are rising due to the strength of the market and the quality of CRE assets. Although the agencies noted strong demand and “reassuring trends in asset-quality metrics,” they cautioned that they have observed looser underwriting standards for CRE loans, including “less-restrictive loan covenants, extended maturities, longer interest-only payment periods, and limited guarantor requirements,” as well as more frequent exceptions to underwriting policies and “insufficient monitoring” of market conditions.

“Historical evidence demonstrates that financial institutions with weak risk management and high CRE credit concentrations are exposed to a greater risk of loss and failure,” the agencies said. They noted that successful CRE lenders maintained adequate loan policies and underwriting standards, held to appropriate lending strategies, conducted robust analysis of ability to repay, stress tested their CRE loan portfolio, kept their boards informed and ensured borrowers could repay on an ongoing basis as rates rise or as loan terms reset.

The agencies also said that their examiners will focus in particular on “those financial institutions that have recently experienced, or whose lending strategy plans for, substantial growth in CRE lending activity, or that operate in markets or loan segments with increasing growth or risk fundamentals,” adding that they may ask banks with “inadequate risk management practices and capital strategies” to develop plans to identify, monitor and manage their CRE concentrations or to raise additional capital. Read more. For more information, contact ABA’s Ashley Gunn.

ABA Provides Clarity on New Annual Privacy Notice Exception

In response to recent questions from member banks, ABA lat week issued a staff analysis providing clarity on the new exception to the annual privacy notice requirement recently signed into law.

Under the new law, banks are no longer required to send out an annual privacy notice to customers, provided that they have not changed their policies and practices on the disclosure of nonpublic information since the previous notice was sent and that they do not share non-public personal information with third parties, unless required by law.

The new law did not change the provisions that apply to information sharing with affiliates under the Fair Credit Reporting Act; however, FCRA does not require an annual notice to be sent to customers.

ABA recommended that institutions review their policies and procedures to be certain that the standards for meeting the notice and opt-out for affiliates under FCRA are in compliance, which should include providing a way for customers to be notified and opt-out if the institution’s policy on information sharing with affiliates changes. Read the staff analysis. For more information, contact ABA's Rob Rowe.

Happy Holidays from the SDBA

Instead of sending Christmas cards to our members this year, the South Dakota Bankers Association has made donations to two charities: Missouri Shores Domestic Violence Center and Pierre Area Referral Service.

As the holiday season is upon us, we at the South Dakota Bankers Association find ourselves reflecting on the past year and on those who have helped us shape our Association. We value our relationship with you and look forward to working with you in the year to come.

We wish you a Happy Holiday Season and a New Year filled with peace and prosperity!