In This Issue

• Yellen: Agencies Exploring Ways to Reduce Capital, Appraisal Burdens
• Fed to Ease Capital Planning Requirements for Banks Under $250B
• OCC to Issue 'Best Practices' Guidance on AML/BSA Risk Management
• FTC Officials Encourage Data Breach Notification Legislation
• ABA Ag Conference to Offer 'New Ag Banker' Track

• NACHA Launches Same-Day ACH

Yellen: Agencies Exploring Ways to Reduce Capital, Appraisal Burdens

As part of its response to the recently concluded Economic Growth and Regulatory Paperwork Reduction Act review process, the federal banking agencies are looking to reduce burdens of appraisal requirements and to simplify regulatory capital rules for community banks, Federal Reserve Chairman Janet Yellen told the House Financial Services Committee yesterday. ABA has long advocated with regulators to recognize highly-capitalized banks as already meeting Basel III capital standards without having to go through the complex calculations.

“Themes emerging from [the EGRPRA process] include streamlining the Call Report, reducing examination frequency, raising long-standing dollar-based thresholds for appraisals, and reducing the complexity of capital requirements for smaller banks,” Yellen said, noting that the agencies have proposed a streamlined Call Report and have implemented a statute extending the exam cycle for smaller, well-capitalized banks.

She said Congress might also “consider carving out community banks” from the Volcker Rule and Dodd-Frank’s incentive compensation limits. “The risks addressed by these statutory provisions are far more significant at larger institutions than they are at community banks,” she said. “Community banks and supervisors would benefit from not having to focus on regulatory compliance for matters that are unlikely to pose problems at smaller banks.”

Yellen emphasized the “very special role” community banks play in the financial system. “Reducing regulatory burden is important and is something that we will seek to foster using every available tool that we have.”

She also reiterated remarks from Fed Governor Daniel Tarullo earlier this week on options the Fed has proposed or is considering to recalibrate the Comprehensive Capital Analysis and Review process for banks with less than $250 billion in assets. Read the testimony.

Fed to Ease Capital Planning Requirements for Banks Under $250B

The Federal Reserve on Monday released a proposed rule that would exempt many regional banks from the complex qualitative requirements of its annual Comprehensive Capital Analysis and Review, or CCAR, process. The rule would apply starting in 2017 to banks with between $50 billion and $250 billion in assets without significant international or nonbank activity.

“We appreciate the Fed’s efforts to examine the stress test process and seek improvements,” said Rob Nichols, president and CEO of ABA, which has for years sought reforms to the CCAR process. “We’ve long believed CCAR is a bad fit for regional banks, which include different-sized institutions with a variety of business models and unique geographic footprints.” Nichols called for further regulatory tailoring, including congressional action to remove stress tests requirements for banks with as little as $10 billion in assets.

The Fed’s proposal, announced in a speech Monday by Fed Governor Daniel Tarullo, comes in response to arguments from ABA that the CCAR process was proving costlier to the smaller banks in its purview than the supervisory value it produced. “Officials from these banks expressed the view that the CCAR qualitative assessment was unduly burdensome because it created pressure to develop complex processes, extensive documentation, and sophisticated stress test models that mirrored those in use at the largest, most complex firms,” he said.

Tarullo also said the Fed is considering a future proposal to replace the existing 2.5 percent countercyclical capital buffer with a “stress capital buffer” as part of the CCAR process. The SCB would be at least 2.5 percent but would vary to match the maximum decline in a firm’s common equity tier 1 capital ratio under the stress test’s “severely adverse” scenario, with “significant increases” in capital anticipated for the eight U.S. institutions designated as global systemically important banks.

“We will carefully evaluate the [SCB] concept,” Nichols added, expressing concern “that it may not preserve the proper function of a capital buffer--to absorb losses in a stressful period--and instead could impose unnecessarily high capital requirements that would make it harder for banks to make loans that help our economy grow.” Read the proposed rule. Read the speech. For more information, contact ABA’s Hugh Carney.

OCC to Issue 'Best Practices' Guidance on AML/BSA Risk Management

 
In response to the “derisking” trend in anti-money laundering and Bank Secrecy Act compliance, the OCC will soon issue guidance that articulates its expectations for banks to routinely evaluate risk in their foreign correspondent banking portfolios, Comptroller of the Currency Thomas Curry said yesterday.

Speaking to the Association of Certified Anti-Money Laundering Specialists in Las Vegas, Curry said the guidance will “reiterate our risk management expectations for banks to establish and follow policies and procedures for regularly conducting risk evaluations of their foreign correspondent portfolios.”

The guidance will include “best practices” that OCC examiners have observed, Curry said, including risk governance for foreign correspondent accounts, communications to senior management and consideration banks might give to “any adverse impact that closures may have on access to financial services for an entire group of customers or an entire region.”

Other best practices include communicating with customers while determining whether to end a relationship, giving sufficient time for customers to establish new accounts before termination and maintaining clear audit trails documenting the reasons for the account termination, he added. Read the speech.

FTC Officials Encourage Data Breach Notification Legislation

Following news last week of a massive hack affecting an estimated 500 million Yahoo customers, all three FTC commissioners on Tuesday voiced their support for a federal-level law that would set notification requirements after consumer data breaches.

“Data security is one of the most significant issues we face as a nation,” said FTC Chairwoman Edith Ramirez, testifying at a Senate Commerce Committee hearing. “I think Congress needs to take action in this area… I am in favor of legislation and believe it’s something that ought to happen.” She recommended a 30-to-60-day timeframe for companies to be required to inform their customers about a data breach.

ABA’s Agenda for America’s Hometown Banks calls for laws that ensure all parties share the same standards and accountability for protecting customer information and for notifying the public after a breach. ABA supports bipartisan legislation to require those standards.

ABA Ag Conference to Offer 'New Ag Banker' Track

 
For the first time, the ABA National Agricultural Bankers Conference--to be held Nov. 13-16 in Indianapolis--will offer a special conference track for young ag bankers with one to seven years of experience or for experienced professionals transitioning into ag banking from other careers.

Special sessions in the New Ag Banker track will cover how to avoid lender liability risk, how to handle troubled ag loans, how to offer alternatives for improving loan repayment capacity and how to project cash flow.

Other breakout sessions at the conference will cover price risk, negotiation, marketing, data analysis and more. General session speakers will include NFL referee Walt Coleman; Formula 1 race car driver Derek Daly; Hormel Foods’ Tom Day; Belstra Milling Company’s Malcolm DeKryger; and noted ag economists Barry Flinchbaugh, Jason Henderson and David Kohl. Register now.

NACHA Launches Same-Day ACH

 
NACHA last Friday launched Phase 1 of its same-day ACH initiative, which allows for the sending and receiving of ACH credit transactions. All banks are now required to accept same-day ACH transactions and will receive a per-transaction fee for doing so. While originating same-day ACH payments is optional, NACHA said it expects that many banks will opt to begin sending same-day transactions as well.

Same-day ACH credit transactions will now post at 1 p.m. and 5 p.m. ET, depending on when the ACH file is received for processing. All ACH return items will post at the next available posting time or following the settlement of the associated forward transaction. Funds associated with same-day ACH credits must be made available to the receiving customer by the receiving bank’s processing day. Transactions that are in excess of $25,000 or are cross-border International ACH Transactions are not eligible for same-day settlement.

The next phase of same-day ACH will launch in September 2017 and will introduce faster processing and settling of debit transactions in addition to credit transactions. Read more. For more information, contact ABA's Steve Kenneally.