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SDBA Seeking Candidates for Board Elections
Elections for the SDBA’s Board of Directors are scheduled for March and April. Three directors have terms that expire on April 30, 2018, in addition to a vacancy in Group 5. Elections will take place in Group 2, Group 5, Country Bank Category and Large Commercial Bank Category.
Terms for Jeff Davis, Bryant State Bank, Bryant representing Group II; Brad Seaman, First State Bank of Warner, Aberdeen, representing the Country Bank Category; and David Bangasser, Dacotah Bank, Sioux Falls representing the Large Commercial Bank Category will expire on April 30, 2018. All three individuals have served one term and are each eligible to run for a second, three-year term. The Group V seat became vacant when Shawn Rost, First Interstate Bank, Rapid City, moved into the position of SDBA vice chairman last year.
If you are interested in running for one of the Board seats, please contact one of the nominating committee members by Wednesday, March 21, 2018. Please also submit a short bio and headshot photo for the voting ballot. Newly-elected Board members will take office on May 1, 2018, and serve a three-year term expiring April 30, 2021. See the list of nominating committee members.
Financial Trade Groups Write to House Leaders in Support of Data Breach Notification Bill
ABA and six other financial trade organizations wrote to U.S. House leaders yesterday underscoring the need for businesses across all industries to be held to the same data protection and breach notification standards currently adhered to by regulated financial institutions.
The associations expressed support for draft legislation released by Reps. Blaine Luetkemeyer (R-Mo.) and Carolyn Maloney (D-N.Y.) that would create a level playing field of nationally consistent data protection standards and post-breach notification requirements. This bill would not create duplicative standards for financial institutions which are already subject to robust standards, but rather extend similar expectations to other sectors that handle consumer data.
The draft bill contains a provision that recognizes the existing, effective regulatory framework for covered financial sector entities. While the provision was intended to prevent banks and credit unions from being subject to duplicative notification requirements, it has been the target of recent negative campaigns circulated by the National Retail Federation and the Retail Industry Leaders Association, which incorrectly suggest that banks do not notify customers of breaches on their computer systems and call once again for universal "chip and PIN." The ads from the retailer groups also mischaracterize and exaggerate the share of data breaches occurring at banks and credit unions while omitting their members' (higher) share of data breaches.
The financial trades refuted the notification assertion, noting that “banks and credit unions have long been subject to rigorous data protection and breach notification practices for financial institutions to follow,” and that in the event of a data breach, banks and credit unions work continuously to communicate with customers, reissue cards and enact measures to mitigate the effects of fraud. They added, however, that “no solution will work unless everyone has an obligation to take these steps.”
Powell: Tailored Regulation Remains a Top Priority for Federal Reserve
Tailoring regulation based on an institution’s size and risk profile is “at the heart of what we’re doing” at the Federal Reserve, Chairman Jerome Powell affirmed Tuesday during testimony before the House Financial Services Committee. Under his leadership, the Fed will continue to focus on reducing the regulatory burden for community banks, and “without losing any safety and soundness, try to make sure that our regulation is no more burdensome than it needs to be,” he said.
Powell pointed to several steps the Fed has taken in recent months to provide relief for smaller institutions, including reducing the scope and burden of the Call Report, reducing the frequency of exams and simplifying capital requirements, adding that “we’re committed to doing more.” He expressed interest in revisiting, among other things, the calibration of the supplemental leverage ratio and the application of the Volcker Rule.
He also acknowledged the effects of excessive regulation on the availability of credit and economic growth. “Small businesses create a lot of the jobs, and small banks have a disproportionate share of small business lending,” he noted. “We really want that credit to flow. We don’t want regulation to inappropriately create too much burden.”
Commenting on the broader economic conditions, he noted that the U.S. economy continues to grow at a solid pace, with GDP posting 3 percent growth in the second half of 2017, unemployment reaching a 17-year low, and inflation running just beneath the Fed’s 2 percent target. He added that the Fed’s ongoing effort to wind down its balance sheet is “proceeding smoothly,” and that he continues to anticipate gradual interest rate increases in the coming months. View Powell's testimony.
Mulvaney Outlines Plans for 'Mild' but 'Certain' CFPB
Consumer Financial Protection Bureau Acting Director Mick Mulvaney on Tuesday echoed his previous comments that the CFPB will no longer “push the envelope” with respect to enforcement actions, adding that instead, he envisions a supervisory body that is “mild” but “certain.”
“We are not going to be pushing the envelope anymore,” Mulvaney said, addressing a credit union industry event in Washington, D.C. “We’re not going to bend over backwards to create ways to sue people just because we have the authority to do so. We’re not going to be legislators--it’s supposed to happen at Congress--and that’s where it’s going to happen. We will be the enforcer.”
Under Mulvaney’s leadership, the CFPB has begun a comprehensive assessment of its core mission, issuing requests for information on a number of topics including the bureau’s supervisory processes, enforcement activities and engagement with external parties. He added that going forward, the bureau will seek to protect not just “people who use credit cards” but also “those who provide credit.”
Credit Union CEO: Sen. Hatch Right to Question Large Credit Union Tax Exemption
Nearly a month after Senate Finance Committee Chairman Orrin Hatch (R-Utah) wrote to the National Credit Union Administration questioning the federal tax exemption for the largest credit unions, one credit union CEO on Tuesday agreed that the time is now to explore taxation for those institutions.
In an op-ed in American Banker, Rob Taylor, president and CEO of Idaho State University Credit Union in Pocatello, Idaho, echoed Hatch’s concerns about large, multiple common bond credit unions that have been allowed to expand and, in many cases, compete with smaller credit unions. Often, these expansions are harmful to small credit unions “that have stayed true to their original fields of membership,” Taylor said. He added that “the NCUA is contributing to this decline with their laissez-faire approach to overlapping fields of membership.”
“The problem with [the credit union] movement is most of us have been indoctrinated to believe our common enemy are bankers … when in fact the real threat to our future lies within our own industry,” he said. “I agree with Sen. Hatch that many larger credit unions operate in the same manner as taxable banks, and I believe it’s time for them to convert to bank charters and be taxed like the ‘big boys.’” Read the op-ed.
Farm Credit Watch: Ely Raises Concern about Ag Provision of Tax Bill
An agriculture-related provision in the recent tax law currently causing tensions between large agribusinesses and cooperatives could help bring the broader conversation around the taxation of the Farm Credit System back into the spotlight, Bert Ely noted yesterday in the latest issue of Farm Credit Watch. The tax bill included a provision--Section 199A--that allows farmers to deduct up to 20 percent of their total sales to cooperatives, letting some farmers reduce their taxable income to zero.
Ely pointed out that Section 199A is expected to affect large agribusinesses as farmers increase grain sales to ag co-ops in order to take advantage of the tax savings. While agribusinesses are working with Congress to address the unintended consequences of the provision, Ely noted the possibility of private grain companies setting up their own co-ops in order to remain competitive. Such co-ops may be funded by CoBank, the only FCS institution authorized to lend to ag co-ops.
“The furor that Section 199A has created should trigger a congressional review of all aspects of agricultural taxation, including the highly favorable tax treatment the FCS has long enjoyed,” Ely said. Read Farm Credit Watch.
New Podcast: Solutions on the Horizon for the Rural Appraiser Shortage
The latest episode of the ABA Banking Journal Podcast tackles the shortage of qualified appraisers--especially in rural areas, where lenders are seeing delays of several months in getting appraisals for commercial real estate and agricultural transactions. Shan Hanes, president and CEO of Heartland Tri-State Bank in Elkhart, Kan., discusses how high demand for appraisals from only a handful of appraisers in his area means that his clients face long waits. In addition to the opportunity cost of delayed investment, he explains, it also harms younger agricultural borrowers.
ABA VP Sharon Whitaker outlines some of the efforts ABA has taken to address the appraiser shortage and minimize its negative effects, including successful advocacy for the Appraisal Qualifications Board to reduce the minimum requirements in a way that does not affect appraisal quality but lowers barriers for new appraisers to join the field. Whitaker also discusses a pending proposal by the banking agencies to raise the de minimis threshold for commercial transactions not requiring an appraisal from $250,000 to $400,00--an approach ABA supports. Listen to this episode.
Learn How Financial Institutions Serve as a Frontline Defense in Human Trafficking Detection
Billions of transactions per day are managed by financial institutions. Yet it’s the unique transactions surrounding some customers’ accounts that could help financial services professionals serve as a key deterrent against human trafficking.
OnCourse Learning will host the free nationally-accredited webinar “How Financial Institutions Serve as Frontline Defense in Human Trafficking Detection” at 11 a.m. CT March 20 featuring human trafficking survivor, author and social advocate Timea E. Nagy. She has trained professionals in more than 1,500 banks and financial institutions throughout North America, along with thousands of law enforcement officers.
“Timea’s story is incredibly powerful and serves as an inspiration for other survivors,” said OnCourse Learning’s Vice President of Governance, Risk & Compliance, Jeff Kelly. “It provides valuable lessons for financial services professionals on how vigilance can help break the cycle of human trafficking.”
The webinar, which will provide actionable tips for human trafficking detection in financial institutions, is accredited by the Association of Certified Anti-Money Laundering Specialists and designed for professionals interested in compliance training, AML training and AML certification. Attendees for the live event will receive one CAMS credit toward their continuing education requirement. The webinar will be recorded and made available, but CAMS credit will only apply to those attending live on March 20. Learn more and register for the webinar.
 Question of the Week
Question: Do we have to require flood insurance during an NFIP lapse?
Answer: Flood insurance technically is not required if the NFIP has lapsed. The reason for this is that flood coverage is only required for a “designated loan,” which is generally defined as a loan secured by a building located in a SFHA in which flood insurance is available under the NFIP. There are several big caveats to this though. The bank should consider obtaining private coverage for safety and soundness purposes and because regulators will expect force placement where applicable when the NFIP is reauthorized. Remember, the bank can always choose to require coverage up to the insurable value, even if the flood regulations would not mandate it.
So lenders effectively have four options for making new loans during a lapse:
- Have the borrower complete an application and pay the premium, and hold it for processing pending reauthorization.
- Postpone loan closing until reauthorization.
- Require that the borrower obtain private flood insurance coverage.
- As a last resort, make the loan without any flood insurance.
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Questions/Comments
Contact Alisa DeMers, SDBA, at 800.726.7322 or via email.
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