Trump to Nominate Kathy Kraninger to Lead CFPB

President Trump will nominate Kathy Kraninger, a top aide at the Office of Management and Budget, as director of the CFPB, the White House confirmed Saturday. Kraninger is an associate director at OMB responsible for financial regulatory agency budgets and previously served as Senate staff on Capitol Hill and at the Department of Homeland Security.

Upon confirmation, Kraninger would replace CFPB Acting Director Mick Mulvaney, who is also the confirmed director of OMB. Kraninger’s nomination comes at a key moment for the CFPB; under the Federal Vacancies Reform Act, Mulvaney’s stint as acting director would have expired this month, but when a permanent replacement is nominated, the clock resets, allowing Mulvaney to remain as acting director until Kraninger is confirmed.

ABA President and CEO Rob Nichols congratulated Kraninger on her nomination. “Her experience at OMB alongside Acting CFPB Director Mick Mulvaney, along with her years of work on Capitol Hill and in the executive branch, would serve her well in this important position,” he said. “We trust she shares our interest in ensuring consumers have access to the financial products they want and need, while maintaining the protections they deserve.”

ABA Urges CFPB to Ensure Rules are 'Consistent with the Law'

The Consumer Financial Protection Bureau should consider whether the rules it has written since 2011 are “consistent with the law, clear, and whether they promote the financial interests of consumers in a strong, vibrant and innovative market that offers the variety of financial products and services that consumers want and value,” ABA said in a comment letter to the bureau on Monday. The letter--the eighth of 12 that the Association will submit in response to the bureau’s ongoing feedback initiative--outlines the banking industry’s priorities for the reform of several CFPB rules and offers an extensive set of recommendations for the CFPB to consider as it undertakes its review.

“Since opening its doors on July 21, 2011, the bureau has published sweeping new rules governing remittance transfers, mortgage origination and servicing, prepaid cards, and small-dollar lending,” ABA said. “Given the breadth and complexity of this new body of regulation, it is important to ensure that each rule is working as intended, and it is inevitable that they can be improved, especially with the benefit of experience and hindsight.”

Among other things, ABA called on the CFPB to identify an acceptable replacement for the “GSE patch;" liberalize debt-to-income ability-to-repay/Qualified Mortgage standards; limit the scope of the mortgage servicing rule’s successor-in-interest requirements to cases involving the death of the borrower and exempt borrowers who are debtors in bankruptcy from the live contract and written early intervention notice requirements; and revise the definition of a prepaid account to clarify the distinction between checking accounts and prepaid accounts. Read the letter. For more information, contact ABA's Ginny O'Neill.

FDIC's McWilliams Previews Agenda at the Agency

Giving her first public remarks since becoming FDIC chairman two weeks before, Jelena McWilliams on Tuesday previewed several elements of her agenda at an industry conference in Washington, D.C. She emphasized that she will give a “fresh eye” to FDIC regulations as part of other regulators’ efforts to revisit post-Dodd-Frank financial rules.

“I have asked staff already to take a look at the existing rules and to make me a list of all the guidelines that we have issued for comment and not for comment, as well as the rulemakings,” she said. “To the extent that guidances were never open for public comment, those will probably rise to the top of my list.”

She added that she will seek to ensure the prudential regulators apply CAMELS ratings consistently, accelerate the process of making decisions on deposit insurance applications by de novo banks and address industry concerns to the extent she can on banking cannabis-related businesses. “It’s not our job as an agency to set our federal policy” on marijuana, she explained, “but it is our job to help our regulated entities learn how to comply in a way that makes sense.”

Luetkemeyer to Fed: Clarify Use of 'Guidance' Versus Regs

The Federal Reserve should clarify that agency guidance and other statements not issued via notice-and-comment rulemaking do not establish binding legal standards, Rep. Blaine Luetkemeyer (R-Mo.) said in a letter to Fed leadership last week. Luetkemeyer added that the Fed should make a “clear statement” that guidance should not be the basis for enforcement actions; supervisory directives, such as Matters Requiring Attention; or other supervisory determinations, such as ratings downgrades.

“Over the years, a significant number of agency guidance, handbooks and circulars have been issued,” wrote Luetkemeyer, who chairs the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. “Greater clarity around the appropriate use and interpretation of such guidance is of the utmost importance.” Luetkemeyer also urged the Fed to ensure that its examiners are “appropriately educated about the use and role of guidance” and “held accountable when guidance is applied inappropriately.” Read the letter.

Fed's Powell: Strengthening Economic Conditions Will Continue to Drive Rate Hikes

As economic conditions continue to improve--with a robust labor market, inflation moving closer to the 2 percent target and growth exceeding most long-term estimates--the Federal Reserve expects to continue pursuing its course of gradual increases to the federal funds rate, Chairman Jerome Powell said in a speech on Wednesday. He added that “while persistently strong economic conditions can pose risks to inflation and perhaps financial stability,” it could also come with some advantages, such as more people returning to the labor force and other productivity and growth opportunities.

Powell noted the importance of ongoing monitoring of the financial system--given that positive economic conditions have previously led to overconfidence and excessive risk-taking--but said that “while some asset prices are high by historical standards, I do not see broad signs of excessive borrowing or leverage.” In addition, banks today are far better capitalized and have greater liquidity than before the financial crisis, he said. Read the speech.

Podcast: How Emerging Community Bank Leaders Are Building Their Careers

A lawyer and a professional baseball player walk into a bank.... No, it’s not a joke -- it’s the latest episode of the ABA Banking Journal Podcast. Emily Gray graduated from law school, and Blake Taylor began his working life as a minor-league baseball player, but both of them ended up building successful careers in community banking. Gray is now senior credit officer at Hardin County Bank, Savannah, Tenn., and Taylor is an SVP and commercial real estate lender at Southern First Bank in Columbia, S.C.

They are chair and vice chair, respectively, of ABA’s Emerging Leaders Advisory Board, and on the podcast they discuss how rising leaders in banking can develop their careers and position themselves to succeed. One important skill, for example, is “horizontal leadership” (compared with top-down leadership). “You’ve got to be able to lead horizontally with your peers,” says Gray. “A lot of the time, and especially in community banks, you have so many people who wear so many different hats that the hierarchy isn’t there as much as in a larger institution.”

Both Gray and Taylor speak frankly about the challenges facing ambitious community bankers as industry consolidation continues. “There’s only a handful of those [C-suite] opportunities,” says Taylor. “What’s going to set me apart?” But Gray adds that she’s optimistic: “I don’t think there’s ever been a better time to be a young banker.” Both veterans of young bankers’ programs in their own states, they also discuss the roles of the state bankers associations in developing the next generation of executive banking talent. Listen to this episode.

Do you use podcast apps to listen? You can find the ABA Banking Journal Podcast on Apple Podcasts, Google Play, Pocket Casts, Stitcher and Spotify, as well as in the Daily Newsbytes email every Friday.

Free Article Examines How to Build CRE Bench Strength

With commercial real estate portfolios growing, especially at community banks, recruiting and retaining top CRE lending talent is becoming a bigger challenge. A new article from the forthcoming July/August issue of the ABA Banking Journal explores how banks are deepening their CRE lending bench.

“In terms of the area of focus, commercial lending is one of the hottest areas in banking,” says Kristine Oliver, managing director at executive compensation consulting firm Pearl Meyer. “People to fill the positions are very challenging to find and even the larger banks are having a hard time attracting that talent.”

Community bankers recommend aggressive networking and connecting with CRE experts outside the bank, and complementing that strategy with a conscious approach to cultivating internal talent. At FirstCapital Bank of Texas, for example, credit analysts and junior lenders attend loan committee meetings as part of their development. “It’s not always just about the numbers,” says chief credit officer Greg Burgess. “There may be other solid reasons for making a loan that on the surface looks weak. You have to learn to see and understand that.” Read the article.

ABA Launches Briefing Series on Social Media and Digital Security

As social media becomes a more salient threat vector for cyber attacks--from spear phishing and spoofed accounts to account takeovers and data loss--ABA will offer a new series of live briefings to help bankers manage risks of social media appropriately.

The series, which begins on July 25 and runs through May 2019, will cover social media attacks and trends for 2018, the emerging threat landscape, social network threat analysis and projections for 2019. Speakers will include Mike Price, CTO of ZeroFox, and ABA VP Denyette DePierro. Continuing education credit is available for the CRCM, CFMP, CAFP, CERP and CFSSP certifications. Learn more and register now.

Question of the Week

Question: If the bank takes a property into Other Real Estate Owned, must the bank buy/ maintain flood insurance on the property?

Answer: For risk management and safety and soundness purposes, a bank with other real estate owned (OREO) in flood hazard areas should purchase flood insurance policies on its OREO property. However, it is not required to do so by regulation.

Other Real Estate Owned— An institution with other real estate owned (OREO) in SFHAs should, as a prudent practice, purchase flood insurance policies on its OREO property, although it is not required to do so by the regulations. https://www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf

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