SDBA eNews

November 1, 2018

Dean Franzen Joins SD Bankers Insurance & Services

Photo of Dean FranzenDean Franzen has joined the South Dakota Bankers Insurance & Services (SDBIS), Inc. as its commercial lines specialist. Franzen is an accomplished underwriter who has earned eight insurance designations. He also had a long career teaching insurance and business practices at the college level.

Franzen began his professional career in the insurance industry and spent almost 25 years in various home office roles. He worked for several companies including Mutual of Omaha, Physicians Mutual, American Republic and PCS Health Systems holding positions such as marketing manager, product development manager, health insurance specialist, senior life and disability underwriter, health underwriting consultant and manager of disability development.

For the past six-plus years, Franzen has served as the business department chair at North Central Kansas Technical College, which is ranked the second best two-year technical college in the U.S. by Forbes Magazine. Franzen was hired to start a business program at the college which includes courses in insurance, personal finance and banking. Dean also created and taught a class on insurance and risk management in the MBA program at Concordia University. 

As the new P&C, bond D&O and health agent for SDBIS, Franzen and SDBIS President Mike Feimer have been visiting member banks familiarizing Franzen with the Association's unique business model. 

Fed Proposes Tailored Supervisory Approach for Largest Banks

The Federal Reserve yesterday issued its highly-anticipated proposed framework for applying enhanced prudential standards to banking firms with $100 billion or more in assets, as required by S. 2155, the regulatory reform law.

The Fed proposed to establish four categories of standards that seek to reflect the risks of firms in the group. The agency outlined the risk-based indicators it would use to determine the applicability of standards, including size, cross-jurisdictional activity, weighted short-term wholesale funding, nonbank assets and off-balance sheet exposure.

In addition, the Fed released a second joint proposal with the OCC and FDIC that would tailor requirements under the regulatory capital rule, the Liquidity Coverage Ratio and the proposed Net Stable Funding Ratio rule for banks in each group. The proposal does not apply to foreign banking organizations or intermediate holding companies of foreign banking organizations, but the Fed signaled it will issue a separate proposal in the weeks ahead on how it will supervise these institutions.

ABA welcomed the proposal. “By advancing today’s proposed rulemakings, the Federal Reserve and the other banking agencies have taken an important step toward rightsizing bank regulations and following through with Congress’ intent in this year’s bipartisan regulatory reform law,” said ABA President and CEO Rob Nichols. “These changes would strengthen supervision with an improved focus on risks, while allowing larger institutions to better meet the needs of their customers and communities, which will help further drive economic growth.” Read the Fed's proposal. Read the joint agency proposal.

Comments on the proposal are due Jan. 22, 2019. Several banker-led working groups will be focused on drafting a comment letter in response to the proposals. To join the comment letter working group, or for questions related to the proposals’ implications for capital and stress testing, contact ABA’s Hugh Carney. Questions or feedback related to liquidity requirements should be directed to Alison Touhey, and feedback on the proposals’ implications for other prudential regulatory requirements should be directed to Hu Benton

Regulators Propose New Approach for Calculating Counterparty Credit Risk

The Federal Reserve, FDIC and OCC on Tuesday issued a proposed rule that would establish a new approach for calculating the exposure amount of derivative contracts under the regulatory capital rule. The proposal would provide the “standardized approach for counterparty credit risk,” or SA-CCR, as an alternative to the current exposure methodology for calculating advanced approaches total risk-weighted assets under the capital rule.

The agencies noted that the SA-CCR better reflects the current derivatives market and would provide important improvements to risk sensitivity, resulting in more appropriate capital requirements.

Banks subject to the advanced approaches would be required to use SA-CCR to calculate their standardized total risk-weighted assets; banks not subject to the advanced approaches could elect to use either of the two methodologies. The proposal would also incorporate SA-CCR into capital requirements for cleared transactions and in the supplementary leverage ratio. Comments on the proposal are due 60 days after publication in the Federal Register. Read the proposal. For more information or to join ABA's comment letter working group, contact ABA's Ananda Radhakrishnan

AICPA Releases Working Draft of Accounting Issues for CECL Implementation

The American Institute of Certified Public Accountants’ financial reporting executive committee on Tuesday issued a working draft of accounting issues related to the implementation of the Current Expected Credit Loss standard. The draft discusses the reasonable and supportable forecast institutions will be required to make for determining loan loss allowances under CECL. Comments on the draft are due Dec. 31.

As banks continue working to implement CECL, ABA encourages member bankers to join the discussion on the ABA CECL network, an online forum where bankers can share successes and challenges. Additional CECL-related resources can be found online at Read the discussion paper. Join the CECL network. For more information, contact ABA's Josh Stein

ABA Supports FDIC's Reopening of Brokered Deposit Rules

In a comment letter to the FDIC last Friday, ABA offered support for a recent proposal to implement Section 202 of S. 2155, the new regulatory reform law. Under the proposed rule, well-capitalized and well-rated institutions would not be required to treat reciprocal deposits as brokered deposits as long as they were less than 20 percent of a bank’s total liabilities or $5 billion. Institutions that are not both well capitalized and well rated may also exclude reciprocal deposits from their brokered deposits under certain circumstances.

ABA noted that the FDIC’s views on brokered deposits have not kept up with changes in law, technology and the market, and applauded the FDIC taking this “useful first step” toward modernizing brokered deposit rules. They called on FDIC to consider “what is considered a brokered deposit, including whether the term itself is applicable in today’s business environment,” and whether the FDIC’s policy goals are in line with statutory requirements.

The association also highlighted the need to revisit the national rate cap and how it is applied to community banks through the examination process. ABA pointed out that in a rising rate environment, the current rate cap may not accurately reflect the cost of deposits, and that “imposing an artificially low regulatory rate in a rising rate environment” could lead to liquidity crunches. Read the comment letter. For more information, contact ABA's Alison Touhey

Podcast: Two Ways to Partner with Fintech Firms

As long as banks have existed, they've deployed innovative technology to better serve their customers and improve efficiency. On the latest episode of the ABA Banking Journal Podcast--sponsored by CSI Fintech Focus --two leading bankers discuss distinct approaches to partnering with fintech firms today.

At Lincoln Savings Bank, Mike McCrary leads fintech partnership efforts--and this more-than-century-old Iowa agricultural bank serves as bank of record for several fintech firms, including Acorns, Square, Money Lion and Qapital. LSB has flipped the script as a vendor to fintech companies. McCrary discusses how these partnerships bring in additional insured deposits in a time of heightened competition, as well as drive non-interest income.

Christopher Maher of OceanFirst Bank discusses his bank's partnerships with fintech companies to speed up mobile account opening and enhance investment choices in its trust/wealth management offering. He outlines considerations banks should make when developing a fintech partnership, including how to identify which functions potential partners can best perform and how to structure partnerships in a way that preserves the franchise value of the banks. Listen to this episode

Eide Bailly to Offer Tax Reform, Section 199A Seminar

Congress has passed the largest and most comprehensive tax reform legislation in the past 30 years. Businesses and individuals alike are trying to figure out the tax implications and what this means for them in their current situation and moving forward.

The new Code Section 199A creates a 20 percent deduction on qualified business income. Join Eide Bailly for a free seminar "Tax Reform and Section 199A: Understanding the 20 Percent Pass-Through Deduction" on Nov. 20 in Sioux Falls. This session will address the mechanics of the deduction including: the types of income that qualify, the income, wage base and capital base limitation as well as strategies to optimize the use of this deduction. 

Presented by Jim Jarding, CPA, partner of Eide Bailly LLP, the seminar will be held at the Hilton Garden Inn Downtown from 7:45 to 9:15 a.m. Learn more and register.

SBS to Discuss True Cybersecurity Horror Stories

While most horror stories are works of fiction designed to keep you up at night, the horror stories SBS CyberSecurity will be sharing are real-life cybersecurity events with outcomes that will haunt your dreams if you aren't properly prepared.

Join SBS, if you dare, as they wander deep into the dark and scary corners of cybersecurity, full of data loss, reputational damage, business closing, and financial devastation. SBS will hold a free webinar "Hacker Hour: True Cybersecurity Horror Stories" on Nov. 28 at 2 p.m. CT.

SBS will share a variety of cybersecurity horror stories and what could have been done to prevent the unfortunate outcomes. Learn more and register.

Compliance Alliance

Question of the Week

Question: HELOCs and escrow for flood--are they always exempt even if in first position?

Answer: Yes, that's correct--there's a specific exemption for HELOCs in and of themselves:

§339.5   Escrow requirement.

(a) In general—(1) Applicability. Except as provided in paragraphs (a)(2) or (c) of this section, an FDIC-supervised institution, or a servicer acting on its behalf, shall require the escrow of all premiums and fees for any flood insurance required under §339.3(a) for any designated loan secured by residential improved real estate or a mobile home that is made, increased, extended, or renewed on or after January 1, 2016, payable with the same frequency as payments on the designated loan are required to be made for the duration of the loan.

(2) Exceptions. Paragraph (a)(1) of this section does not apply if: ...

(iv) The loan is a home equity line of credit;

So the loan doesn't necessarily have to meet one of the other exemptions, like the lien position exemption for example, in order to be exempt from the escrow requirement. 

Not a member? Learn more about membership with Compliance Alliance by attending one of our live demos:

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Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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Contact Alisa Bousa, SDBA, at 800.726.7322 or via email.