SDBA eNews

March 14, 2019

Hotel Deadline Nearing for SDBA Ag Credit Conference 

The hotel block for the SDBA's Agricultural Credit Conference to be held on April 10-12 at the Ramkota Hotel & Conference Center in Pierre will be released on Monday, March 18.

This conference focuses on the unique needs of ag bankers and the need for quality information and training to better serve their customers. The SDBA has lined up speakers on a variety of timely topics to help ag bankers navigate through challenging times. Experienced and new ag lenders, as well as CEOs, will all benefit from this conference.

To reserve a room from the SDBA block, call the Ramkota Hotel at 605.224.6877. View the complete conference agenda and register to attend.

ABA, Trade Groups Call for National Beneficial Ownership Registry

As the House Financial Services Committee yesterday held a hearing on financial crimes, ABA joined eight other financial trade organizations in a letter to committee leaders highlighting the need for a national beneficial ownership registry.

While banks are required to collect the beneficial ownership information of their customers, the groups noted that the lack of a single, centralized federal registry that could be used to verify that information “represents a significant gap in the U.S. regulatory system that allows criminals, money launderers, kleptocrats and terrorist financiers to obscure their identities from law enforcement.”

In addition, the groups urged lawmakers to pursue reforms to the current anti-money laundering framework that would bring greater clarity and simplicity for banks. Specifically, the groups called for reforms that would better align the examination and compliance framework with national AML/CFT priorities; facilitate information sharing between financial institutions and law enforcement; update and streamline reporting requirements; and encourage the use of technology and artificial intelligence in support of AML efforts. Read the letter.

Luetkemeyer Warns of CECL's Negative Consequences 

Rep. Blaine Luetkemeyer (R-Mo.) on Monday warned of the negative consequences that the Financial Accounting Standards Board’s current expected credit loss standard could have on community banks and consumers if implementation moves forward. In an American Banker op-ed, Luetkemeyer pointed out that “CECL threatens to eliminate some lending services and restrict access to credit, particularly for low-income families.

Recounting a recent conversation with a Midwestern banker, Luetkemeyer added that “for smaller institutions, the banker said in no uncertain terms that CECL has no benefit for their customers nor would it have any bearing on the safety and soundness of their institution, but it will present onerous operational challenges.”

Luetkemeyer also raised concerns that no effort has been made thus far to conduct a quantitative study that would gauge the potential effects of CECL—something ABA has long advocated for. “It is simply reckless for FASB to move forward with the implementation of the CECL standard without adequate information on possible outcomes,” he wrote. Read the op-ed.

With the CECL standard for loan loss accounting coming into effect for many banks—and the vast majority of bank assets—on Jan. 1, 2020, where are bank CFOs and managers in the process of implementing CECL, and what challenges are they seeing? ABA accounting experts Michael Gullette and Joshua Stein provide a CECL update on the latest issue of the ABA Banking Journal Podcast. Listen to this episode.  View ABA's CECL resources.

Bipartisan Cannabis Banking Bill Introduced 

Reps. Ed Perlmutter (D-Colo.), Denny Heck (D-Wash.), Steve Stivers (R-Ohio) and Warren Davidson (R-Ohio) last Thursday introduced a bipartisan bill that aims to address the gap between state and federal laws that inhibits most financial institutions from serving cannabis businesses. The SAFE Banking Act specifies that proceeds from “cannabis-related legitimate businesses” would not be considered unlawful under federal money laundering rules or other laws.

The bill would provide a safe harbor for banks that serve these businesses, preventing regulators from penalizing a bank for providing services to a cannabis-related legitimate business or its employees or owners, as well as to related businesses such as landlords or service providers. It would also direct the Financial Crimes Enforcement Network and federal banking regulators to issue guidance and exam procedures for banks that serve cannabis-related legitimate businesses.

ABA expressed its support for the SAFE Banking Act, noting that it is “an important step” forward. “Explicit, consistent direction from federal financial regulators will provide needed clarity for banks and help them to better evaluate the risks and supervisory expectations for cannabis-related customers,” wrote ABA President and CEO Rob Nichols. “The SAFE Banking Act is not a cure for all cannabis banking challenges, but it is an important measure that helps clarify many issues for the banking industry and regulators.” Read more. Read ABA’s letter.

Labor Department Releases New Overtime Rule Proposal

The U.S. Department of Labor last Thursday released its long-awaited rewrite of the Obama administration’s “overtime rule”—which was adopted in 2016 but never took effect due to a federal judge’s ruling later that year. Comments on the proposal will be due 60 days after publication in the Federal Register.

In the proposed rule, DOL set the salary level at which an employee could be exempted from federal overtime and minimum wage requirements at $679 per week, or $35,308 per year. These figures reflect the methodology adopted by the George W. Bush administration in 2004—which set the salary level at the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region and in the retail sector—updated for projected 2020 salary data.

DOL’s proposed salary level reflects a significant reduction from the salary level adopted by the Obama administration, under which far more employees would have been treated as hourly earners had the 2016 rule gone into effect. DOL also proposed that the salary level be updated every four years through notice-and-comment rulemaking. DOL did not propose any changes to the “duties test.”

In previous comments, ABA urged DOL to adopt a single national salary level computed according to the 2004 methodology. ABA also opposed any automatic adjustments to the salary level and urged DOL not to make any changes to the duties test. Read the proposed rule. Read ABA's previous comments. For more information or to join a working group to assist ABA with preparing comments, contact ABA's Jonathan Thessin.

Fed's Brainard Discusses Potential Changes to CRA Assessment Area Definition 

As financial regulators continue their review of the Community Reinvestment Act regulations, Federal Reserve Governor Lael Brainard yesterday said that they are considering making adjustments to the assessment area definition that would allow banks to receive CRA consideration for community development activities in a more expansive area.

“We have been considering a possible approach that might rework the assessment area definition so that banks of a certain scale would have separate assessment areas for their retail activities and their community development activities,” Brainard said. “This would retain the law’s focus on the credit needs of a bank’s local community by evaluating the retail lending and services it offers in the county or other geographic area surrounding its branches, deposit-taking ATMs and other concentrations of lending and deposit-taking.”

Brainard added that this approach “would help eliminate uncertainty and could encourage more capital for affordable housing, community facilities, and economic development activities in underserved areas.” Read Brainard’s remarks. View ABA resources on CRA modernization.

Registration Open for Tri-State Trust Conference

The NDBA will hold the 2019 Tri-State Trust Conference on April 29 to May 1 at the Hilton Garden Inn in Fargo, N.D.

The conference focuses on trust officers' unique responsibilities and their need for quality information and training to serve customers. The conference features two days of educational sessions led by experts in the business of trust and wealth management. 

This year's sessions will include “Point of View: The Economy, Markets and Investment Strategy," “Fiduciary Law Update," “Preventing and Responding to Abuse, Neglect and Financial Exploitation” and "Revolutionizing Minerals Management." Learn more and register to attend

ABA to Host Free .bank Webinar this Month

ABA will host a free webinar on Wednesday, March 27, at 1 p.m. CDT, to highlight bankers’ recent experiences with migrating to a .bank domain. ABA SVP Sam Lisker will moderate a discussion between Paul Abramson, chief technology officer at Montecito Bank and Trust, and Melissa Beltrame, chief marketing officer at Lead Bank, that will touch on lessons learned and best practices to follow when making the switch. Register now.

Compliance Alliance

Question of the Week

Question:  We have a commercial customer with a line of credit that they use for working capital. They may also use the line for any other type of business-related expense. So, the commercial borrower used this original line to purchase a rental property. Now, we are paying down the line of credit with the property that was purchased as security. The original line won’t be fully paid down. Is this HMDA-reportable?

Answer: No--this is not HMDA-reportable. This is because a commercial-purpose loan is only reportable as a home purchase loan, home improvement loan or refinance. This situation only possibly implicates “refinance” for HMDA purposes (since there’s no indication that this is a home purchase or home improvement loan). However, this type of transaction does not constitute a “refinance” under HMDA because the new loan is only paying down the existing line of credit, rather than fully satisfying and replacing the line.

(10) A closed-end mortgage loan or open-end line of credit that is or will be made primarily for a business or commercial purpose, unless the closed-end mortgage loan or open-end line of credit is a home improvement loan under § 1003.2(i), a home purchase loan under § 1003.2(j), or a refinancing under § 1003.2(p);

12 CFR 1003.3(c)(10):

1. Loan or line of credit secured by a lien on unimproved land. Section 1003.3(c)(2) provides that a closed-end mortgage loan or an open-end line of credit secured by a lien on unimproved land is an excluded transaction.

(p) Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.

12 CFR 1003.2(p):

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