SDBA eNews

May 23, 2019

Bill Introduced to 'Stop and Study' CECL

Sen. Thom Tillis (R-N.C.) on Tuesday introduced a long-awaited bill—S. 1564—calling for a delay in the implementation of the Financial Accounting Standards Board’s current expected credit loss standard until a quantitative impact study can be completed to understand its likely effects it will have on the economy.

The bill comes after bipartisan groups of lawmakers from both the House and Senate earlier this month wrote to the heads of several regulatory agencies raising concerns about CECL. ABA—which has long highlighted the procyclical effects of the standard to both lawmakers and regulators—welcomed the bill’s introduction.

“An ABA review of preliminary bank estimates indicates CECL would likely cause significant spikes in loan loss reserves and inadvertently restrict consumer lending during periods of economic stress,” said ABA President and CEO Rob Nichols. “Only a rigorous quantitative impact study conducted by regulators can properly assess the effect this new standard will have on financial institutions, their customers and the broader economy. This commonsense legislation would make that happen.” Read ABA’s statement.

ABA, Trade Groups Welcome DOL Rewrite of 'Overtime Rule'

ABA, along with several other industry trade groups under the Partnership to Protect Workplace Opportunity, on Tuesday expressed support for the U.S. Department of Labor’s proposed rewrite of the Obama administration’s 2016 overtime rule, which was overturned in federal court. The groups welcomed DOL’s proposal to 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. The groups also expressed support for DOL’s use of a nationwide uniform salary level and rejection of automatic updating of the salary level.

The groups asked that DOL not limit the amount of incentive payments that may be used to satisfy the salary level test, not increase the minimum salary required for an employee to be classified as exempt under the “highly compensated employee” test and provide a 180-day implementation period in the final rule. ABA serves on the management committee of the trade group coalition and was involved in drafting the letter. For more information, contact ABA’s Jonathan Thessin.

S. 2155 Rule Changes to Be Done by Year-End, Regulators Say

The heads of the banking agencies told lawmakers that they expect to have regulatory changes from the S. 2155 regulatory reform law implemented by year-end. Testifying before the House Financial Services Committee last week, Federal Reserve Vice Chairman for Supervision Randal Quarles said that the agencies are “on track to complete the implementing actions for S. 2155,” adding that they would “have the bulk of the implementing actions completed by the third quarter of this year and all of them completed by the end of this year.”

Items still outstanding include a final rule on the treatment of high-volatility commercial real estate, a framework for applying enhanced prudential standards to banks with more than $100 billion in assets, an appraisal exemption for certain rural real-estate transactions and the finalization of the community bank leverage ratio.

Regulators also faced questions from several lawmakers who raised concerns about the current expected credit loss standard and its effect on credit availability. When asked about the extent to which the agencies themselves have evaluated the implications of CECL, FDIC Chairman Jelena McWilliams acknowledged that “it’s difficult, because there are so many different ways of implementing CECL.” As implementation moves forward, “our hope is that . . . we will be able to get the information from the first tranche of banks that are complying,” she said.

Comptroller of the Currency Joseph Otting added that regulators will be closely monitoring the regulatory capital effects of CECL over the three-year phase-in period, noting that “there’s no magic to that number—if there are other issues, we’ll be happy to consider that.” Added Quarles: “As we see the consequences of CECL during the phase-in period, we have the tools to respond on the capital side.”

State Associations Urge Cannabis Hearings in Senate

The 51 state bankers associations on Monday urged the Senate Banking Committee to hold hearings on legislative solutions to the conundrum faced by banks in states where marijuana has been legalized. While legislation backed by ABA—the SAFE Banking Act—cleared the House Financial Services Committee in March, no action has been taken on the companion bill in the Senate.

“Since 1996, 33 states comprising 68 percent of the nation’s population have legalized cannabis for medical or adult use, and that number is only expected to grow,” the associations said. “Despite this ever-growing voter preference, current federal law continues to prevent banks from safely banking these businesses without fear of federal sanctions. Leaving the cannabis industry unbanked presents serious public safety, revenue administration, and legal compliance concerns and must be remedied immediately.”

In their letter to the committee’s leadership, the associations—which did not take a position on the legalization of marijuana—acknowledged that “there are broader public policy questions surrounding cannabis legalization that merit debate, but we ask that you focus narrowly on the urgent banking problem at hand, which is within your power to resolve.” Read the letter.

FCA Board Chairman Dallas Tonsager Dies

Dallas P. Tonsager (64), board chairman of the Farm Credit Administration (FCA), died Tuesday of lymphoma in Falls Church, Va. 

Tonsager grew up on a dairy farm near Oldham, S.D. For many years, he and his older brother owned Plainview Farm in Oldham, a family farm on which they raised corn, soybeans, wheat and hay. Tonsager was a graduate of South Dakota State University, where he earned a bachelor of science in agriculture in 1976.

“Dallas dedicated his life to helping farmers, ranchers and other rural Americans,” said FCA Board Member Jeff Hall, who was designated CEO on May 20. “Both at USDA and FCA, he worked hard to promote investments in rural communities. As chairman of FCA, he urged the Farm Credit System to work with borrowers experiencing stress as a result of the current downturn in the farm economy. He was also a fine colleague and friend. His passing is a great loss to agriculture and rural America and a personal loss to everyone who knew him.”

Tonsager was appointed to the FCA Board by President Obama on March 13, 2015, and chairman and CEO on Nov. 22, 2016.

In 1993, Tonsager was selected by President Clinton to serve as USDA's state director for rural development in South Dakota. He oversaw a diversified portfolio of housing, business and infrastructure loans in South Dakota, with his term ending in February 2001. Tonsager served as under secretary for rural development at the U.S. Department of Agriculture from 2009 to 2013.

Tonsager is survived by his wife, Sharon; his son Keith and daughter-in-law, Lindsey; his son Josh; and his granddaughter, Ilia. The Tonsager family plans to host a funeral service in South Dakota and a memorial service in Washington. Read more.

UN Effort to Combat Human Trafficking to Host Kickoff Calls Next Week

A new United Nations-led initiative to combat human trafficking will sponsor two upcoming conference calls to provide background and discuss next steps. The effort—known as the Financial Access Project—is intended to provide a framework for financial institutions, survivor service and support organizations, relevant governmental actors and other key stakeholders to collaborate to offer easier access to basic financial services for victims of human trafficking.

The calls are scheduled for next Wednesday, May 29, and Friday, May 31, at 8 a.m. CDT. To participate in the call, dial 712.451.0247 and use the access code 274519#. Learn more. For more information, contact ABA’s Rob Rowe.

GSB Wisconsin Enrollment Deadline Nearing

Since 1945, the Graduate School of Banking at the University of Wisconsin-Madison (GSB) has helped develop banking leaders through a program of advanced management education. Today, GSB is widely recognized as a leading and progressive banking school, offering a comprehensive course of study that focuses on meeting the changing needs of today's bank manager. The 2019 school session will be held July 28 to Aug. 9 in Madison, Wis.

GSB students acquire a broad knowledge and understanding of major bank functions and their interrelationships and develop the skills required to lead and manage effectively. The school's curriculum reflects the contemporary trends impacting the financial services industry. Core courses address broad areas of finance, marketing, management and the environment in which banks operate while elective courses allow students to customize their learning experience.

Graduates of the GSB program also receive the prestigious Certificate of Executive Leadership from the Wisconsin School of Business Professional and Executive Development--the highest level certificate they offer. The deadline to enroll in the 2019 session is June 1. Learn more and register

Open the Tackle Box and Go Phishing

Many organizations are implementing valuable internal phishing programs in order to ensure their employees can spot and report phishing emails.  At some point, organizations struggle with how to continue to challenge their employees and keep the phishing emails fresh.

Join SBS for Hacker Hour: Open the Tackle Box and Go Phishing on Wednesday, May 29, at 2 p.m. CDT. During the free webinar, SBS will discuss tips and tricks to keep your internal phishing program fresh and continually push the maturity level of your security awareness program. Register for the webinar.

Compliance Alliance

Question of the Week

Question: I have spent the afternoon looking for a simple “definition” of what a distressed and underserved community is. I have found bits and pieces, and I have found the updated lists for 2018, but we are undergoing some policy updates and would like to align our definition with what the FRB and FFIEC define them as, but I am at a loss to find something. Can you help or point me in the right direction?

Answer: Distressed or underserved communities are designated by the FRB, FDIC, and OCC, based on rates of poverty, unemployment, population loss, population size, density and dispersion. The bank would need to use the lists for determining if a loan is being made in a distressed or underserved community.

For reference:
The distressed lists:

And the CRA:

(iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board of Governors of the Federal Reserve System, FDIC, and Office of the Comptroller of the Currency, based on—

(A) Rates of poverty, unemployment, and population loss; or

(B) Population size, density, and dispersion. Activities revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals.

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

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

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.