SDBA eNews

August 22, 2019

FDIC, OCC Finalize Volcker Overhaul Proposal

The FDIC and the OCC on Tuesday approved a long-awaited set of changes to the Volcker Rule simplifying the rule’s compliance burden and better targeting its effects toward indended activities. The final rule streamlines and tailors the Volcker Rule by focusing its restriction on proprietary trading and investments in covered funds on banks with “significant” and “moderate” trading activities. Banks with limited trading assets and liabilities of less than $1 billion will have a rebuttable presumption of compliance with the Volcker Rule. Once approved by the Federal Reserve, SEC and CFTC, the changes will take effect on Jan. 1, 2020, with mandatory compliance not required until Jan. 1, 2021.

“We appreciate the actions taken today by the FDIC and OCC, which have started the agencies’ process of finalizing sensible reforms to the Volcker Rule that will help banks better serve their customers and the broader economy,” said ABA President and CEO Rob Nichols. “These improvements will allow bank supervisors to focus on systemic risk, while providing the tailored and precise oversight that was the Volcker Rule’s original purpose.”

As advocated by ABA, the final rule does not include the proposed accounting prong in the trading account definition. Instead, it makes meaningful improvements to the so-called 60-day rebuttable presumption that provide clear boundaries between permissible and prohibited trading.

ABA has been actively engaged with its Volcker Rule working groups to identify and address issues with the rule throughout the rulemaking process, and a number of ABA’s recommendations were incorporated into the final rule. Read the final rule. For more information, contact ABA’s Tim Keehan.

FASB Formalizes Proposal to Delay CECL Implementation for Some Institutions

Following a vote last month, the Financial Accounting Standards Board last Thursday formally issued its proposal to delay the implementation of the current expected credit loss standard until January 2023 for certain companies. The delay would apply to small reporting companies (as defined by the SEC), non-SEC public companies and private companies. Comments on the proposal are due by Sept. 16.

ABA—which has raised numerous concerns about the procyclical nature of the CECL standard and its potential to negatively affect credit availability in an economic downturn—previously called on FASB to extend the delay to all banks, including larger public companies, which must still comply by January 2020. The association also continues to advocate for legislation introduced in both the House and Senate that would halt the implementation of CECL until a quantitative impact study can be conducted.

Appellate Court Issues Mixed Decision in CU Field of Membership Appeal

A three-judge panel of the D.C. Circuit Court of Appeals on Tuesday upheld much of the National Credit Union Administration’s 2016 field of membership rule, which further expanded the already loose fields from which federal credit unions can draw their customers.

In a limited win for ABA, which sued to block the rule, the court remanded the portion of the rule—without vacating it entirely—addressing core-based statistical areas “for further consideration of the discriminatory impact it might have on poor and minority urban residents.” This provision, upheld by the district judge, permits credit unions to serve core-based statistical areas without serving the urban core that defines the area. The appellate court saw merit in ABA’s argument that this would encourage redlining by allowing credit unions to construct fields of membership consisting of wealthier suburbs without lower-income core neighborhoods.

However, NCUA prevailed in its appeal of the district judge’s decision vacating portions of the NCUA rule related to combined statistical areas and rural districts as “local communities.” In upholding these portions, the court cited the doctrine of Chevron deference, which gives wide latitude to administrative agencies to interpret their authorizing statutes. The court’s opinion left open the possibility that certain future approvals of fields of membership based on expansive interpretations might warrant legal challenge.

Rob Nichols said he was “pleased that the D.C. Circuit recognized the potential redlining risks that are created when credit unions try to exclude the urban core from their communities” and added that ABA is “disappointed the court ruled that rural districts may be large and cross state lines [and] that a local community may be larger than a county.” ABA staff will review the ruling in detail as the association determines its next steps. Read the opinion. For more information, contact ABA's Thomas Pinder

South Dakota Woman Sentenced for Elderly Exploitation 

Jennifer Ahrendt, 46, of Trent, S.D., has been sentenced following a guilty plea entered on May 21 for the crime of theft by exploitation of an elder or adult with a disability, a Class 4 Felony, according to a press release from South Dakota Attorney General Jason Ravnsborg's Office.

Ahrendt was entrusted under a power of attorney to handle the financial affairs of her elderly, now deceased, grandmother. Between Dec. 29, 2016, to May 11, 2018, Ahrendt took money from the accounts she was managing on behalf of her grandmother and used the funds for herself, including gambling away a large portion of the funds. 

The case was investigated by the South Dakota Attorney General’s Division of Criminal Investigation Elder and Adults with Disabilities Abuse and Financial Exploitation Investigation Unit, which included numerous interviews, review of legal documents, bank records and more. 

Ahrendt was sentenced to 180 days in the county jail, all of which was suspended on the condition that she be placed on probation for a period of 10 years, pay full restitution in the amount of $115,899.13 and not manage any finances other than her own while on probation. 

FDIC Proposes Changes to National Rate Cap Calculation 

The FDIC on Tuesday proposed a new methodology for calculating the national rate and the national rate cap for specific deposit products. The FDIC is proposing to set the national rate cap at the higher of 75 basis points above the national rate, or the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits. The proposed rule would also allow less than well-capitalized institutions to offer up to 90% of the highest rate paid on a product in the institution’s local market.

While the rate cap is intended to prevent struggling banks frFederal Register. Read the proposal. For more information, to offer feedback on the proposal or to be included in ABA’s comment letter working group, contact ABA’s Alison Touhey

Podcast: The (Public) Bank in the Background

In 2019, a unique financial institution marked its centennial: the Bank of North Dakota, America's only state-owned and state-run bank. Part Federal Reserve, part economic development agency and part bankers’ bank, BND was spawned as a prairie populist reaction to a very different economic and social milieu.

However, the latest episode of the ABA Banking Journal Podcast explores how BND's successes came when it decided to prioritize partnership with private-sector institutions, eschewing politics for pragmatism. Amid today's public banking debates, this episode provides perspective on what makes a bank like BND unique. Listen to this episode. Read an ABA Banking Journal article on BND

This episode concludes the second season of the ABA Banking Journal Podcast. Season three will begin next month. To receive the podcast delivered straight to your own device, subscribe using Apple Podcasts, Google Play, iHeart Radio,, Pocket Casts, TuneIn, Spotify or Stitcher.

Otting Shares Vision for CRA Modernization

ABA President and CEO Rob Nichols and a delegation of ABA member bankers, along with other trade associations, met last Thursday with Comptroller of the Currency Joseph Otting and senior OCC staff to discuss the ongoing effort to modernize the Community Reinvestment Act. During the meeting, Otting shared his vision for a new CRA regulatory framework and indicated that OCC is continuing to work with the other banking agencies, with the goal of issuing a proposal early in the fall.

ABA members emphasized that the rulemaking should ideally be conducted on an interagency basis and also advocated for a 90-day comment period when the proposal is released. ABA members also shared questions and concerns regarding CRA metrics, assessment areas and potential new reporting requirements. For more information, contact ABA's Krista Shonk

Still Time to Register for SDBA 2019 IRA School

IRAs continue to be an essential part of a person’s retirement planning. IRA rules are always changing, and more changes are expected in the near future. It is important to be informed and prepared.

The SDBA is offering its 2019 IRA School on Sept. 4-6 at the Clubhouse Hotel & Suites in Sioux Falls.  The instructor is Mike Nelson with JM Consultants, who is the SDBA's endorsed IRA training and audit provider. 

This is the most comprehensive IRA course offered. You can attend as many one-day IRA seminars as you want, but it will not equal what is covered in a three-day IRA school. Learn new rule changes and reinforce existing rules and learn what it means to be in or out of compliance. Attendees can questions, share with peers and hear real case problems.

See the full agenda and register to attend

Compliance Alliance

Question of the Week

Question: I'm not sure how to handle deferred student loan payments. I have a borrower that is working as a teacher and stated that her student loans would be paid for by the state. Does Appendix Q state that I can in essence ignore these debts?



Answer: The bank can exclude them if they can show written evidence that they are not due until after 12 months from closing. Otherwise, they would need to be included, unfortunately, as set out here:

1. Projected Obligations

a. Debt payments, such as a student loan or balloon-payment note scheduled to begin or come due within 12 months of the mortgage loan closing, must be included by the creditor as anticipated monthly obligations during the underwriting analysis.

b. Debt payments do not have to be classified as projected obligations if the consumer provides written evidence that the debt will be deferred to a period outside the 12-month timeframe.

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.