SDBA eNews

October 17, 2019

FASB Greenlights Delay of CECL Implementation for Small Companies

The Financial Accounting Standards Board yesterday voted to extend the implementation of the current expected credit loss standard for certain financial institutions, as proposed earlier this year. The delay would apply to small reporting companies (as defined by the SEC), non-SEC public companies and private companies.

“With today’s vote to delay CECL implementation for smaller companies, FASB acknowledges the significant challenges of complying with one of the most sweeping accounting changes in year,” said ABA President and CEO Rob Nichols, though he expressed disappointment that the board failed to extend the implementation delay to all filers, as ABA has long called for.

“Major market participants including investors, consumer groups, auditors and financial institutions, as well as members of Congress from both parties, have all called for such a delay given concerns that CECL could harm the broader economy and vulnerable populations in particular,” Nichols added. “While we view this as a missed opportunity, FASB still has time to do the right thing and put CECL on pause for all companies until it can determine its impact.” Read more.

ABA SVP Mike Gullette and VP Josh Stein discussed the risks of delaying CECL for some banks but not others, including distortionary competitive effects and auditor readiness, on a recent episode of the ABA Banking Journal Podcast. Listen to the podcast.

Agencies Propose Policy Statement, Guidance to Reflect CECL Changes

As banks prepare to implement the current expected credit loss accounting standard, the financial regulatory agencies have issued a proposed interagency policy statement on allowances for credit losses and proposed interagency guidance on credit risk review systems.

The policy statement describes the CECL methodology for determining allowances for credit losses applicable to financial assets measured at amortized costs, including loans held-for-investment, net investments in leases, held-to-maturity debt securities and certain off-balance-sheet credit exposures. Once finalized, it would be effective at the time of each institution’s adoption of CECL.

The proposed credit risk review guidance would update the 2006 interagency policy statement on the allowance for loan and lease losses to reflect the CECL methodology. It reaffirms the key elements of an effective credit risk review system, including qualifications and independence of credit risk review personnel, among other things. It also reiterates the importance of ensuring that employees that are involved with assessing credit risk are independent from the lending function. Read the ACL policy statement. Read the credit risk review guidance.

Blake Paulson Named OCC's Official for Midsize, Community Bank Supervision

The OCC has announced that Blake Paulson has been named the next senior deputy comptroller for midsize and community bank supervision, effective in December. He will succeed Toney Bland, who will retire from the agency in January. Paulson currently serves as deputy comptroller for the central district.

In his new role, Paulson will oversee a team of more than 1,500 employees responsible for supervising approximately 1,100 community and midsize national banks and federal savings associations that provide banking services to consumers, business and communities across the country. In addition, he will serve on the OCC’s Executive Committee and sit on various governance committees that oversee critical agency functions and help align its activity to its strategic goals and objectives.

Before becoming deputy comptroller for the Central District, Paulson served as associate deputy comptroller and oversaw nine field offices. Prior to that, he was an assistant deputy comptroller for midsize bank supervision and was responsible for a portfolio of national banks with total assets between $10 billion and $30 billion. Paulson joined the OCC in 1986 in the Sioux Falls office and holds a bachelor of science in business administration from the University of South Dakota in Vermillion. Read more.

Bankers Nationwide Observe Get Smart About Credit Day

More than 6,000 bankers will deliver financial education lessons to nearly 156,000 teens nationwide this year as part of ABA’s Get Smart About Credit initiative, which is sponsored by Ally Financial, Citi, U.S. Bank and Wells Fargo. As the industry observes Get Smart About Credit Day today, bankers will present lessons to students on important financial obstacles facing young adults, including paying for college, knowing their credit score, managing their money and protecting their identity.

ABA staff will mark the day by partnering with staff from the Consumer Financial Protection Bureau, M&T Bank, Columbia Bank, Revere Bank and Sandy Spring Bank to volunteer at Junior Achievement’s Finance Park facility in Montgomery County, Md. During the presentation, approximately 150 seventh-grade students will hear directly from bankers about the importance of budgeting. Read more.

Bankers: Contact Lawmakers in Support of AML/BSA Reform Bills

With the House poised to vote as early as next week on two Bank Secrecy Act/anti-money laundering reform bills, ABA is urging bankers to contact their lawmakers in support of these much needed changes. Both bills would help make it easier and more efficient for banks to report suspicious activity and further empower law enforcement to fight financial crimes.

The first bill, H.R. 2513, introduced by Rep. Carolyn Maloney (D-N.Y.) would direct the Financial Crimes Enforcement Network to create a national database that banks could use to verify a business's beneficial ownership. The second bill, H.R. 2514, sponsored by Rep. Emmanuel Cleaver (D-Mo.), would modernize the existing BSA/AML framework by, among other things, enhancing bank-law enforcement communications. Contact your representatives.‌

Podcast: What Legislative and Regulatory AML/BSA Changes Mean for Banks

Next week, the House is expected to vote on two ABA-backed, bipartisan bills to modernize the anti-money laundering/Bank Secrecy Act regime. The House vote continues what has been a busy fall on BSA reforms. On the latest episode of the ABA Banking Journal Podcast—sponsored by Money Concepts International—ABA’s policy team breaks down:

  • Legislative developments in the House and Senate—including Rep. Carolyn Maloney’s Corporate Transparency Act (H.R. 2513), Rep. Emanuel Cleaver’s Counter Act (H.R. 2514) and Sens. Mark Warner and Tom Cotton’s Illicit Cash Act (S. 2563)—and what they will mean for compliance and financial crimes professionals.
  • Anticipated changes from federal regulators and the Financial Crimes Enforcement Network, including possible changes to the BSA examination manual.
  • Efforts by regulators and FinCEN to promote innovation in AML/BSA monitoring and enforcement.

Listen to the episode. Contact your lawmakers in support of BSA/AML modernization

SDBA to Hold Annual Security Seminar

The SDBA will hold its annual Security Seminar on Tuesday, Oct. 29, at the Hilton Garden Inn Sioux Falls Downtown in Sioux Falls. This well-rounded seminar focuses on a range of issues of concern to security officers, facility personnel and management. Using current trends and examples, a variety of topics will be covered: workplace violence planning and active shooter preparedness, trending fraud, handling difficult people and conducting a physical risk assessment. See the full agenda and register to attend

ABA Issues Staff Analysis on ADA Website Accessibility Standards

The ABA has published a members-only staff analysis describing banks’ legal obligations to maintain websites that are accessible under the Americans with Disabilities Act. After the Supreme Court recently declined to review a federal appellate court decision on the application of the ADA to business’ websites, courts remain split on whether and how the ADA applies to websites.

In the face of this uncertainty, plaintiffs’ attorneys have sent thousands of demand letters to banks and other businesses and filed thousands of lawsuits demanding that businesses comply with the most widely accepted accessibility standard—Web Content Accessibility Guidelines 2.0 AA. The staff analysis describes the existing legal regime regarding banks’ obligations to comply with the ADA. Read the members-only staff analysis. For more information, contact ABA’s Teshale Smith.

Compliance Alliance

Question of the Week

Question: I noticed that a lot of banks no longer hand out the substitute check consumer awareness disclosure. Was the requirement to disclose this information revised as part of the regulation CC amendments?

Answer: The likely reason that you are seeing fewer of these disclosures going out is that the notice is only required when you are actually providing substitute checks back with the periodic statements. If you are only providing photocopy images, and not actual substitute checks, then the notice is not necessary.

Some of the financial institution’s customers get their checks back and some don’t (they get an imaged statement or just the statement). Do they all have to get the initial consumer awareness disclosure?
No. Only the institution’s consumer customers who receive paid checks or substitute checks along with their periodic account statements are required to get the notice. Any new consumer customers, who will get paid original or paid substitute checks back in their periodic statement, must get the notice at the time the consumer relationship is established.

Consumer Compliance FAQ for Check Clearing for the 21st Century Act (Check 21) and the Implementing Regulation (12 CFR 229); Question 19:

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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.