SDBA eNews

December 26, 2019

Senate Clears 2020 Spending Bills; Orders CECL Review

In a 71 to 23 vote last Thursday, the Senate approved a spending package for the current fiscal year, funding the government through Sept. 30, 2020. The legislation, which was passed earlier last week by the House, now goes to the President’s desk for his signature.

Among the many provisions included in the package is one that directs the Treasury Department to conduct a study on potential adverse effects of the current expected credit loss model for loan loss accounting on regulatory capital. ABA, along with members of Congress and expert observers, have long expressed concern that CECL could amplify the effects of an economic recession, and the Association has called for CECL implementation to be paused while a quantitative impact study is conducted.

The spending package also includes several program extensions advocated by ABA. It authorizes the National Flood Insurance Program through Sept. 30, 2020, and provides long-term renewals for the U.S. Export-Import Bank (through 2026) and the Terrorism Risk Insurance Program (through 2027). The bill also establishes alternative procedures for Ex-Im to authorize financing in the event of a quorum lapse, ensuring that the agency’s board can remain fully functional.

“Bipartisan passage of this seven-year reauthorization, the longest ever in Ex-Im history, heralds a new era for the agency,” said Tod Burwell, president and CEO of BAFT, ABA’s global transaction banking subsidiary, who applauded the bill's passage. “Our member banks work with Ex-Im to fill required financing gaps and ensure the availability and affordability of trade finance for businesses of all sizes. We look forward to partnering with Ex-Im to deliver trade finance products that are crucial to international commerce and the growth of the U.S. economy.”

Nichols Recaps ABA's 2019 Accomplishments

In a year-end message to ABA member banks last week, ABA President and CEO Rob Nichols provided a recap of several major accomplishments made on behalf of the banking industry in 2019.

In the area of smarter banking policy, Nichols highlighted bipartisan House votes on key banking priorities, the finalizing of several tailored regulation rules, an increase in the residential real estate appraisal threshold, a partial delay in CECL implementation for smaller entities and a Community Reinvestment Act modernization proposal that includes several ABA-recommended changes. The Association also launched a new grassroots platform—Secure American Opportunity—to make it easier for bankers to engage.

ABA helped facilitate improved access to competitive technologies through its Core Platforms Committee, its partnership with Alloy Labs Alliance, its investment in Finxact and advocacy for faster payments. In addition to launching a major initiative to attract top talent to banking while launching new courses and certificates to train bank professionals, the Association also promoted consumer surveys showing that Americans are happy with their banks—and their banks’ digital experience—and launched a revamped with powerful search capabilities, simpler navigation and streamlined content. Read more

ABA Issues Staff Analysis of CRA Modernization Proposal

ABA has released a free, members-only staff analysis of the OCC and FDIC’s proposal to modernize the Community Reinvestment Act regulatory framework. The staff analysis covers 10 key aspects of the proposal, including the anticipated list of pre-approved CRA-eligible activities, the new concept of assessment areas, the performance standards used to measure CRA compliance, data collection and reporting requirements and the opt-in for banks with less than $500 million in assets.

In addition to the staff analysis, ABA members may now access the recording and slides of a free, members-only webinar on the proposal and how bankers can provide feedback. The hour-long webinar covered key changes envisioned in the proposal and provided tips for bankers when they submit comments on the proposed rule—as ABA encourages all banks to do. A bonus episode of the ABA Banking Journal Podcast also featured senior OCC official Grovetta Gardineer, who provided further details on several aspects of the proposed CRA changes.

Nichols Op-Ed: Congress Can Keep Bad Actors Out of the Financial System

Congress has an opportunity to provide law enforcement and America’s banks with new tools to keep criminals, terrorists and human traffickers from gaining access to the financial system by advancing important anti-money laundering legislation, ABA CEO Rob Nichols wrote in a Fox Business op-ed Friday.

Nichols urged the Senate to approve the Illicit Cash Act, the Senate version of a House bill that passed on a bipartisan vote earlier this year. The bill—which is co-sponsored by Sens. Mark Warner (D-Va.), Tom Cotton (R-Ark.), Mike Rounds (R-S.D.) and Doug Jones (D-Ala.)—would establish a national database of beneficial ownership information, eliminating a key vulnerability of the U.S. financial system. Both the House and Senate bills also enhance information sharing between law enforcement and financial institutions to make money laundering efforts even more effective.

“These bipartisan bills demonstrate that lawmakers can still craft commonsense measures to support law enforcement and enhance the security of the country,” Nichols wrote. “We urge the Senate to follow the House’s lead and pass these important reforms so the president can sign this legislation into law.” Read the op-ed.

IRS Issues Final Regulations on Opportunity Zones

The Internal Revenue Service has issued a long-awaited package of final regulations on the Opportunity Zones tax incentive that was created by the 2017 tax reform law. Opportunity Zones are intended to spur economic development in designated areas by allowing taxpayers who invest capital gains in qualified projects and meet various requirements to defer the taxation of the capital gain for up to seven years. It also allows them to permanently avoid paying tax on up to 15% of the reinvested capital gain, and, if the investment is held for 10 years or more, no tax is due on any appreciation on the project when it is ultimately disposed of.

The final regulations—which total more than 500 pages—combine two proposals that were issued and provide comprehensive guidance on the incentive, including important transition relief for taxpayers who invested in good faith prior to the guidance being issued. ABA has been engaged with the IRS as it worked to develop these regulations, and a number of concerns raised by the association have been favorably addressed in the final rules. ABA is currently reviewing the final regulations and invites members to submit any feedback.

ABA Issues Staff Analysis on Taxpayer First Act

As previously reported, with a significant new law—the Taxpayer First Act—set to take effect on Dec. 28, 2019, ABA has prepared a members-only staff analysis to help bankers understand how it might apply to their institution. In circumstances where the IRS is providing information directly to a lender, the new law requires that taxpayers provide a new written consent for how their tax information will be used and shared with other parties. Banks may be required to obtain taxpayer consent for several situations, most commonly in connection with extending credit or in selling or participating out a loan.

The staff analysis provides background on the law, sample consent language and suggested answers to various questions and issues that have arisen. ABA continues to work with other industry trade groups, banks and other stakeholders to seek additional clarity from the Internal Revenue Service, Treasury Department, Fannie Mae and Freddie Mac and other policymakers. The staff analysis reflects important guidance issued by the IRS yesterday, and will continue to be updated as additional guidance becomes available.

Read the staff analysis (members only). For more information, contact ABA’s John Kinsella, Rod Alba or Sharon Whitaker.‌

Registration Open for 2020 Dakota School of Lending Principles

The Dakota School of Lending Principles, hosted by the NDBA and co-sponsored by the SDBA on April 14-17, 2020, in Bismarck N.D, is a learning event with one foot grounded in the classroom and one foot in the bank. This school allows students to learn the theory and process of basic lending and then put this knowledge to work in actual nuts-and-bolts sessions.

In the four modules on loan types (consumer lending, real estate lending, analyzing small business loans and loan documentation, and agricultural lending), learn the lending process by studying elements applicable to each loan type: terminology, the application process, interviewing, investigation, credit analysis, loan structure, decision communication and selling. Case studies and exercises provide hands-on learning experience. 

This school provides basic instruction appropriate for loan officer trainees, loan support personnel and personal bankers. To ensure exposure to bank structure and terminology, it is recommended that applicants have a minimum of six months lending experience or one year of loan department experience. Applicants not meeting the suggested prerequisites will be contacted to discuss admission qualifications. Learn more and register.

National Interagency Community Reinvestment Conference To Be Held in March

How can we work together to foster equitable community investments? The 2020 National Interagency Community Reinvestment Conference (NICRC) on March 9-12, 2020, in Denver is your chance to connect with leaders and peers from across the country and find out what works.

Sponsored by the Federal Reserve Banks of San Francisco, Chicago and Kansas City, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency, the conference will explore new partnerships and strategies to advance equitable growth. The conference program features CRA modernization updates and compliance training for banks of all sizes, emerging community development trends and issues, and tours highlighting on-the-ground success stories in Denver.

The conference brings together community development leaders, practitioners, investors and policymakers for four days of insightful sessions and networking. Discover strategies to support small businesses, affordable housing, rural development and inclusive growth efforts. Hear how regions are recovering from natural disasters and investing in community resiliency. Explore innovations in workforce development, including the role of investments in early childhood education and youth programs. And pick up new ways to get creative in your financing models to achieve more impactful results. Learn more and register.

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