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SDBA eNews

December 17, 2020

SD Bankers Foundation Scholarship Application Deadline Extended

The application period for the South Dakota Bankers Foundation’s new post-secondary scholarships has been extended to Dec. 31, 2020. SDBA member banks can apply for one of 40, $2,000 scholarships.

The scholarships must be awarded to South Dakota college juniors/seniors with an expressed interest in banking/financial services or second-year South Dakota technical school students with an expressed interest in banking/financial services. There is no match required by member banks, however banks may choose to supplement the $2,000 scholarship to increase its attractiveness. Recipient banks must award the $2,000 as one scholarship.

Applications must be submitted through the parent bank, however, scholarships may be awarded through any of the organization’s locations. Learn more and apply. Questions, contact Halley Lee via email or 605.224.1653.

ABA-Advocated Provisions Expected in Bipartisan COVID-19 Package

As negotiations continue on Capitol Hill over a bipartisan, $908 billion coronavirus relief package, draft language released by the congressional negotiators indicates that several ABA-advocated provisions are likely to be included. These key provisions include a $300 billion Paycheck Protection Program reauthorization along with several enhancements: a simplified forgiveness application; language holding PPP lenders harmless; and clarification on agent fees, the deductibility of Economic Injury Disaster Loan advances from PPP loan forgiveness and the tax-deductibility of business expenses paid for with PPP loan proceeds.

Amid the fluid negotiations, ABA continues to advocate for extensions on CARES Act provisions like the treatment of troubled debt restructuring accounting to ensure banks can continue to provide a wide range of forbearance options to borrowers affected by the pandemic. For more information, contact ABA’s James Ballentine.

FDIC Finalizes Changes to Brokered Deposit Rules 

The FDIC on Tuesday finalized long-awaited changes to modernize its existing brokered deposit rules and foster greater innovation by financial institutions. The final rule establishes a new framework for designating an entity as a “deposit broker” and amends the methodology for calculating the national rate and national rate cap for specific deposit products.

The final rule narrows the definition of “deposit broker.” It also designates certain business relationships and services that meet the rule’s “primary purpose exemption,” and do not require an application to the FDIC. These designated exemptions include: deposits where the agent has less than 25% of the total “assets under administration” for its customers; health savings accounts; deposits related to certain real estate and mortgage servicing transactions; certain retirement funds; and customer funds held for various regulatory, tax and other government purposes.

To better accommodate fintech partnerships, the rule also provides that entities with exclusive deposit placement arrangements with one bank are not deposit brokers. With respect to the national rate cap, the FDIC would include credit unions in the data that backs the national rate and incorporate Fed funds and Treasury rates into the national rate cap.

ABA has long called for an update to the brokered deposit rules, and ABA President and CEO Rob Nichols applauded the FDIC for its efforts. “Today’s final FDIC rule is an important step that recognizes that markets have evolved, and new technologies have changed the ways banks gather deposits and the ways bank customers access and manage their funds,” Nichols said. He also called on Congress to “revisit Section 29 of the [Federal Deposit Insurance] Act, and to consider whether it still achieves the policy goals it was enacted to accomplish.” Read the final rule. For more information, contact ABA’s Alison Touhey.

Security Vendor Reports Major Cyber Attack Affecting Government, Private Clients

A major cyber attack announced over the weekend on SolarWinds—a security vendor that serves a wide range of military, private companies, government agencies and academic institutions—may have allowed hackers to gain access to the emails, systems and data of several of its clients, including the Treasury and Commerce Departments, among others.

According to reports this weekend, suspected Russian hackers targeted SolarWinds’ Orion business software with a “supply chain attack,” through which malicious code was embedded within a routine software update that was distributed to SolarWinds’ clients.

The Cybersecurity and Infrastructure Security Agency on Sunday issued an emergency directive noting that the breach “poses an unacceptable risk” and directing federal agencies to take steps to disconnect or shut down use of affected SolarWinds Orion products, among other things. SolarWinds also issued a security advisory to its users with more detailed instructions. The Financial Services Information Sharing and Analysis Center and the Financial Services Sector Coordinating Council are planning calls to discuss the incident later this week.

The ABA has created a webpage on aba.com to provide bankers with incident response resources. The page is updated frequently to include the latest resources and links to security advisories, webcasts and information on countermeasures being taken as they become available. 

Agencies Propose Rule Regarding Timely Notification of Cyber Attacks

A new proposed rule by the federal banking agencies would require banks to notify their primary regulator within 36 hours of becoming aware that a “computer-security incident” or “notification incident” has occurred. The rule would also require bank service providers to notify “at least two individuals at affected banking organization customers immediately after the bank service provider experiences a computer-security incident that it believes in good faith could disrupt, degrade or impair services provided for four or more hours.”

The rule defines a computer-security incident as an occurrence that results in actual or potential harm to the confidentiality, integrity or availability of an information system or the information the system processes, stores or transmits; or constitutes a violation or imminent threat of violation of security policies, security procedures or acceptable use policies. It defines a notification incident as one that could materially disrupt, degrade or impair bank operations or the delivery of bank products and services, among other things. This notice requirement is intended to signal the occurrence of a significant material event; based on a review of FinCEN reports, the banking agencies anticipate that incidences of this type (such as ransomware, Trojan malware, zero day attack, etc.) occur approximately 150 times annually across the aggregate financial services industry.

Under the proposed rule, banks would be required to notify their regulator “as soon as possible and no later than 36 hours after the banking organization believes in good faith that the incident occurred.” The agencies added that the requirement “is intended to serve as an early alert to a banking organization’s primary federal regulator and is not intended to provide an assessment of the incident.” The FDIC and OCC approved the NPR on Tuesday and comments will be due 90 days after publication in the Federal Register. Read the proposed rule. For more information, contact ABA’s Denyette DePierro. 

ABA: Include Frontline Bankers Among 'Essential Workers' in Vaccine Rollout

With the first coronavirus vaccines being rolled out this week, the ABA wrote to the Centers for Disease Control and Prevention last Thursday reiterating ABA’s position regarding which bank employees it believes should be considered to receive the vaccines alongside other essential workers.

The CDC’s Advisory Committee on Immunization Practices—which makes recommendations to states on which individuals should receive priority doses of the COVID-19 vaccines as they become available—has already recommended that “essential” personnel from a range of industries, including banking, be included in Phase 1B of the vaccine distribution effort, after health care workers and long-term care residents.

ABA emphasized that “the definition of ‘essential’ bank employees for consideration in Phase 1B should be limited to front-line bank employees who come into contact with customers, such as tellers and loan officers. We believe these frontline workers face the highest risk of infection, pose the greatest risk of spreading the virus if infected, and are absolutely essential, especially in communities where residents may not have access to electronic banking tools.” Read the letter. For more information, contact ABA’s Paul Benda.

FDIC Proposes to Allow  Exemptions from SAR Requirements

To help banks develop more efficient and effective Bank Secrecy Act compliance programs, the FDIC on Tuesday issued a proposal that would allow the agency to issue exemptions from Suspicious Activity Report (SAR) requirements, in conjunction with the Financial Crimes Enforcement Network. Comments on the proposal are due 30 days after publication in the Federal Register.

While FinCEN currently has authority to grant exemptions from SAR filing requirements, the FDIC’s current SAR regulations “contain a discrete set of filing exemptions pertaining to physical crimes (robberies and burglaries), and lost, missing, counterfeit or stolen securities.” Allowing the FDIC to grant exemptions where it deems appropriate will help reduce regulatory burden on banks while encouraging innovation in BSA/AML compliance, the agency said. Read more. For more information, contact ABA's Rob Rowe .

Happy Holidays from the SDBA

The team at the South Dakota Bankers Association wishes everyone peace, joy and prosperity throughout the coming year. Thank you for your continued support and involvement in our association. We look forward to working with you in the years to come.

During the holiday season, we like to thank our membership by making donations to worthy causes. The SDBA this year has made donations to Make-A-Wish South Dakota and Capital Area United Way.

The SDBA Office will be closed on Thursday and Friday, Dec. 24-25. We will reopen on Monday, Dec. 28. May the holiday spirit be with you and your loves ones today and throughout the new year.

 Compliance Alliance

Question of the Week

Question: Bank A has a loan that is paying off a dwelling with funds from a new dwelling secured loan. The old and new loans are not secured by the same dwelling, but they are both to the same borrower. Would this be reported as a refinance for HMDA purposes?

Answer: Under HMDA's definition of a refinance, the old and new loans do not have to be secured by the same dwelling, as long as they both are to the same borrower. As such, this would be reported as a refinance. 

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.  

§ 1003.2(p): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/2/#p 

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

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 and ask for our Membership Team.

For timely compliance updates, subscribe to Bankers Alliance’s email newsletters.

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Questions/Comments
Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.