SDBA eNews

June 3, 2021

Still Time to Register for Quad States Convention

2021 Quad States ConventionIf you haven't yet registered to attend the Quad States Convention on June 14-15 in Rapid City, there is still time to register, and the SDBA will waive the late fee. There is also a virtual option to watch the presenters on Tuesday, June 15, who those who are unable to or prefer not to attend in person. 

This year's convention will celebrate all that we have accomplished this past year as we reimagine, reinvent and revolutionize in a new direction. The Quad States Convention will include bankers from South Dakota, North Dakota, Montana and Wyoming and their business partners. 

See the full agenda and register to attend. Questions, email the SDBA or call 605.224.1653. 

Treasury Releases Details on Tax Proposals to Fund Proposed Budget

The Treasury Department last Friday released its “Green Book,” which contains details on the tax changes that the Biden administration is proposing to help fund the budget for the coming fiscal year. High-level descriptions of most of the tax proposals have been included in the Biden administration’s previously released legislative agendas. The Green Book provides explanations of the proposals and suggested legislative and technical changes required should they be adopted.

The 114-page document includes increases in the corporate tax rate to 28% and an increase in the individual tax rate to 39.6%, effective starting after the 2021 tax year. It also includes a book earnings minimum tax, significant changes to international taxation rules and elimination of the capital gains rate preference and step-up in basis at death (excluding $1 million in gains).

The Green Book provides a few details on President Biden’s proposed expansion in information reporting for financial institutions, which would apply to all business and personal accounts at financial institutions, including deposit accounts, loans and investment accounts. A $600 de minimis gross inflow threshold would apply to reporting, and Treasury would have broad authority to issue regulations for the proposed requirements, which if enacted would take effect starting after the 2022 tax year. Read the Green Book. For more information, contact ABA’s John Kinsella or Mike Gullette.

Schatz, Casten Introduce Climate Risk Stress Testing Bill

Sen. Brian Schatz (D-Hawaii) and Rep. Sean Casten (D-Ill.) introduced legislation last Thursday that would direct the Federal Reserve to subject large banks to stress tests to measure their resilience to climate-related financial risks. Schatz previously introduced the bill in the last Congress.

Among other things, the bill would direct the Fed to establish and work with an advisory group of climate scientists and economists to develop climate change scenarios, including a 1.5 degree Celsius warming scenario, a 2 degree warming scenario, and a “business as usual” scenario, which assumes a higher level of warming if there are no climate policies in place.

Stress tests would be conducted every two years for large financial institutions that are currently subject to the Fed's Comprehensive Capital Analysis and Review stress tests. Banks would be required to create a “qualitative remediation plan” that would address how they plan to evolve capital planning, balance sheet and off-balance sheet exposures and other business operations to respond to the most recent stress test results. While Fed objections to an institution’s remediation plan would limit its ability to proceed with capital distributions, it would not require the firm to increase its current capital.

Additionally, the bill directs the Fed to work with the OCC and the FDIC to issue a “nonbinding exploratory survey” that will assess the ability of banks with more than $10 billion in assets to withstand climate risks. The survey would be issued every two years, with results reported in aggregate only. Survey participants would remain anonymous and would not face adverse consequences on the basis of their responses. Read a summary of the bill. For more information, contact ABA’s Hugh Carney or Alison Touhey.

OCC's Hsu: Recent Approvals of Crypto Charters 'On the Table' for Review

As the OCC reviews recent interpretive letters on digital assets and trust charters, “everything’s on the table,” current Acting Comptroller Michael Hsu told reporters during a press briefing yesterday—including reviewing provisional approvals already granted under prior acting agency leadership.

“Charters that were in the pipeline as well as those that were conditionally approved” are “in the scope of the review,” Hsu said. For example, cryptocurrency firms Anchorage, Paxos and Protego have received conditional approvals for national trust charters to custody digital assets.

Hsu expanded on his recent congressional testimony, arguing that regulatory agencies need to work together on “an overall strategy and overall view about where the regulatory perimeter should be set” for innovative financial business models, ensuring that “all of these individual decisions fit and are in broader alignment with those strategies.” As a member of the FDIC board and of the Financial Stability Oversight Council, Hsu said “I want to use all the seats I have” to pursue that strategy.

Fed Proposes Changes to Reg J to Accommodate FedNow

The Federal Reserve on Tuesday proposed to create a new subpart of Regulation J that would provide a “comprehensive set of rules” to govern funds transfers made through FedNow, the real-time payments network the Fed is developing.

The new subpart, Subpart C, would specify terms and conditions under which reserve banks will process funds transfers and grants the reserve banks authority to issue an operating circular for the FedNow service. Also included in Subpart C would be a requirement for a FedNow participant that is the beneficiary’s bank to make funds available to the beneficiary immediately after it has accepted the payment order over the service.

The proposal also includes changes and clarifications to Subpart B of Reg J—which governs the Fedwire Funds Service—to reflect that the reserve banks will be operating a second funds transfer service in addition to Fedwire, along with technical changes to Subpart A, which governs check service. Comments on the proposal are due 60 days after publication in the Federal Register. Read more. For more information, contact ABA’s Steve Kenneally

EEOC Updates Vaccination Guidance

The Equal Employment Opportunity Commission last Friday updated its technical assistance question-and-answer document to confirm that a bank or other employer may offer an incentive to employees to receive a COVID-19 vaccination. If the employer is administering the vaccine, the incentive may not be “so substantial as to be coercive.”

The EEOC also confirmed that, under the Americans with Disabilities Act, an employer may inquire about or request documentation or other confirmation that an employee obtained a COVID-19 vaccine. In addition, the EEOC stated that an immunocompromised employee who is fully vaccinated for COVID-19 may be eligible for a reasonable accommodation because of a continuing concern that he or she faces a heightened risk of severe illness from a COVID-19 infection, despite being vaccinated.

The EEOC also stated that if an employee chooses not to receive a COVID-19 vaccination due to pregnancy, the employer must ensure that the employee is not discriminated against compared to other employees similar in their ability (or inability) to work. Read EEOC’s Q&As. For more information, contact ABA’s Jonathan Thessin.

Learn About Winning New Customers in Times of Change

Finding the right marketing tactics for your bank can be a challenge, even more so with a limited budget and competitive ecosystem. How do you differentiate your bank from the others in your market? We know that it takes many touchpoints with a brand for a consumer to make a buying decision, so how do you ensure your bank is there when your future customer is ready to make a decision?

Learn how you can implement a successful marketing strategy that builds your bank’s digital presence and drives real results by attending the Virtual Marketing Seminar: Winning New Customers in Times of Change on Tuesday, June 8. This day-long training, which is being held by the North Carolina Bankers Association, will cover five parts of winning new customers. 

The cost for the virtual seminar is $300. Learn more and register

Learn About Escaping the Liquidity Trap

Prior to the global pandemic of 2020, community banks were challenged to raise funds to fulfill liquidity needs. As we enter the post-pandemic environment, banks are faced with the opposite problem: too much liquidity. 

Many banks struggle with the decision to either hold excess balances in cash in hopes of lending it, investing it when rates begin to rise, or investing it now to preserve or enhance their net interest margins.

Join UMB Bank for an in-depth discussion of escaping the liquidity trap during a free webinar "The Liquidity Trap" on Thursday, June 24, at 2-3 p.m. CDT. Learn more and register


Question of the Week

Question: A borrower passed away, leaving the property to her daughter. The borrower’s outstanding debt remains, and the daughter applied for a loan to pay off the debt. With respect to HMDA requirements, what type of loan is the daughter applying for?

Answer: This is an equity loan for HMDA purposes. HMDA, § 1003.2(j), defines a “purchase loan,” in part, to mean, credit used, in whole or in part, to purchase a dwelling. Additionally, § 1003.2(p), further defines a “refinance” to mean an obligation replacing another obligation by the same borrower. In this case, the interest in the home passes from the mother to the daughter immediately upon the mother’s death. Therefore, the daughter cannot purchase something that she already owns. Further, because the mother was the borrower on the existing loan, the daughter cannot refinance such loan for HMDA purposes, since the borrowers would not be the same. By exclusion, the HMDA loan purpose here would be an equity loan.

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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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.