SDBA eNews

December 8, 2022

SDBA Adds New CRA Peer Group

The SDBA has added a new peer group for CRA (Community Reinvestment Act) professionals. If you’d like to join the new group, please email Natalie Likness at [email protected] or call 605.224.1653 and she’ll add you to the email list. The peer groups are generally informal but a good way to stay connected to cohorts from other banks across South Dakota. The goal of the CRA Peer Group is to create a forum/space for compliance officers, fair lending officers, community development officers and other regulatory officers to connect and discuss current issues. The peer group is meant to serve as a space for CRA professionals at your institution to gather and discuss the Community Reinvestment Act, its implementing regulations, and regulatory guidance. Thank you to Lesa Jarding, Community Development Officer for First Interstate Bank in Sioux Falls, for helping get this peer group started. For other ways to get involved with the SDBA, such as committees, work groups and peer groups, go to https://www.sdba.com/committees-work-groups-peer-groups.


Governor Noem Proclaims December 7, 2022, as Larry Ness Day

First Dakota National Bank became the first official government-chartered bank in the Dakota Territory 150 years ago on December 7. In addition, Governor Noem has joined in the celebration by recognizing Larry Ness and issuing an Executive Proclamation declaring December 7, 2022, Larry Ness Day in the state of South Dakota! 


Save the Date: USD Beacom School of Business Speed Networking

The Beacom School of Business - Career Success Center is hosting the 2023 Speed Networking event on Thursday, February 16 from 3-5pm. This is a great opportunity to come on-campus and network with students, especially May 2022 graduates and remaining summer internship seeking students. There is no cost to attend.

They will use a speed networking format where employers will have a table set up and small groups of students will rotate to tables in 10 minute intervals until about 4:30pm. The last 30 minutes of the event will be an open networking reception for you and students to visit more in depth. During your 10 minutes you are welcome share information about your company and any full-time, part-time, or internship opportunities that you may have available. At the event you are more than welcome to collect student contact information to keep in touch with them. Also, feel free to bring any recruitment materials and promotional items you’d like to share with students.

Would you be interested in participating in this event?  If so, please RSVP today! Registration is will close on Tuesday, February 7th.

Speed Networking Registration Link


Sen. Thune Urges President Biden to Be Honest About Real-World Costs of Climate Agenda

President Biden's push to impose environmental, social and governance standards (ESG) on companies is imposing significant costs on companies and hurting families, Sen. John Thune warned Biden in a letter on Wednesday.

Read the letter here.

"While businesses may elect to pursue their own ESG agendas as part of a free-market society, the heavy-handed imposition from the federal government will have (and in some cases, already has had) negative real-world impacts on our economy and American families, especially by deepening the ongoing energy and inflation crises," wrote Thune, R-S.D., in a letter reviewed exclusively by Fox News Digital.

"These efforts, though sold by administration officials as steps necessary to mitigate climate risks, are solely an attempt to strong-arm financial institutions and other firms into choking off capital to industries that are foundational to our nation’s economy, yet are continually villainized by the far left," he wrote.

Thune said one example of overreach is the Securities and Exchange Commission’s proposed climate-disclosure rule that would not only require registrants to disclose information about their own greenhouse gas emissions, but, in many cases, report indirect emissions "from upstream and downstream activities (i.e., their suppliers and customers)" in their value chain – known as scope 3 emissions.

Thune said that rule would, "almost certainly reduce or potentially even eliminate businesses’ access to the resources they need to operate, as it would discourage firms from investing in or extending capital to them."

"Equally alarming," Thune said, is the recently proposed Federal Supplier Climate Risks and Resilience Rule that would require certain federal contractors to publicly disclose not only their greenhouse gas emissions, but also their scope 3 emissions, compounding the burden imposed by the SEC.

"Ultimately, private companies would be disincentivized to apply for these federal contracts altogether, which would increase project costs for the federal government and harm taxpayers," Thune wrote.

Thune highlighted several other examples of how ESG priorities have infected U.S. financial regulators.

Thune said the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve have all published draft principles for climate-related financial risk management for large banks. The Department of Labor just finalized a rule that would require pension fiduciaries to consider climate change and ESG factors in making investment decisions, regardless of their financial relevance.

"And last, but certainly not least, the National Credit Union Administration published a since-rescinded strategic plan that seemed to recommend credit unions need to alter their field of membership and loan offerings in farming communities," Thune said.

Thune warned Biden that while his ESG push is generally aimed at big banks on Wall Street, the president needs to recognize the "trickledown effect" those policies have on local community banks and credit unions which are "feeling the pressure from Washington" to comply.

Thune says that those community financial entities are worried about how the Biden administration’s environmental agenda "could impede their ability to lend to their clients and foster the growth necessary to steer our economy away from a recession."

"And in rural communities, community banks and credit unions are acutely wary of how your administration’s overreach could harm their ability to lend to their agriculture clients," Thune wrote.

"It would be prudent for your administration to actually take the time to evaluate the costs its actions are directly and indirectly imposing on American businesses and families," Thune said.

"As our nation continues to grapple with record-high inflation, administrative actions that increase prices should be the last thing on your agenda," he said.

Click here for the original article.


Op-ed: FTX Crash Shows Cryptocurrency Market Needs Bank-Like Regulation

The recent turmoil in the trillion-dollar crypto sector, including FTX’s sudden liquidity crisis and spectacular collapse, has updated the concept of a bank run — made famous in movies like “It’s a Wonderful Life” and “Mary Poppins.” But this time, the run hasn’t been on a bank at all. 

Instead, many crypto-asset customers had accounts at nonbank crypto firms. When they ran (that is, when they simultaneously rushed to make large-scale withdrawals), the customers found their withdrawals slowed and then frozen by the firms in a desperate attempt to remain solvent. Customers were forced to watch helplessly as their accounts plummeted to zero. This is very similar to what happened at nonbank financial firms during the 2008 financial crash and would have happened when the 2020 pandemic hit if the Fed had not acted so quickly.

The recent bankruptcies of crypto lenders Voyager and Celsius — and at the algorithmic stablecoin TerraUSD — make the risks of nonbanks painfully clear for the consumers who lost billions in uninsured crypto accounts and investors who have lost trillions of dollars. And now, the largely unregulated nonbank FTX, which had multiple crypto business activities spanning the globe, saw $6 billion in withdrawals in 72 hours and has collapsed entirely amid the potential for law enforcement and congressional investigations.

The 2008 financial crash and the 2020 pandemic-caused crisis already proved that nonbanks are not mere fringe players in our global financial system; they are critically important and deeply interconnected to the banking system and economy and can threaten financial stability.  And they are growing in importance: nonbank financial intermediation (sometimes called “shadow banking”) accounts for nearly half of $470 trillion in global financial assets, according to the Financial Stability Board’s most recent report.

More recently, the growth of the trillion-dollar crypto sector — with its many asset types, exchanges and wallets, intersecting with mainstream finance in a number of ways — has created a whole new field of unregulated nonbank players.   

Our organizations don’t always agree on banking policy. But today, as the warning lights blink on the economic dashboard and we confront both persistent inflation and the risk of a recession in the months ahead, we both agree that crypto companies and other nonbanks pose a significant and increasing risk to our financial system that needs to be better understood and regulated.    

The critical overriding principle to getting the shadow banking system on safer ground is this: apply the same regulatory standards to the same products and services, regardless of origin or the technology involved.   

Americans should know that when they engage in any financial activity, be it a checking account or a credit card or a car loan, or invest in a digital asset, that they have the same fundamental consumer, investor and financial stability protections — regardless of who offers the product or service. It wouldn’t make sense to say that cars built in a unionized factory must have seatbelts, while cars built in a non-union shop could go seatbelt-free — instead, our auto regulators set uniform standards for vehicles regardless of who makes them, how, or where.  

That means the providers of these products — banks and nonbanks alike — should be subject to the same underwriting requirements, the same regulatory and risk management standards, the same cybersecurity and anti-fraud protections, and the same consumer protection standards. Despite our disagreements on some other banking issues, we share this common ground: the same activity should face the same regulation.   

The “same risk, same rule” principle ensures a competitive marketplace with a level playing field where incentives for regulatory arbitrage are minimized if not eliminated. If you want to serve consumers through the payments system, through deposit products or loans, or through asset management and trade facilitation, you should be subject to the same requirements as all other participants.   

This principle also provides policymakers a better window on systemic risk—making sure that we don’t let an economy-wrecking level of risk-taking build up outside of the regulated banking sector as grievously happened in 2008. Like the proverbial man searching for his glasses under the streetlight “because that’s where the light is,” evaluating financial stability shouldn’t mean that policymakers should only look for systemic risks in the entities they directly regulate.   

Finally, this principle doesn’t mean that a company has to be a bank to offer financial products or services. That’s a decision that involves business models, funding, governance and other strategic considerations. There are good reasons for financial intermediaries to be banks, and there are legitimate reasons for some companies to offer financial products or services outside the banking system.

But while the institution type may vary, the safeguards must be aligned. Innovation in the financial sector is critical to maximizing benefits for consumers, and fair, properly and consistently regulated competition can drive this process forward. But consumers also expect that the rules that govern providers — whether bank or nonbank — protect them and financial stability.    

As the unseen risks of more unregulated nonbanks materialize and the shadows of an economic recession lengthen around the world, it’s more critical than ever to bring crypto and other shadow banks into the light. 


"NAUGHTY OR NICE - Which is Your Risk Assessment?" December 14 Webinar to be Hosted by SBS Cybersecurity

Webinar: Naughty or Nice - Which is Your Risk Assessment?
Date: Wednesday, December 14
Time: 2:00 - 3:00 PM CT
SBS Hosts: Bret Rock and Andy Meyer
Register

Description: Let's be honest: risk assessments aren't something that makes us very jolly, but that doesn't mean they aren't important or useful. An efficient, effective, repeatable IT risk assessment can help us demonstrate compliance AND make better decisions - pretty nice, right?

During this season of giving, join SBS for this free webinar. We will boil down all of the guidance surrounding the IT risk assessment to what you need to know; discuss the differences between a compliance-based and risk-based assessment; and demonstrate how our TRAC tool can help make your life easier, while helping your institution understand its strengths and weaknesses and how to become more proactive when it comes to cybersecurity.

If your risk assessment (and the process of completing it) makes you scream words that put you on the naughty list, this is the webinar for you!


CISA News: Twitter Data Leak

If you’re a Twitter user, a good idea to change your password and ensure multi-factor authentication is enabled. The threat actor behind the theft stole the Twitter user data in December 2021 and then posted it for sale on a hacker forum in July 2022 for $30,000 USD. Reports also indicate that even though the majority of the data consists of public information such as Twitter IDs, names, login names, etc., it also contains private information such as telephone numbers and addresses.


  Compliance Alliance logo

QUESTION OF THE WEEK

Q: We are refinancing a line of credit and need to determine if right of rescission is applicable. Does the fact that this is a refinancing exempt this from right of rescission? 

A: It does not. Unlike with closed-end credit there is not a similar exemption for open-end credit. Therefore, right of rescission must be provided here unless another exemption applies. With open-end credit there are only two possible exemptions: (1) residential mortgage transactions and (2) credit plans in which a state agency is a creditor.

https://www.consumerfinance.gov/rules-policy/regulations/1026/15/#f

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 [email protected] and ask for our Membership Team.

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