Volcker RuleRegulators Respond to ICBA Pressure on Volcker RuleFederal banking regulators responded to ICBA’s repeated calls for them to take action to rectify a Volcker Rule provision requiring banks to divest by July 2015 their holdings of collateralized debt obligations (CDOs) backed by trust-preferred securities (TruPS). The release follows ICBA’s frequent communications and meetings with the banking agencies and Congress seeking a resolution. The interim final rule permits banks to retain TruPS CDOs they owned as of Dec. 10, 2013, if the CDOs were issued before May 19, 2010, and are backed primarily by TruPS or subordinated debt of bank holding companies that had less than $15 billion in assets when the securities were issued or of mutual holding companies. Regulators have provided a non-exclusive list of the TruPS CDOs that meet this test. Banks of all sizes are permitted to retain the qualifying CDOs, but the TruPS CDOs are exempt from the Volcker Rule only if the bank owned the CDO before Dec. 10. Thus, any TruPS CDOs purchased by banks after that date would have to be divested by July 2015. The rule will avoid the dramatic market impact of revised accounting treatment and forced divestiture of these securities. This is an important response to ICBA’s repeated calls for the regulators to exempt TruPS CDOs from the Volcker Rule. ICBA has worked with members of Congress to introduce House and Senate legislation to exempt these instruments from the Volcker Rule. S. 1907, introduced by Sens. Mark Kirk (R-Ill.) and Mike Crapo (R-Idaho), and H.R. 3819, introduced by Reps. Shelley Moore Capito (R-W.Va.) and Jeb Hensarling (R-Texas), would prohibit the Volcker Rule from requiring banks to divest their holdings of TruPS CDOs issued before Dec. 10, 2013. ICBA is reviewing the interim final rule to assess its impact and will weigh options for pursuing additional relief measures as necessary. ICBA resources on the rule, including registration for an ICBA audio conference on the rule, are available on the association’s new webpage dedicated to the Volcker Rule TruPS CDOs provisions. Read the Interim Final Rule. Read the Agency News Release. Read the Non-Exclusive List of TruPS CDOs that Are Not Covered Funds. Access Additional Volcker Rule Resources. Read ICBA Release. Read ICBA Special Coverage. Volcker RuleICBA Thanks Congress for Bills That Pressured Regulators to Act on Volcker RuleICBA thanked Congress for legislation to protect community banks and the communities they serve from the unintended consequences of a provision of the Volcker Rule. In a statement for today’s House Financial Services Subcommittee on Financial Institutions and Consumer Credit hearing, ICBA said the legislation was essential in pressuring the federal banking regulators to release an interim final rule to rectify the Volcker Rule provision. The Fairness for Community Job Creators Act (H.R.3819) was introduced by subcommittee Chairman Shelley Moore Capito (R-W.Va.) and committee Chairman Jeb Hensarling (R-Texas). The legislation would allow banks to retain their holdings of TruPS CDOs issued before Dec. 10, 2013. Prior to yesterday’s release by the agencies of an interim final rule revising the Volcker Rule, the rule would have required, in certain instances, that banks divest their holdings of these securities and write down these investments under “other than temporary impairment” accounting standards. For some banks, writing down these securities would have resulted in a permanent loss of capital. ICBA noted that TruPS CDOs were structured and sold with the purpose of helping community banks raise capital to serve their communities, and they were highly rated and performed well until the Wall Street financial crisis of 2008. Community banks had every reason to believe they would have the right to own these investments until maturity, ICBA said. Read ICBA Statement. Volcker RuleICBA Audio Call on Volcker TruPSCDOs TomorrowAn ICBA audio conference scheduled for tomorrow will help community banks affected by Volcker Rule provisions on collateralized debt obligations backed by trust-preferred securities. The audio conference, slated for 2 p.m. (Eastern time), will cover the agencies' interim final rule released yesterday and its treatment of TruPS CDOs. Additional resources are available on ICBA’s new webpage dedicated to the Volcker Rule CDO TruPS provisions. Register for the Audio Conference. Visit the Volcker Rule Resource Page. SecurityICBA Posts Video with Tips on Dealing with Retail Security BreachesICBA posted a new video with tips for community banks on how to deal with the security breach at Target, Neiman Marcus and other retailers. The video features advice from ICBA Executive Vice President of Regulatory Policy Viveca Ware and ICBA Bancard President and CEO Linda Echard on how to work with customers and their accounts. In the video, Ware and Echard encourage community bankers to ensure frontline staff is prepared to receive customer inquiries and to explain that the breach is not at their community bank. They also note that community banks that decide to selectively reissue cards should focus on accounts at greatest risk, such as cards with suspected fraud or high credit limits. The video is available as part of ICBA’s comprehensive toolkit to help community bankers deal with the breach. The ICBA Toolkit on Maintaining Consumer Confidence During a Data Security Breach provides the resources community bankers need to respond to these security breaches and to defend against future criminal acts. Watch the Video and Learn More.SecurityICBA, Bancard Ask Visa, MasterCard for Audited Statement on Breach ResponseIn related news, ICBA and ICBA Bancard asked Visa and MasterCard to provide an audited statement on what they have done to ensure the integrity of changes made by Target, Neiman Marcus and other retailers experiencing security breaches. In letters to Visa and MasterCard executives, ICBA and ICBA Bancard wrote that they want to understand the additional steps the payment processors are taking to with retailers to ensure others cannot be compromised in the manner used for these recent breaches. ICBA and ICBA Bancard noted that these types of compromises cause unanticipated costs to community banks and other financial institutions and can require mass reissuance of payment cards to reduce risk and maintain consumer confidence. The letters and additional resources are available on ICBA’s online toolkit dedicated to the breaches. Read the Letters. MortgageICBA Testifies Before Congress on Need to Address New Mortgage RulesICBA urged Congress to advance legislation to limit the adverse consequences of new Consumer Financial Protection Bureau mortgage rules. Testifying before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, ICBA Vice Chairman Jack Hartings said the CFPB’s Qualified Mortgage rule has the potential to drive many community banks with fewer resources out of the mortgage market, curtail access to mortgage credit and hamper the housing recovery. Hartings testified that the QM rule will restrict the availability of low-dollar-amount loans, balloon-payment mortgage loans, higher-priced mortgage loans and other safe, legitimate loans that will fail to meet the QM definition. He called on policymakers to expand the “small creditor” definition under the QM rule by raising the loan-volume threshold above 500 mortgages and disregarding loans sold into the secondary market. Hartings also called on the committee to advance ICBA-advocated legislation that offers a simple, straightforward approach—offering safe harbor QM status for community bank loans held in portfolio, including balloon loans in rural and non-rural areas and without regard to their pricing. This solution, which is part of ICBA’s Plan for Prosperity regulatory relief agenda, supports continued access to community bank credit without compromising consumer protection or safety and soundness, he noted. Read ICBA Testimony. Read ICBA Release. ICBA NewsWatch Today is sponsored by FIS:When it comes to serving community banks, FIS is right in your neighborhood. FIS understands that you’re more than a bank. You’re a vital resource to your community. That’s why we offer a wide range of integrated solutions that can be tailored to the unique needs of your valued customers. To stay competitive in an ever-changing banking landscape, you need to be more connected with your customers than ever before and FIS is focused on connecting the best people, processes and technology to your business to help you succeed. For more information on FIS’ complete suite of technology solutions, visit www.fisglobal.com.Plan for ProsperityHouse Approves ICBA-Advocated Thrift Holding Company ReliefThe House approved ICBA-advocated legislation to allow thrift holding companies to take advantage of the new 1,200-shareholder Securities and Exchange Commission deregistration threshold. The Holding Company Registration Threshold Equalization Act (H.R. 801) also would raise the registration threshold to 2,000 shareholders. Due to an oversight in the Jumpstart Our Business Startups (JOBS) Act, thrift holding companies cannot take advantage of the increased shareholder threshold below which a bank or bank holding company may deregister with the SEC. Because thrift holding companies are regulated just like bank holding companies, ICBA has strongly advocated legislation to correct the oversight. Similar legislation (S. 872) has been introduced in the Senate. The bills are among many regulatory relief provisions in ICBA’s Plan for Prosperity platform for the 113th Congress. CongressFiscal Approps Bill Benefits USDA Guaranteed Farm Real Estate LoansThe omnibus spending bill, H.R. 3547, that funds federal agencies and programs for fiscal 2014 was released this week and is expected to quickly pass the House and Senate. The bill paves the way for an increase in the volume of USDA guaranteed farm real estate (ownership) loans by providing up to $2 billion in loans and allowing USDA to transfer funds between various credit programs (see pages 26-28).RegulationFed Considering Restrictions on Banks’ Physical Commodity ActivitiesThe Federal Reserve Board sought comment on possible restrictions physical commodity activities conducted by financial holding companies. The Fed released an advance notice of proposed rulemaking on the risks of these activities, potential conflicts of interest, and the potential risks and benefits of imposing additional capital requirements or other restrictions on these activities. Comments are due by March 15. The Fed said it will consider what further action, including a rulemaking, is warranted after reviewing the comments. The Senate Banking Subcommittee on Financial Institutions and Consumer Protection is holding a hearing on the issue at 2 p.m. (Eastern time) today. EconomyRetail Sales Increase 4.2 Percent in 2013Retail sales increased a seasonally adjusted 0.2 percent in December from the previous month, the Commerce Department reported. Sales were up 4.1 percent from a year ago, and total sales for 2013 were up 4.2 percent from the previous year.PollTake This Week’s Quick PollTake this week’s Quick Poll on the Consumer Financial Protection Bureau’s new mortgage rules, and view results from the previous poll on the Target payment-card breach. View the Archive.ConventionEarly-Bird Convention Registration Deadline is Jan. 20There’s still time to save on registration deadline for ICBA Community Banking Live 2014. The early-bird registration deadline is Monday, Jan. 20. Community bankers who register by then will receive a $300 discount to attend the most comprehensive educational and networking event in the community banking industry. ICBA Community Banking Live 2014 hits the shores of Honolulu, Hawaii, March 2-6. To learn more about all the activities and events that are planned, and to join more than 1,000 other bankers from throughout the country, watch your mailbox for the latest convention brochure or go to the convention website. Learn More and Register Today.