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ICBA Backs Bill Mitigating Volcker Impact on CLOs

ICBA NewsWatch Today 03/13/2014

RegulationICBA Backs Bill Allowing 'Rural' Designation ReassessmentICBA expressed its support for legislation to create a process in which individuals could petition the Consumer Financial Protection Bureau to have the rural status of a county reassessed. The association thanked the House Financial Services Committee for marking up the CFPB Rural Designation Petition and Correction Act (H.R. 2672), which is slated for 10 a.m. (Eastern time) today. In a letter to committee Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Waters (D-Calif.), ICBA noted that it has serious concerns with the CFPB’s “rural” designation and its negative impact on community bank mortgage lending. The petition process created by H.R. 2672, introduced by Rep. Andy Barr (R-Ky.), would allow for a broader range of evaluation criteria, more accurately identify rural counties and help ensure continued access to mortgage credit in those communities, ICBA wrote. The CFPB’s annual designation of “rural” counties is used to administer mortgage rules such as the ability-to-repay rule’s restriction on qualified mortgage balloon loans, which are protected from heightened legal risk. In addition, the rural designation applies to rules relating to escrow and appraisal requirements for certain higher-priced mortgage loans. ICBA recently expressed its support for similar Senate legislation—the HELP Rural Communities Act of 2014 (S. 1916)—introduced by Sens. Mitch McConnell (R-Ky.) and Rand Paul (R-Ky.). Volcker RuleICBA Supports Bill to Mitigate Volcker Rule Impact on CLOsICBA advocated legislation that would allow community banks to retain debt securities of collateralized loan obligations issued before Jan. 31, 2014. In a letter to House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Waters (D-Calif.), ICBA wrote that the legislation would protect community banks from an arbitrary and damaging provision of the final Volcker Rule. The Restoring Proven Financing for American Employers Act (H.R. 4167), introduced by Rep. Andy Barr (R-Ky.), would repeal a requirement that banks divest their holdings of CLOs by July 2015. Left unaddressed, this requirement could cause a significant, immediate and permanent loss of capital for community banks that hold these securities and are still recovering from the financial crisis, ICBA wrote. H.R. 4167 also is slated to be marked up today by the House Financial Services Committee. ICBA recently called on federal regulators to broaden Volcker Rule accommodations for community banks. In a comment letter and national news release, ICBA said the agencies’ interim final rule should exempt all TruPS CDOs and CLOs. Prior to the release of the interim final rule, the Volcker Rule would have required, in certain instances, that banks divest their holdings of TruPS CDOs and write down these investments under “other than temporary impairment” accounting standards. 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. SecurityICBA: Merchants Should Help Community Banks Cover Fraud LossesRetailers should help pay for payment card expenses after a breach if they are shown to have had inadequate security measures in place, ICBA Executive Vice President of Regulatory Policy Viveca Ware told BankInfoSecurity. In a podcast interview, Ware said that community bank expenses can be high following retailer data breaches and that retailers do not have the same level of oversight as financial institutions. “Merchants benefit from the acceptance of payment cards, and they certainly should be responsible for the fallout resulting from breached payment card information,” Ware said. ICBA has been meeting and communicating with Congress and the national media on the impact of recent retailer data breaches on community banks and the need for a stronger payments system. ICBA also continues offering data-security resources for community banks and their customers on the association’s online security breach toolkit. RegulatorsICBA Congratulates Raskin on Treasury ConfirmationICBA congratulated former Federal Reserve governor Sarah Bloom Raskin on her confirmation for deputy Treasury secretary. In a statement, ICBA President and CEO Cam Fine said Raskin’s experience in financial services regulatory policy at the federal and state levels makes her eminently qualified to serve in this role. Raskin served on the Federal Reserve Board since October 2010 and was previously the state banking commissioner in Maryland.ICBA NewsWatch Today is sponsored by Holtmeyer & Monson:Community banks are taking advantage of SBA Lending in record numbers! It’s easy to see why. With secondary market premiums for loan guarantees at historic highs, banks are increasing non-interest fee income and commercial loan growth. ICBA Preferred Service Provider Holtmeyer & Monson does all the work, at no net cost to banks. Call (800) 340-7304 or visit Essay Proposes Too-Big-To-Fail Measurement StrategyToo-big-to-fail is the result of creditors’ beliefs that financial shocks will be transmitted among banks and that policymakers will undertake firm-specific policies to stop such transmissions, according to an essay from American Action Forum. The result is an inappropriate perception of safety accorded to financial firms’ securities, author Satya Thallam wrote. Thallam, who traces the too-big-to-fail issue back decades, proposes in the essay an empirical strategy to measure the effect of too-big-to-fail on large institutions. He proposed estimating the large-small implied default risk differential for banking and other industries, testing the difference between banking and other industries and determining how that inter-industry differential has changed before and after specified major market and policy events. AdvocacyWashington Policy Summit Registration Fee WaivedRegistration for the upcoming ICBA Washington Policy Summit is free for community bankers and a spouse or guest. Scheduled for April 29-May 2 in the nation’s capital, the summit will feature addresses from Washington insiders and face-to-face meetings with members of Congress and regulators. ICBA this week announced that Senate Banking Committee members Jerry Moran (R-Kan.) and Heidi Heitkamp (D-N.D.) are confirmed to speak, as is FDIC Chairman Martin Gruenberg. Visit ICBA’s Washington Policy Summit webpage to learn more and register today. Learn More and Register. PollTake This Week’s Quick PollTake this week’s Quick Poll on the impact of winter weather on job and economic growth, and view results from the previous poll on the ICBA national convention. View the Archive.EducationICBA Offers Compliance Checkup MonitoringICBA’s Compliance Checkup is a sound monitoring program that includes checklists for deposit, lending, administrative and security regulations. The program will help community bankers determine if their compliance program is meeting requirements and will highlight areas that need improvement. Learn More.Products and ServicesWhite Paper: Compliance Officer 2.0Continuity Control, ICBA’s new Preferred Service Provider, is offering ICBA members a free white paper: “Compliance Officer 2.0—Are You Ready?” The role of the compliance officer has significantly changed, and examiner expectations have become much more stringent. Does your bank pass muster? Read this complimentary guide and accompanied self-assessment checklist to evaluate your readiness and determine what you need to do to make the transition. Download Now.

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