IBA E-News 12-21-18
STATE GOVERNMENT RELATIONS
IBA Legislative Briefing and Reception
Registration is now open for the 2019 IBA Legislative Briefing and Reception, scheduled for Feb. 4, at the Hyatt Regency Indianapolis. As the first IBA grassroots advocacy event of the new year, this is a prime opportunity to get your bank involved in 2019. The briefing, conducted by the IBA Government Relations Team, will begin at 4:00 PM and include an in-depth discussion of current legislative issues. To register, click here!
New this year, we have added to the agenda an informative and entertaining discussion on Indiana politics with WFYI’s Indiana Week in Review team. Host Brandon Smith will cover the issues facing Indiana related to politics and policy, with insightful viewpoints from panelists Mike O’Brien, Ann DeLaney, Jon Schwantes and Niki Kelly.
FEDERAL GOVERNMENT RELATIONS
The FDIC Federal Deposit Insurance Corp. Tuesday voted to approve a final rule giving banks the option to phase in, over a three-year period, the day-one adverse effects of the Current Expected Credit Loss standard on regulatory capital. The CECL standard, which goes into effect in 2020 for SEC registrants, 2021 for non-SEC banks that are FASB-defined "public business entities," and 2022 for all other banks, requires an estimate of expected credit losses over the life of the portfolio to be effectively recorded upon origination.
FDIC Seeks Public Comment on Brokered Deposit Regulations
The FDIC Tuesday issued an advanced notice of proposed rulemaking on brokered deposits and the national rate cap. Written over 30 years ago, brokered deposit regulations were designed to restrict certain kinds of deposits that institutions in a weakened capital position could accept. With the advent of the internet, smartphones and new business models, however, brokered deposits have evolved, and many in the industry have long been concerned that the rules can interfere with customer interactions, penalizing banks for finding new and innovative ways to provide deposit services.
Also at issue is the FDIC’s view on deposits above a rate cap. While the rate cap is intended to prevent struggling banks from offering excessively high rates, it is often used as a proxy for volatile deposits at healthy banks and calculated in a way that doesn’t account for differences in local markets and how banks compete.
The financial regulatory agencies Tuesday issued a proposed rule to implement a section of the S. 2155 regulatory reform law that grants an exemption from the Volcker Rule for community banks. To qualify for the exemption, community banks and their controlling entities must have $10 billion or less in total consolidated assets, as well as trading assets and liabilities of 5 percent or less of total consolidated assets.
Because the exemption became effective upon the law’s implementation, the agencies in June indicated that they would no longer enforce the Volcker Rule for those banks while waiting for the rulemaking to be finalized.
Senators Urge Action on Private Flood Insurance
A group of eight Republican senators on Friday called on financial regulators to adopt a rule that would provide clear parameters for broad acceptance of private flood insurance. The rule should “[mandate] the acceptance of flood insurance provided by private insurers as satisfaction of the flood insurance coverage requirement to at least the extent contemplated” by the Flood Insurance Market Parity and Modernization Act -- a bipartisan, industry-supported bill introduced by Sens. Dean Heller (R-Nev.) and Jon Tester (D-Mont.) -- the senators said.
The lawmakers raised concerns that more than six years have passed without a final rule, and that a 2016 proposed rule raised several obstacles for private flood insurance. “It does little good to homeowners and taxpayers if private insurance is ‘accepted’ but not truly on an even playing field,” they said.
Read the letter.
Completing the Securities and Exchange Commission’s rulemaking on best interest standards for broker-dealers and investment advisers is a “key priority” for 2019, SEC Chairman Jay Clayton said in a speech last Friday. The rule -- proposed in April -- has attracted more than 6,000 comment letters, he added. The SEC’s proposal took a different tack than the Department of Labor’s now-overturned fiduciary rule; under the SEC’s proposal, a broker-dealer making a recommendation to a retail investor would have a duty to act in the best interest of that customer at the time the recommendation is made.
Looking ahead to market risks, Clayton flagged the ongoing transition away from the London Interbank Offered Rate as a global benchmark for financial instruments. The SEC is working with other regulators to monitor risks associated with transitioning to the Secured Overnight Financing Rate, the Alternative Reference Rates Committee’s preferred alternative, including differences between Libor and SOFR. “More work needs to be done to develop a SOFR term structure that will facilitate the transition from term-based Libor rates,” Clayton said.
Clayton also said that the SEC will focus in 2019 on reforms to the proxy process, access to capital, incentives for long-term investment, distributed ledger technology and initial coin offerings.