IBA E-News 3-10-17


FLD Day at the Statehouse
Thank you to everyone who attended the FLD Day at the Statehouse on Tuesday. Over 50 bankers participated in the event. The day began with networking opportunities and followed with an informative presentation on the legislative process, the importance of grassroots lobbying and how a bill becomes a law. Lunch featured a panel discussion of the current political climate, and how decisions made during the 2017 legislative session will impact the 2018 elections. In the afternoon, attendees walked to the Statehouse to watch the legislative session. Several bankers were able to meet with their elected officials to form or build on relationships to enhance grassroots advocacy for the banking industry. View photos from FLD Day at the Statehouse.

Indiana Legislative Session Update
The Indiana General Assembly is beginning to work through bills during the second half of Session. Long-term road funding and the biennial budget remain top legislative priorities for the General Assembly. The IBA will continue to monitor bills and potential amendments as Session progresses.

SB 412 – 529 Education Savings Plan Matters
Sen. Eric Koch, R-Bedford

Bill summary:
The bill prohibits, unless otherwise provided under federal law, money in a 529 education savings account from being considered as a resource or asset in determining an applicant's or recipient's eligibility for: (1) certain public assistance programs; or (2) scholarships, grants or awards administered by the Commission for Higher Education. This bill was filed to encourage college savings by allowing students to receive full financial assistance without a reduction due to their education savings.

What happens next: The bill passed the House Education Committee 12-0 and moves on to second reading in the House.



CFPB Publishes Guide to Prepaid Rule Disclosures
The Consumer Financial Protection Bureau has published a guide on the short-form disclosures required by its final rule on prepaid accounts. The guide provides basic instructions on how to prepare the disclosures for prepaid accounts, other than government benefit accounts or payroll account cards. The final rule, which takes effect Oct. 1, amends Regulation E to encompass prepaid cards, as well as Regulation Z to cover prepaid products with credit-style elements.

Industry-Advocated Thrift Flexibility Bills Introduced in Senate, House
Reps. Keith Rothfus (R-Pa.) and Jim Himes (D-Conn.) and Sens. Heidi Heitkamp (D-N.D.) and Jerry Moran (R-Kan.) on Wednesday introduced industry-advocated bills to help federal savings associations serve their customers more flexibly while retaining their unique thrift charters.

The bills would provide a simple process for thrifts to elect to receive the lending powers -- and compliance responsibilities -- of national banks without changing their Home Owners Loan Act charters. They would give thrifts more options to diversify their portfolios.

The proposal is modeled on an approach championed by Comptroller of the Currency Thomas Curry when he was commissioner of banking in Massachusetts. The OCC is supportive of the concept behind the legislation, and a similar bill cleared the House Financial Services Committee unanimously in the last Congress.

FDIC's Supervisory Insights Highlights Credit Risk Trends
Total loan balances at FDIC-insured banks grew 6.8 percent between September 2015 and September 2016, with considerable growth occurring in commercial real estate and agricultural lending portfolios, the agency indicated in the winter issue of its Supervisory Insights publication released on Tuesday. The report highlighted credit risk trends in CRE, agricultural, and oil and gas lending, and reiterated the importance of maintaining strong risk management processes.

“Historically, financial institutions that have prudently managed loan growth have been better positioned to withstand periods of stress and continue to serve the credit needs of their local communities,” said Doreen Eberley, director of the FDIC’s Division of Risk Management Supervision. “We encourage bankers to identify and correct loan underwriting and administration problems before they adversely affect the bottom line.”

The report noted that on-balance-sheet CRE loans in particular have seen significant increases over the last few years, and have now surpassed the pre-crisis peak volume, totaling $2 trillion as of September 2016. Drawing from more than two decades of historical data, the FDIC warned that community banks specializing in CRE had a failure rate 2.25 times that of the average community bank, and stressed that banks’ ability to withstand market volatility is dependent on having robust capital and risk management frameworks in place.

While the FDIC noted that its guidance on CRE concentrations does not establish a specific concentration limit that applies to all banks, it reminded banks that risk management around CRE should include several key elements, including board and management oversight, portfolio management, management information systems, market analysis, credit underwriting standards, portfolio stress testing and sensitivity analysis, and credit risk function review.

In addition to CRE, the FDIC noted concentrations growing among banks making agricultural and oil and gas loans, and cautioned that these loans are susceptible to volatile market forces. The ag sector, for example, has seen net farm income decline and commodity prices decrease in recent years, while the oil and gas industry has been affected by significant changes in supply and demand.

Curry Addresses Fintech Charter Questions in Speech
The OCC’s plan to issue limited-purpose national bank charters to fintech companies is not a path to “light-touch” regulation, nor will it mix banking and commerce, Comptroller of the Currency Thomas Curry said at an industry conference in New York on Monday. In addition to addressing several questions raised in public debate over the OCC’s plans, he announced that the OCC is currently working on a supplement to its Licensing Manual that will clarify its approach.

Curry emphasized that “the notion that receiving a national bank charter is a ticket to light-touch supervision is not the case.” Fintech companies that receive national bank charters would be subject to all national bank laws and regulations, including “appropriate capital and liquidity standards,” he said. He added that the limited purpose charter would not be a path to evading state financial regulations and laws, as representatives of state banking regulators have argued.

As for objections based on risks of intermingling of banking and commerce, Curry said that doing so could “interfere with the allocation of credit and foster anti-competitive effects and undesirable concentrations of economic power. Proposals that would mix banking and commerce are inconsistent with the OCC’s chartering standards and would not be approved.”

Posted 3-10-17