Sweeping Senate Majority Passes Bipartisan Regulatory Reform Bill

In a bipartisan 67-31 vote, the Senate last night passed S. 2155, the bipartisan regulatory reform bill crafted by Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Sens. Jon Tester (D-Mont.), Heidi Heitkamp (D-N.D.), Mark Warner (D-Va.) and Joe Donnelly (D-Ind.). The bill includes several provisions that are longstanding priorities in ABA’s Blueprint for Growth, among them reforms that would:

• Provide Qualified Mortgage designation for mortgages held in portfolio by banks with less than $10 billion in assets
• Raise the threshold for designation as a systemically important financial institution from $50 billion in assets
• End stress tests entirely for banks with under $100 billion in assets
• Simplify capital calculations for community banks
• Provide relief from appraisal requirements for smaller mortgages
• Institute longer exam cycles for community banks
• Provide charter flexibility for federal thrifts with less than $20 billion in assets

“This bill is an important step in right-sizing the rules for America’s banks, and it will allow financial institutions to better serve their customers and communities while maintaining safety and soundness,” said ABA President and CEO Rob Nichols. “This legislation is the byproduct of years of hearings, input from hundreds of stakeholders and careful negotiations between lawmakers on both sides of the aisle who refused to ignore the serious issues facing financial institutions trying to grow the economy. The cooperation on this bill marks a long overdue and welcome return to the tradition of bipartisan banking policy in Washington. We hope it continues.”

ABA, the state bankers associations and bankers across the country worked hard to advance the bill. Many of its individual provisions are measures long advocated by ABA and the state associations. Bankers authored numerous op-eds in key states to thank the bill’s co-sponsors and build support and sent thousands of messages to their senators.

While thanking the co-sponsors and welcoming the passage of the bill, which will provide much-needed relief for almost all banks, Nichols reiterated that more work needs to be done to tailor banking regulations, “but we are encouraged by the important progress in this legislation.” Read ABA's highlights of the bill.

SDBA Thanks Sen. Rounds, Thune for Support of Regulatory Reform

As U.S. Senate leaders work with the House to get S. 2155, the bipartisan regulatory reform bill, to the President’s desk for his signature, South Dakotans should be thanking the lawmakers who made it happen, especially Senators Mike Rounds and John Thune. Their support was critical to moving this legislation forward.

"We thank Sen. Rounds, who co-sponsored the legislation, successfully staking out the middle ground and helping build support for the overwhelming majority this bill secured. He is showing that Congress can get things done when lawmakers of different parties put aside politics and work together to solve real problems," the SDBA said in an op-ed sent to South Dakota newspapers today.

"And we also thank Sen. Thune, who supported this bill on the floor and ignored the barrage of false claims from critics who would prefer to never improve rules that clearly weren’t working as intended."

The SDBA looks forward to the House building on the solid bipartisanship that achieved this important victory in the Senate, and the President signing this into law soon. And thanks again to South Dakota’s senators for leading the way and showing that Washington can still work on behalf of the American people. Read the full SDBA op-ed.

House Passes ABA-Advocated Tailored Regulation Bill

In a bipartisan 247-169 vote, the House last night passed the Tailor Act. Vigorously advocated by ABA and the state bankers associations and championed by Rep. Scott Tipton (R-Colo.), the bill would require regulators to tailor their actions to meet the diverse characteristics of different banks.

“While regulation is often a fact of life for financial institutions, the indiscriminate application of many rules to institutions whose business models and risk levels do not warrant it adds little to overall safety and soundness and much to the costs of financial products in this country,” ABA said in a letter urging House members to pass the bill. “At its extreme, such over-regulation threatens the viability of many smaller institutions that provide essential banking services and products to communities across this country.” Read the letter. 

Judge Holds Hearing in ABA Lawsuit Against NCUA

A federal judge in Washington, D.C., yesterday held oral arguments in ABA’s lawsuit challenging the National Credit Union Administration’s expansive field of membership rule. The hearing was on both ABA’s and NCUA’s motions for summary judgment in the case. Observers noted that Judge Dabney Friedrich was engaged and asked thoughtful questions of attorneys for both sides. A ruling on the motions is expected in the coming months.

NCUA’s final rule expanded community-based credit union fields of membership far beyond the limitations imposed by Congress. In its lawsuit, ABA specifically challenged the inclusion of combined statistical areas--which encompass multiple metropolitan statistical areas--as “local communities;" the ability of credit unions to serve core-based statistical areas without serving the urban core that defines the area; the ability to add “adjacent areas” to existing community fields of membership; and the dramatic expansion of what constitutes a rural district. 

New ABA White Paper Provides Info, Answers Questions on Payment App Zelle

As part of its efforts to help bankers better understand and employ financial technology, ABA has published a new white paper titled “Understanding Zelle.” A supplement to ABA’s Fintech Playbook, the paper provides an overview of Zelle, the fast-growing new person-to-person, bank-centric, rapid payment app. In 2017, consumers sent $75 billion in 247 million transactions using Zelle, a 36 percent greater dollar volume and 45 percent higher in terms of transactions than in 2016.

The white paper explains how consumers use Zelle, whether through their banks’ apps or through a standalone app; what makes Zelle different in terms of speed, fees, privacy and the customer relationship; Zelle applications for commercial transactions; and what joining Zelle means for banks in terms of the technical requirements, user experience, network directory and compliance factors. The white paper also summarizes how Zelle moves funds in-network and out-of-network and addresses other common questions consumers might have.

In addition to the paper on Zelle, ABA has also published supplements on regtech, biometrics, APIs, digital lending and blockchain technology. Bankers can access the papers--which are available free to ABA members--as well as other fintech resources by visiting aba.com/fintech.  Read the white paper.

Fedgazette Article Recaps Neel Kashkari's Visit to Pierre 

"Small, town, but not small talk" was the headline of a story published in fedgazette about Federal Reserve Bank of Minneapolis President Neel Kashkari's visit to Pierre on Feb. 7.

"Despite its small economy, the seat of state government offers a unique stethoscope to listen to the state’s economic and policy heartbeat. While in Pierre, Kashkari met with a variety of stakeholders to hear about the opportunities and challenges faced by businesses and workers in the region and state, as well as to learn about priorities during the current legislative session. Foremost among stakeholders were Gov. Dennis Daugaard, Lt. Gov. Matt Michels and other cabinet-level officials, along with Legislative leaders from both political parties."

In addition to meeting with state officials, Kashkari met with around 40 bankers prior to a Town Hall Forum open to the public. The goal of the outreach trip to Pierre was to get a ground-level view of how businesses, workers and communities are faring in the current economy. Read the story.

Tri-State Trust Conference To Be Held in Fargo

Registration is now open for the 2018 Tri-State Trust Conference April 30 to May 2 at Hilton Garden Inn in Fargo. The conference focuses on trust officers' unique responsibilities and their need for quality information and training to serve customers. The conference features two days of educational sessions led by experts in the business of trust and wealth management. 

Topics at this year's conference include an economic outlook, guide to the markets, avoiding the trustee risks you didn't even know existed, a Washington update, leveraging tax-deferred annuities in irrevocable trusts, cybersecurity and safeguarding client information, retirement plan update, and guarding seniors against financial fraud and exploitation. In addition, the conference will feature more than 30 exhibitors. 

Conference content has been submitted for continuing education credit. The hotel room block will be available until April 2. Learn more and register. 

Funds Available for Specialty Crop Advancement in South Dakota

The South Dakota Department of Agriculture (SDDA) announced that funds are available for specialty crop block grants, which can be used for marketing, promotion, research, food safety, nutrition, distribution and best management practices to advance the specialty crop industry. Specialty crops are generally defined as fruits, nuts, vegetables, honey and some turf and ornamental crops. A full list of specialty crops is also available on the SDDA website.

“These grants give farmers a way to increase the demand for the specialty crops they’re already growing,” says SDDA grant and loan specialist, Kimberly Sturm. “This year’s projects are maximizing the value of specialty crops and contributing to South Dakota’s greater agricultural economy.”

Stakeholders have identified this year’s top priorities as enhancing the competitiveness of specialty crops through increased sales, increased consumption and sustainable practices of specialty crop production. The deadline for applications is May 1. Details explaining the application are available online.

Question of the Week

Question: The bank is currently receiving and CRA review from the OCC. The bank has a loan that it counted as a community development loan because it qualified as affordable housing.  Although the loan was within the bank’s MSA, it is across state lines and outside of their assessment area. The OCC is saying the bank cannot count this loan as it is out of state. If there any guidance to the contrary?

Answer: There is not a complete ban on counting loans outside the bank’s state and assessment area as a community development loan; however, the bank does need to demonstrate the loan somehow “addresses the needs” of the bank’s assessment area.

See 12 CFR §25.25(e)(2): "Benefit outside assessment area(s). The OCC considers the qualified investments, community development loans, and community development services that benefit areas outside the bank's assessment area(s), if the bank has adequately addressed the needs of its assessment area(s)."

So for example, if you make an affordable housing loan to a borrower in a town in another state that is outside your assessment area and that is located in an isolated mountain pass, you're probably not going to be able to demonstrate it's a valid community development loan. If, however, the loan is to a borrower in a mainly residential town where all the town's residents commute to work in and shop at a town within your assessment area, you would have a much better case. 

• Tuesday, March 20, 2018, 10-11 a.m. CT
• Thursday, March 22, 2018, 1-2 p.m. CT

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Contact Alisa DeMers, SDBA, at 800.726.7322 or via email.