SDBA eNews: July 17, 2014

In This Issue

Compliance Alliance Assists Bank's Compliance Personnel

Compliance Alliance is an exciting and innovative tool that represents the unified efforts of state bankers associations across the United States, including the SDBA, to provide critical compliance services to the banking industry.

First developed in response to the ever-increasing workload created by the Dodd-Frank Act, the tools and resources assist with both consumer and regulatory compliance and cover topics such as BSA, RESPA and regulatory reporting.

Join Compliance Alliance for a live demonstration of its tools and resources. Compliance Alliance is offering South Dakota banks a free, week-long preview of its products and services.

Learn more at Compliance Alliance's website. Or contact Kasey Stone with Compliance Alliance at 888.353.3933.

Preventing Elder Financial Abuse Video and Toolkit

The Senior Housing Crime Prevention Foundation (SHCPF) has produced the Preventing Elder Financial Abuse Video Toolkit for the banking industry.

The video gives banks the ability to educate people on how to look for signs of elder financial abuse and how to prevent it. The toolkit includes a 30-minute video, customized companion handouts filled with important information, and a customized press release to let the community know the information the bank has to offer.

The new tool is an added value for bank participation in the SHCPF program, and all bank partners will receive a copy. For a small fee, those not part of the program can pre-order the toolkit to be shipped on Aug. 1. Learn more.

SDBA Taxation Equality Awareness Campaign


Learn more and get involved.

Upcoming Events

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Sponsorship Opportunity

Learn more about sponsoring the SDBA eNews.


Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

FDIC: Prudently Manage Credit as Ag Sector Slows

After a long run of overall profitability, the agricultural sector is forecast to slow down -- and banks making ag loans must enforce sound underwriting principles and establish effective risk management procedures, the FDIC said yesterday in a financial institution letter.

The USDA is reporting a 27 percent decline in farm income in 2014, the agency noted, and the ag sector remains susceptible to financial shocks. Banks with agricultural loan exposures should implement a prudent risk management process that places strong emphasis on borrower cash flow and repayment capacity and does not rely unduly on collateral, the FDIC said. Banks should be sensitive to evidence of speculation in agricultural land prices or commodities that are influencing the market and stay focused on repayment ability and borrower underwriting, the agency said.

The agency encouraged banks to work constructively with struggling borrowers to restructure loans in a prudent and reasonable way. Previous FDIC guidance on commercial real estate loan workouts, small business borrowers and other struggling but creditworthy customers is readily adaptable to ag bankers, the agency added. Read more.

Law: Financial Firms Should Adopt Federal Cyber Framework

All financial services companies should use the federal government’s cybersecurity framework to help them respond effectively and share information usefully, Treasury Secretary Jack Lew told an investment conference in New York yesterday. Those firms’ vendors and service providers with access to systems and payment processing should also adopt the federal framework, he added.

“Just as you consider your counterparties when you take on financial risk, you should also consider your counterparties in the area of cyber risk,” Lew said. He called on financial firms to increase cyber preparedness both within their firms and to demand similar preparedness from their vendors, and for Congress to pass cybersecurity legislation that would facilitate more information sharing. He also announced that Deputy Treasury Secretary Sarah Bloom Raskin would lead a group of federal and state agencies assessing cyber risks to the financial system.

“We commend Secretary Lew’s leadership on cybersecurity and his call to improve information sharing between the government and private sector,” ABA responded in a joint statement with other financial trade groups. “The financial industry is leading the way in combating cyber attacks and has been working diligently in this area for more than 15 years.”

“With extensive collaboration within the industry and the federal government, the financial industry closely monitors the changing threats and adapts to stay ahead,” the groups added. “We also urge Congress to quickly pass cyber threat information sharing legislation to further enable us to expand our abilities to fight future attacks.” Read Lew's speech.

ABA, Groups Suggest Alternative for Privacy Notice

The Consumer Financial Protection Bureau’s proposal to simplify the annual privacy notice requirement under the Gramm-Leach-Bliley Act would fail to accomplish its goal, ABA and several trade groups said Tuesday. They urged the bureau to consider an alternative approach that would eliminate the annual mailed notice requirement for institutions that have not changed their privacy practices and do not share information under the GLBA in a way that gives customers a right to opt out -- a simple approach compatible with pending legislation in Congress.

The CFPB’s proposal creates an option “so circumscribed that it has very little practical value to consumers or financial service providers,” the groups said. Under the proposal, an institution may forgo mailing the annual privacy notice only if the terms have not changed since the previous notice, if it does not share the customer’s personal information in a way that triggers opt-out rights and if the bank uses the federal agencies’ model privacy notice form.

Banks would be required to post their privacy notices online in a continuously accessible place, offer a toll-free number customers can use to request a mailed copy of the notice and notify customers in other required notices where to find it, that it has not changed, and that it will be promptly mailed upon request. This “requirement to provide a notice about the notice merely substitutes a new burden for the existing burden,” the groups said. “[M]any of our members believe that the risks associated with the proposal make it unlikely it will be useful or used. With some adjustments, however, the bureau’s goals can be achieved.” Read the letter.

CFPB to Publicize Consumer Stories in Complaint Database

The Consumer Financial Protection Bureau yesterday proposed adding consumers’ narratives to the publicly available material in its consumer complaint database. The CFPB said that narratives would provide context for the complaints and spotlight trends. A company subject to a complaint would be given an opportunity to post a response that would appear next to a customer’s story.

“While the banking industry is committed to helping consumers make informed and responsible financial decisions, public disclosure of unverified consumer complaint narratives doesn’t advance that goal and raises significant consumer privacy issues,” said ABA SVP Richard Riese. “ABA appreciates the bureau’s decision to provide banks and members of the public with the opportunity to comment on all aspects of the proposed disclosure.”

Complainants must opt-in to have their stories published, the bureau proposed, and personally identifiable information would be hidden in both the customer narrative and company response. Comments are due 30 days after publication in the Federal Register, and ABA said it intends to seek an extension of the comment period. Read the proposal.

At Four Years, Analysts Assess Dodd-Frank Act

With the Dodd-Frank Act reaching its fourth anniversary on Monday, think tanks have been releasing their assessments and recommendations. The Bipartisan Policy Center offered 10 recommended tweaks each for regulators and Congress. Among others, it urged regulators to test consolidated exam teams to improve the exam experience, implement the Volcker Rule based on real-world conditions, provide more stakeholder input in the Consumer Financial Protection Bureau’s rulemaking process and beef up the CFPB’s data security practices.

The BPC also suggested that Congress raise the asset threshold for systemically significant firms from $50 billion to $250 billion, fix the swaps pushout rule, create an independent CFPB inspector general, merge the Securities and Exchange Commission with the Commodity Futures Trading Commission and create a federal insurance charter.

Meanwhile, researchers at the American Action Forum examined the effects of Dodd-Frank. They found that it has resulted in 398 new regulations imposing $21.8 billion in costs and 60.7 million hours of paperwork. They also noted tighter mortgage and consumer credit conditions than usually occur in the years after a recession. “With about one-quarter of the law still left to implement, one can only expect the costs to continue to rise,” the researchers said. Read the BPC recommendations. Read the AAF report.

FDIC Proposes Changes to Assessments

The FDIC board on Tuesday proposed three changes in how assessments are calculated. The proposal would incorporate Basel III capital ratio and prompt corrective action thresholds into the agency’s assessment schedule, conform custodial banks’ deduction from the assessment base to the Basel III asset risk weights and require “highly complex” banks to measure counterparty exposures using Basel III’s standardized approach.

Comments are due 60 days after publication in the Federal Register. Read the proposal. For more information, contact ABA’s Rob Strand.