SDBA eNews: January 29, 2015

In This Issue

White Paper Reveals Public Benefits of State Regulation

A white paper released by the Conference of State Bank Supervisors (CSBS) highlights the critical value state regulators play in local economic development. In the white paper, CSBS examines how state supervisors support a strong community banking system, lead in non-depository supervision and promote local economic development.

“This white paper is important because it provides case studies to show how divisions like ours can weigh in on many local issues,” said South Dakota Banking Director Bret Afdahl.

The summary of case studies and research allows state supervisors and regulators to ensure consumer protection and focus on the relationship-based  business model of community banks. Read the white paper.

CFPB Reminds Supervised Entities: Keep Exam Materials Confidential 

The Consumer Financial Protection Bureau, which directly supervises financial institutions with more than $10 billion in assets, on Tuesday advised the institutions it examines about their responsibilities to keep exam reports and related communications confidential.

Such “confidential supervisory information” can only be disclosed to bank affiliates, to individual personnel and directors to the extent it is relevant to their duties, and to outside contractors like accountants and lawyers. Private non-disclosure agreements do not supersede federal requirements about disclosure or confidentiality of information, the CFPB said.

Read the guidance.

Upcoming Events

View all SDBA events

Sponsorship Opportunity

Learn more about sponsoring the SDBA eNews.


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

Calling All Vendors for 2015 Convention

for the 2015 SDBA/NDBA Basic Training: Banker Boot Camp.

The 2015 SDBA/NDBA Annual Convention will be held June 7-9 at the Sioux Falls Convention Center/Sheraton Hotel in Sioux Falls, S.D. This year’s event will refresh bankers on the basics of banking and provide an arsenal of ideas and practical ammunition to help bankers emerge as winners in the regulatory battle.

There are many reasons to support this outstanding event by sponsoring, exhibiting or advertising. You will have the opportunity to promote your products and services, position your solutions with top-level bank executives, show your support for the banking industry, interact with association members and celebrate their achievements.

Those who confirm their convention sponsorship by Feb. 27, 2015, will be listed in our pre-convention marketing flier, which will be mailed to all banks, branches and associate members in March.

For questions on sponsoring or advertising, contact Alisa DeMers. For more information on exhibiting, contact Nadine Kepford.

Make Plans to Attend State Legislative Day Feb. 11 in Pierre

The SDBA’s State Legislative Day on Feb. 11 in Pierre is your opportunity to stay up-to-date on both state and federal legislation which could affect the banking industry and to visit with state legislators.

This year's featured speaker is Kenneth T. Walsh, an award-winning political journalist, a Washington insider and an expert on American presidents. He has covered the presidency, presidential campaigns and national politics for U.S. News & World Report since 1986 and will speak about implications of the mid-term elections.

The day will also include a luncheon and banking legislation review, chance to visit with legislators at the state capitol, and an evening reception and dinner with legislators and constitutional officers. The Governor has also been invited to speak.

Learn more and register.

FHFA Rulemaking on FHLBs 'Touched a Nerve,' Watt Says

The Federal Housing Finance Agency’s proposal to limit membership in the Federal Home Loan Banks “touched a nerve” with the industry, agency director Mel Watt told the House Financial Services Committee on Tuesday. The proposal received more than 1,300 comments, “probably 90 percent” of them opposed, he said.

Watt faced questions from members on both sides of the aisle about the proposal. Rep. Frank Lucas (R-Okla.) said it could hurt community banks in his home state. Other members of the committee, including Joyce Beatty (D-Ohio) and Scott Tipton (R-Colo.), also questioned Watt about the proposal.

Watt assured all questioners that FHFA would carefully review all of the comments received and take them into consideration before taking further action. He added that the FHFA is intent on following the FHLBs’ authorizing statute, although ABA has noted in its comment letter that the membership proposal runs counter to the statute and congressional intent. Read Watt’s prepared testimony. Read ABA’s comment letter.

FDIC Pledges to Respect Banks' Risk-Based Customer Judgments

ABA scored an advocacy win yesterday as the FDIC took a further step to distance itself from Operation Choke Point. The agency issued guidance reiterating that it does not prohibit or discourage banks with appropriate risk management systems from serving customers with risk profiles that the bank is capable of handling. The agency’s action followed its retraction last summer of several controversial lists of “high-risk” customer categories.

The FDIC acknowledged that some banks may be reluctant to provide certain services to certain customers out of fear they will not be able to comply entirely with Bank Secrecy Act requirements. “[A]s a practical matter, it is not possible for a financial institution to detect and report all potentially illicit transactions that flow through an institution,” the agency said. “Isolated or technical violations ... generally do not prompt serious regulatory concern or reflect negatively on management’s supervision or commitment to BSA compliance.”

The FDIC invited banks that question the application of the guidance by examiners to reach out to the agency’s ombudsman or inspector general. ABA has aggressively urged the FDIC to end Choke Point and to modify its supervisory approach accordingly. Read the guidance. For more information, contact ABA’s Rich Riese.

FDIC Tightens Rules on Account Termination Orders

In related news, the FDIC has established policies for what examiners may and may not do to recommend that a bank cut off a customer. The policy states that recommendations for customer terminations may not be solely based on reputation risk.

According to the procedures -- reported yesterday by Politico -- examiners may use only formal channels to recommend or demand account terminations. These requests or requirements must be approved by the local FDIC regional director before being communicated to the bank and must be accompanied by the basis for the request, including any laws or regulations being violated.

The change in policy comes after complaints by bankers and members of Congress that FDIC officials had pressured institutions, formally and informally, to terminate particular customer relationships the officials found unsavory. View the procedures.

Farm Credit Lender Expands Telecom Lending

On the heels of its financing deals for Verizon and Frontier Communications, Farm Credit System lender CoBank this month committed $425 million in financing in two separate deals to AT&T and U.S. Cellular, according to the latest issue of ABA’s Farm Credit Watch e-bulletin. The two nine-figure deals bring FCS financing for large telecoms to a total of $1.5 billion.

“These loans lie far outside CoBank’s authority to lend to cooperatively owned telephone companies, yet it appears the FCS’s regulator, the Farm Credit Administration, has done nothing to prohibit CoBank’s lending to corporate America,” said Bert Ely in the e-bulletin. Ely noted that CoBank appears to have sold participations of at least $5 million apiece to a Texas Farm Credit lender and 12 FCS direct lending associations.

“These four loans certainly warrant congressional scrutiny as they are excellent examples of the FCS, and CoBank in particular, abusing its lending authority and the FCA turning a blind eye towards these deals,” Ely said. Read Farm Credit Watch. View ABA resources on FCS reform.