In This Issue

• FASB Issues Final Loan Loss Accounting Standard
• House Bill Introduced to Repeal Durbin Amendment
• ABA Seeks Letters to Congress to Stop Overtime Rule
• OCC Examining Possibility of Limited-Purpose Fintech Charter
• ABA Offers Tips for Stopping Elder Abuse
• FBI Updates Business Email Compromise PSA

FASB Issues Final Loan Loss Accounting Standard

As long expected, the Financial Accounting Standards Board (FASB) today issued its new loan loss accounting framework, also known as the current expected credit loss model. Bank regulators have described CECL as the “biggest change to bank accounting ever.”

First proposed in 2012, CECL effectively requires bankers to record, at the time of origination, credit losses expected throughout the life of the asset portfolio on loans and held-to-maturity securities. This is in contrast to today’s “incurred loss” accounting, under which losses are recorded when it is probable that a loss event has occurred.

Though the exact amount remains unknown, the new standard is expected to increase the allowance for loan and leases losses throughout the industry. CECL will require significant operational changes at all banks, including collecting and analyzing the type of data that supports the modeling of the life-of-loan loss expectation, as well as forecasting and quantifying losses in the future.

“While we continue to have strong concerns with the costs related to CECL’s life of loan loss concept, we are committed to working with both regulators and auditors to ensure banks of all sizes can meet the implementation challenges of the new standard,” said ABA President and CEO Rob Nichols. “We appreciate the significant time and consideration FASB has given to bankers’ views as they worked on this extremely complex and difficult issue.”

ABA staff have worked closely with FASB to advocate targeted improvements in the standard and to ensure it can be implemented by banks of all sizes.

CECL will be effective in 2020 for Securities and Exchange Commission registrants and 2021 for all others, but ABA and regulators are urging bankers to start the CECL implementation process as soon as possible. To help bank CEOs understand CECL, ABA has produced a brief introductory video. A slide deck is available to educate board members. ABA will also offer webinars on July 26 on strategic questions about CECL and Aug. 23 on CECL measurement methods. All resources are available at aba.com/CECL.

• Read the standard.
• Watch the video.
• View all resources and webinar information at aba.com/CECL.
• For more information, contact ABA's Mike Gullette.

House Bill Introduced to Repeal Durbin Amendment

Rep. Randy Neugebauer (R-Texas) Tuesday introduced H.R. 5465, a bill that would repeal Dodd-Frank’s Durbin Amendment, which institutes a cap on debit interchange fees charged by institutions with $10 billion or more in assets. Neugebauer noted that as a result of the Durbin Amendment, some banks reduced their free checking account offerings, increased account fees and instituted higher minimum balance requirements.

“What the Durbin Amerndment did… was artificially shift over $30 billion in revenue from one industry to another,” Neugebauer said. “Instead of promoting free market principals and technological advancement, such as enhanced data security capabilities, the Durbin Amendment was nothing more than a government action to manipulate the marketplace. This legislation will restore competition in the marketplace, remove arbitrary government price caps, and ensure consumers have affordable access to basic banking services.”

ABA expressed strong support for the bill. “When the government picks winners and losers in the marketplace, consumers lose. The Durbin Amendment has distorted the market to the detriment of small businesses, consumers and banks of all sizes,” said ABA President and CEO Rob Nichols. “Retailers would rightfully oppose laws setting the price of milk or paintbrushes in their stores. After a half decade of trial and failure, we hope Congress will allow this divisive and outdated retailer giveaway to fade into the rearview mirror.” Read ABA's statement.

ABA Seeks Letters to Congress to Stop Overtime Rule

ABA is urging all bank employees to write to Congress in support of the Protecting Workplace Advancement and Opportunity Act, which would impede the Department of Labor’s controversial rule raising the threshold for which employees are considered exempt from overtime under the Fair Labor Standards Act. The bill--introduced in the House as H.R. 4773 and the Senate as S. 2702--would require DoL to examine fully the rule’s impact on small businesses before it takes effect.

The final overtime rule is controversial because it would double the threshold to be exempt from FLSA, capturing many management-level employees--at banks and other businesses--who are currently exempt, especially in lower-wage parts of the country. When employees are reclassified as non-exempt, many consider it to be a demotion, and they lose the opportunity to demonstrate their dedication and take on new responsibilities by working longer hours. Other employees will lose flexible work arrangements that they currently enjoy as they transition to clocking in.

“Without congressional action, the Labor Department's rule will do serious damage to the small businesses in your community,” said ABA EVP James Ballentine. “ABA urges all bankers to contact their senators and representatives today and ask them to support the Protecting Workplace Advancement and Opportunity Act.” Take action now.

OCC Examining Possibility of Limited-Purpose Fintech Charter

 
Comptroller of the Currency Thomas Curry said Tuesday that the OCC is examining its legal authority to offer a limited-purpose charter for fintech firms, similar to those granted to trust companies without deposit insurance and to credit card banks. According to a report in American Banker, Curry said that the OCC “probably” has the authority to offer a charter to a non-deposit-taking entity, but added that the fintech industry must carefully consider whether or not such a charter would be suitable to the business model of a fintech firm.

Regulators have been receiving increased calls from major fintech players to create a national charter that would provide a regulatory “umbrella” of federal preemption of state rules. However, Curry commented previously that such a charter would require fintech companies to be subject to more stringent regulatory requirements.

“I would be very concerned, for example, if we were to authorize a federal license that offers the benefits of the national bank charter, including preemption, without any of the safeguards or responsibilities that apply to banks and thrifts,” Curry said.

ABA Offers Tips for Stopping Elder Abuse

In observance of World Elder Abuse Day on June 15, the ABA Foundation on Monday issued a press release with steps older Americans and their caregivers can take to prevent financial abuse, which is estimated to cost seniors $2.9 billion each year.

ABA recommended that seniors work with a banker or financial advisor to plan ahead to protect their assets; choose a trustworthy person to act as their agent in estate planning matters; check references and credentials before hiring a caregiver; and contact their local adult protective services agency if they feel they have been the victims of abuse. In addition, seniors should take care to not give out personal information over the phone, be wary of common scams targeting older adults, keep a paper trail of financial transactions by paying with a credit card and take their time when making financial decisions.

“Americans 50 years and older control more than 70 percent of our nation’s wealth, making them prime targets for exploitation,” said Corey Carlisle, executive director of the ABA Foundation. “One of the first steps toward prevention is to have conversations with the important people in your life, including your banker, about how you can work together to safeguard your money and personal information.”

ABA is committed to leading the charge against fighting the financial exploitation of older Americans through its Safe Banking for Seniors program, which provides free resources to help bankers educate seniors and their caregivers. Carlisle spoke about the ABA’s efforts at the World Elder Abuse Awareness Day Summit in Washington, D.C., today. Read ABA’s press release. Learn more about Safe Banking for Seniors.

FBI Updates Business Email Compromise PSA

The FBI on Tuesday released an updated public service announcement to provide new information and statistical data related to business email compromise scams. The updated PSA details a new data theft scenario employed by fraudsters that targets departments responsible for maintaining tax and personally identifiable information, such as human resources, bookkeeping or audit.

Since January 2015, business email compromise scams--in which criminals hack into corporate email accounts through social engineering or computer intrusion techniques and conduct unauthorized funds transfers--have increased 1,300 percent, with victims in all 50 states and 100 countries. Criminals target businesses of all sizes, specifically those that work with foreign suppliers or that regulatory perform wire transfer payments.

The PSA provides an overview of the complaints submitted to the FBI’s Internet Crime Complaint Center, provides tips for mitigating the risk of BEC and outlines steps businesses can take if they fall victim to this type of scam. View the PSA. For more information, contact ABA's Heather Wyson-Constantine.