SDBA eNews: June 30, 2016

In This Issue

Deadline Nearing to Register for RuralX Summit in Aberdeen

RuralX stands for Rural Experience--a convergence of thinkers and doers from rural communities across South Dakota coming together to share creative energy, positive motivation and compelling new ways to "ruralize their potential" in the places they call home.

The deadline to register for the RuralX Summit is July 8. The event will be held July 19-20 at the Dakota Event Center in Aberdeen

The lively, action-packed summit will inspire critical conversations, connect people with ideas, encourage community-to-community collaboration and transform ideas into action. Attendees will be actively engaged throughout the summit and beyond through innovative programming and real-time technology.

Community leaders, economic development corporations, entrepreneurs, business owners, educators, students, farmers, ranchers and forward-thinking residents who want to make the most of their rural community’s potential are invited to attend. The RuralX Summit is hosted by Dakota Resources. Learn more and register.

Federal Agencies Release Ransomware Resources

Several federal agencies yesterday released two new resources developed to inform senior executives at critical infrastructure entities of the threat of ransomware.

The resources provide an overview of existing federal government and private industry practices and mitigation strategies on the prevention and response to ransomware threats. The documents identify the various forms of malware and outline preventative measures, business continuity considerations, what to do if infected with ransomware and how law enforcement can assist.

Bankers can access these documents at ABA’s newly created ransomware issue page, which also includes a link to ABA’s ransomware infographic, as well as additional tips and articles for combatting this type of fraud.


Question of the Week

Is CIP required on an individual that is on a deed, but not the person on the loan?

Answer: Assuming this individual is not the person opening the account, it is not required by regulation (31 CFR §1020.200(a)(2)) but is recommended as a best practice.

Not a Compliance Alliance member? Learn more about membership with Compliance Alliance by attending one of our live demos:

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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

Save the Date for 2017 Quad States Convention in Rapid City

With the 2016 SDBA/NDBA Annual Convention in the books, the SDBA is making plans to host the 2017 Quad States Convention June 4-6 at the Rushmore Plaza Civic Center in Rapid City. Next year's convention will include South Dakota, North Dakota, Montana and Wyoming.

The SDBA and NDBA hope that those who were able to join us this year in Bismarck--business partners, bankers, spouses, guests and presenters--had a great time networking with potential and current clients, acquaintances and new friends. It is also our hope that the lineup of speakers provided valuable information to take back to your hometown banks and businesses to be implemented for positive change.

For those who attended the 2016 Convention, speaker materials and photos taken during the event can be found online.

Be watching for more details on the 2017 Quad States Convention to be coming later this year.

Farm Credit Watch Highlights FCA's Skewed YBS Data Reporting

The Farm Credit Administration this month released its annual report on lending to young, beginning and small farmers (YBS), but the numbers may not tell the complete story, Bert Ely wrote yesterday in the latest edition of Farm Credit Watch.

Ely pointed out that FCA allows YBS loans to be counted for multiple categories for reporting purposes; in other words, a loan to a young farmer just starting out with an annual farm receipt of under $200,000 category would be logged three separate times as a young, beginning and small farm loan. He added that as the FCS monitors total credit exposure to each of its borrowers, it has the capacity to report YBS data by borrower, but chooses not to.

“Aggregating FCS loan data by borrower would, of course, significantly shrink FCS’ YBS numbers, which should raise even more questions about how extensively the FCS serves YBS farmers,” Ely wrote. “Even with its double- and triple-counting, FCS loans and commitments outstanding to beginning farmers and ranchers dropped from 17.3 percent of all FCS loans and commitments at the end of 2013… to 16.9 percent at the end of 2015. Similar declines were seen in FCS lending to small and young farmers.”

Also covered in this month’s Farm Credit Watch bulletin are the planned large-scale merger between three Midwestern FCS associations, which, if completed, would make the merged association the third-largest FCS association in the country; the pending lawsuit over FCA’s recent redemption of subordinated notes; and FCS’ pushback against Kansas banker Leonard Wolfe’s testimony at a recent oversight hearing held by the Senate Agriculture Committee. Read Farm Credit Watch.

FDIC, Census to Survey Banks on Small Business Lending

The FDIC on Tuesday announced the launch of a survey of banks’ small business lending practices. The Web-based survey will encompass 2,000 randomly selected banks and will be administered by the U.S. Census Bureau.

Topics covered by the survey include general characteristics of small business borrowers, types of credit offered, the importance of commercial lending for banks of different sizes and differences between business lending in urban and rural markets. ABA offered feedback on the proposed survey in meetings and letters to FDIC in December and March.

Banks chosen to participate will receive letters by the end of June with further instructions. For more information, survey participants can click here or email [email protected].

ABA: NCUA Rule Would Take Commercial Property Off Tax Rolls

ABA on Monday urged the National Credit Union Administration (NCUA) to withdraw a proposed rule that would give federal credit unions greater incentives to spend depositors’ money on acquiring commercial real estate for leasing and on speculative real estate investments--all while taking commercial properties off of local tax rolls.

NCUA’s proposal would require FCUs only to partially occupy acquired properties within six years of acquisition. As ABA pointed out, the proposal will “incentivize FCUs to maximize non-mission-related income from leasing out their properties,” which is “inconsistent with the limited scope of credit union operations envisioned by Congress.”

And since credit unions--unlike other not-for-profit organizations--do not pay unrelated business income taxes, the rule would maximize an FCU’s incentive to “occupy the minimum amount of space required by its regulator and leasing the remaining area,” ABA said. “This is a clear abuse of the credit union industry’s tax-exempt status.”

ABA cited as an example the recent purchase by Pentagon Federal Credit Union--the nation’s third largest by assets--of an 11-story, $164 million headquarters building in pricey Tysons Corner, Va. The rule would enable PenFed to develop adjacently purchased land for lease to outside tenants while paying no property taxes. Read the letter. For more information, contact ABA’s Brittany Kleinpaste.

House Committee Releases Full Text of Dodd-Frank Rollback Bill

The House Financial Services Committee last week released the full text of the Financial Choice Act, a nearly 500-page bill aimed at rolling back the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief for banks of all sizes. The bill’s chief architect, committee Chairman Jeb Hensarling (R-Texas), first introduced the plan in a speech earlier this month.

At the core of the proposed legislation is a regulatory “off-ramp” from the DFA and Basel III supervisory regimes for all banks that elect to maintain a 10 percent non-risk weighted leverage ratio and have composite CAMELS ratings of 1 or 2. Qualifying banks would be exempt from certain rules and regulations that limit mergers, acquisitions or other transactional activities whenever those limitations are based upon capital or liquidity standards, or upon regulators’ assessment of systemic risk. The regulatory relief provided by the bill would be contingent upon the bank maintaining the specified leverage ratio and ratings.

Another key component of Hensarling’s plan is ensuring no institution is “too big to fail” by stripping the Financial Stability Oversight Council’s authority to designate firms as systemically important and replacing DFA’s Orderly Liquidation Authority provision with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution. Additionally, it significantly restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors.

The bill further details plans to overhaul and demand greater accountability from the various federal regulatory agencies, including the Consumer Financial Protection Bureau; impose more stringent penalties for Wall Street in cases of fraud or deception; and repeal sections of Dodd-Frank that limit capital formation, including the Volcker Rule. It also seeks to reduce the regulatory burden on community institutions by incorporating more than two dozen proposed regulatory relief measures. View the full text of the bill. Read an executive summary of the bill.

Pentagon Signals Progress on Military Lending Act Implementation

With many banks struggling to be ready for the Military Lending Act regulatory changes taking effect in October, Department of Defense officials signaled that the Pentagon is working on changes that would facilitate compliance. These would include signing the necessary contracts to allow lenders to verify borrowers’ military status through credit reports, as well as issuing an interpretive rule to address compliance concerns identified by ABA earlier this year.

ABA last week hosted a meeting with Diana Banks, the recently-appointed deputy undersecretary of defense for personnel and readiness, as well as other DoD representatives, trade associations, banks and outside bank counsels to discuss the ongoing compliance concerns. Meeting participants also emphasized the need for an extension in the October compliance deadline given delays in rule clarification and database availability.

The final rule, issued last summer, expanded restrictions in the Military Lending Act to cover credit cards, lines of credit, installment loans and deposit advances offered to service members. It also required lenders to verify military or military dependent status for loan applications. However, credit reports do not include military dependent status, and Pentagon-provided databases do not provide full reliability. For more information, contact ABA's Nessa Feddis.