Emergency Farm Aid to Ease Concerns Over Trade Disputes

The Trump administration said Tuesday it would extend $12 billion in emergency aid to farmers amid signs the U.S. agricultural sector is beginning to feel the impact of President Donald Trump’s escalating trade disputes with major U.S. trading partners.

Agriculture Secretary Sonny Perdue said the U.S. government would provide incremental payments to support prices of some of the hardest-hit commodities, including soybeans, sorghum, cotton, corn, wheat and pork, according to a story by The Wall Street Journal.

“This is a short-term solution that will give President Trump and his administration time to work on long-term trade deals,” Perdue told reporters. Agriculture Department officials said the aid wouldn’t need congressional approval.

Perdue said the move, tentatively planned for the coming months, was in response to what he called U.S. trading partners’ “illegal retaliation” to the policies of Trump, who has ordered tariffs on imports ranging from metals to materials to clothing to electronic parts. Those tariffs apply to goods from a broad range of countries, including China and those of the European Union.

U.S. trading partners are retaliating, with ominous implications for the American Farm Belt. China, a huge market for U.S. agricultural exports, has applied tariffs on $34 billion worth of U.S. goods, including soybeans and pork. Other places applying retaliatory tariffs include allies such as Canada, Mexico and the European Union.

Congressional lawmakers, with few exceptions, expressed skepticism about the administration’s aid plan, according to The Wall Street Journal. Farmers, the critics said, need certainty on trade, not a bailout from the government. Even GOP senators who usually defend Trump expressed worry that aid might have to be extended to other sectors if he continues his trade fights on various fronts. Read the full story.

House Passes ABA-Backed Flood Insurance Extension

The House yesterday passed an ABA-supported measure extending the National Flood Insurance Program through Nov. 30, providing certainty for lenders and borrowers during this year’s hurricane season. Following the 366-to-52 vote, the Senate must now pass the measure to ensure authorization for the NFIP does not expire as scheduled on July 31.

ABA President and CEO Rob Nichols welcomed the House’s action. “If there is a lapse, many loan closings in high-risk areas will be delayed or otherwise complicated, resulting in additional costs and borrower frustrations,” Nichols commented. He added that “ABA strongly supports both a long-term reauthorization of the program and necessary reforms that will make the NFIP more sustainable, while also balancing concerns over availability and affordability.”

A recent ABA Banking Journal article provided tips for bankers on preparing for a possible lapse in NFIP authorization. Read the article.

Treasury Submits Proposed Pass-Through Regulations to OMB

The Treasury Department on Monday submitted to the Office of Management and Budget the first group of proposed regulations related to a provision of the tax reform bill that established a 20 percent deduction for pass-through entities, including Subchapter S corporations. OMB has 10 days to review and approve the regulations before they are issued publicly for comment.

While it is unclear which specific issues this first set of regulations will address, it is anticipated that additional regulations will follow in the coming months. The 20 percent deduction for pass-through entities is one of the most critical remaining regulatory issues for the banking industry that arose from the tax reform bill. ABA has closely monitored developments in this area and will continue to do so as Treasury and OMB release more regulations.

In partnership with other trade organizations, ABA has provided information to Treasury and the Internal Revenue Service on this issue and urged them to follow the intent of Congress with respect to the treatment of banks operating as S-corps. ABA will closely review the regulations as they are released and will provide feedback. Read ABA's previous comments. For more information, contact ABA's John Kinsella.

FASB to Extend CECL Effective Date for Private Banks

Responding to a concern initially raised by ABA in a discussion paper, the Financial Accounting Standards board agreed yesterday to propose changing the effective date of the Current Expected Credit Loss accounting standard for “non-public business entities” to fiscal years beginning after Dec. 15, 2021. This would mean that non-PBE banks would adopt CECL and adjust their opening retained earnings balance as of Jan. 1, 2022.

As currently written, while non-PBE banks would not adopt CECL in their Call Reports until Dec. 31, 2021, the requirement to prepare an “opening balance” means that banks would have to effectively run both CECL and their current accounting systems throughout all of 2021. FASB’s standard practice to provide private entities an extra year of implementation time was unintentionally neglected. The correction will be proposed in an exposure draft, which is expected to be issued in the coming weeks with a 30-day comment period.

Read ABA’s discussion paper on CECL’s effective date for private banks.
Read ABA’s discussion paper on definitions of private companies and PBEs.
For more information, contact ABA's Josh Stein.

OCC Outlines Plans for Implementing S. 2155's Charter Flexibility Provision

During a meeting of the OCC’s Mutual Savings Association Advisory Committee on Tuesday, OCC senior staff revealed their anticipated timeline for implementing a section of S. 2155--the new regulatory reform law--that would permit certain federal savings associations to elect the rights and duties of national banks. Making this election would remove portfolio asset restrictions known as the “qualified thrift lender test,” providing greater flexibility to federal savings associations to meet a wider range of community credit needs.

OCC staff noted that a proposed rule is currently in draft form and is undergoing further review. They added that they expect to publish the proposal in the Federal Register around Labor Day with a 60-day comment period, which would permit a final rule to be issued by year end. For more information, contact ABA's Joe Pigg or Bob Davis.

FHFA Halts Credit Score Initiative

As expected, the Federal Housing Finance Agency announced on Monday that it will not issue a decision this year about updating the credit score models required by Fannie Mae and Freddie Mac. Instead, the agency will shift its focus toward implementing a section of S. 2155--the new regulatory reform law--that requires it to define through rulemaking the criteria the GSEs will use to validate credit scores.

FHFA Director Mel Watt noted that moving forward with the current evaluation process “would be duplicative of, and in some respects inconsistent with” the requirements set forth in S. 2155. He added that, as directed by the law, the agency will be issuing a proposed rule for comment.

ABA has previously urged FHFA to carefully consider the effects of any changes to credit scoring requirements, as any such changes could significantly affect lenders’ ability to safely and soundly underwrite loans and ensure fair and equitable treatment of loan applicants. ABA continues to advocate for models that are empirically derived, accurately predictive and well-tested prior to implementation, and will engage with FHFA as it begins the rulemaking process. Read more. For more information, contact ABA's Joe Pigg.

DOD Reports Technical Issue with MLA Database

The Department of Defense is currently working to resolve a technical issue with its Military Lending Act database after bankers reported receiving rejection messages when attempting to verify a service member’s status. DOD confirmed that an expired commercial security certificate on site the was the cause of the problem. While some users were unaffected, others reported being unable to access the database at all. Bankers experiencing difficulties with the database should contact the Defense Manpower Data Center technical assistance number at 800.477.8227.

Upcoming ABA/FS-ISAC Webinar to Focus on Destructive Malware

To help bankers understand the growing threat of destructive malware, ABA will host a joint webinar with FS-ISAC on Thursday, Aug. 2, at 1 p.m. CDT. Joined by ABA’s cybersecurity experts, FS-ISAC Chief Information Risk Officer Greg Temm will provide a high-level overview of the threat, discuss the potential effects on banks and identify several industry resources available to mitigate the threats. Sheltered Harbor CEO Trey Maust will also discuss how the industry-led initiative protects and secures account data, making it easier for an institution to recover from a crippling cyberattack. Register now.

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