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Senators Urge Further Regulatory Tailoring for Banks Over $100B
In a letter to Federal Reserve Vice Chairman for Supervision Randal Quarles last Friday, seven Republican senators including Sen. Mike Rounds called on the Fed to more closely tailor regulations for banks with more than $100 billion in assets. The senators’ letter came after a pledge from Quarles last month that the Fed would move swiftly to develop its framework for tailoring enhanced prudential standards for banks between $100 to $250 billion in assets.
The lawmakers pointed out that data from the Fed itself “establish[es] that the financial companies below $250 billion are not systemic,” and questioned the Fed’s intention to continue broadly applying enhanced prudential standards to banks in the $100 billion to $250 billion asset range. They noted that in passing S. 2155--which raised the SIFI designation threshold from $50 billion to $100 billion--"Congress did not ask the Fed to create a third layer of treatment between financial institutions above and below $100 billion in total assets," but rather "empowered the Fed to tailor the regulations to address individual risk-profiles of financial companies."
The Fed’s data “also shows that regional financial companies with more than $250 billion in assets are not systemic as well,” the lawmakers added. In cases where data indicates that an institution does not pose a systemic threat, they urged regulators to “reduce regulations so that all non-systemic firms are treated accordingly.”
Turning to international banks, the lawmakers noted that the Fed already requires international banks with significant U.S. operations to establish intermediate holding companies, and said that these institutions should “receive comparable regulatory treatment to U.S. BHCs of similar size and risk profile.”
ABA welcomed the letter. “ABA has been a long-time advocate for tailoring regulation to a bank’s business model and risk profile, as opposed to relying on arbitrary asset thresholds--a principle now enshrined in law,” said ABA EVP Wayne Abernathy. “Tailored regulation will allow banks of all sizes to better serve their customers and communities while improving the safety and soundness of any institution.” Read the letter.
OCC Updates CRA Policies and Procedures Manual
The OCC last week updated its policies and procedures manual to clarify its policy and methodology for determining how evidence of discrimination or illegal credit practices will affect a bank’s Community Reinvestment Act rating. The updated version replaces a previous edition of the manual issued in October 2017.
Importantly, the updated manual maintains the OCC’s position that there be a logical nexus between the CRA rating and evidence of discriminatory or illegal credit practices. The revisions clarify that in assigning a CRA rating, the OCC first evaluates a bank’s CRA performance for the applicable time period and then makes any adjustments that are warranted based on evidence of discriminatory or other illegal credit practices. The OCC also clarified that its general policy is to downgrade the rating by only one rating level unless such illegal practices are found to be particularly egregious.
The OCC reiterated that its policy is “generally not to penalize a bank by lowering its CRA rating when examiners have determined the bank has taken appropriate remedial actions because penalties in such cases can unnecessarily distract and divert the bank’s resources from lending, investing, or serving the relevant communities and thereby frustrate the CRA’s purposes.”
SEC Amends Disclosure Requirements for Municipal Securities
The Securities and Exchange Commission on Monday adopted amendments regarding disclosure requirements for direct loans and purchases in the secondary municipal securities market. Following publication in the Federal Register, banks will have 180 days to comply with the changes.
Under rule 15c2-12 of the Securities Exchange Act, brokers, dealers and municipal securities dealers acting as underwriters in primary offerings of municipal securities must reasonably determine that the issuer or obligated person has agreed to provide to the Municipal Securities Rulemaking Board timely notice of certain events. The amendments add two new event disclosures that obligated persons must file on the Electronic Municipal Market Access system within 10 days of the event’s occurrence.
ABA remains concerned that the amendments are overly broad and will result in an increased regulatory burden, as it will result in vast new amounts of filings that could burden the EMMA reporting system and dilute the ability of investors to find useful information. ABA also noted in previous comments that the amendments’ definition of “financial obligation” was too broad, and that they included no mechanism for redacting confidential information. The association encourages member banks to monitor and provide feedback on the effectiveness, cost and burdens of the new disclosure requirements after the rule takes effect.
New York Times Features Banks' Efforts to Protect Seniors
A story in last Sunday's New York Times spotlights the recently enacted Senior Safe Act as well as banks' efforts to detect and prevent financial fraud targeting seniors. The Senior Safe Act, which is part of S. 2155, offers institutions that train employees on spotting senior fraud legal protection to report such suspicious activity to a regulatory or law-enforcement agency.
The New York Times piece features several banks whose award-winning senior fraud prevention efforts predate the law, including Bank of the Rockies, Clyde Park, Mon.; Montecito Bank and Trust, Montecito, Calif.; and First Financial Bank, Abilene, Texas. It also cites data from the ABA Foundation's 2017 survey that benchmarked how banks are addressing issues around banking older Americans.
The ABA Foundation's Safe Banking for Seniors program offers several free resources to help banks conduct outreach on senior fraud issues. ABA also offers a course, which is part of the association's free Frontline Compliance Training for members, to help employees spot elder financial abuse.
Dakota Wesleyan University Set to Launch Trust Management Programs
Dakota Wesleyan University (DWU) in Mitchell, S.D., has heard from various financial institutions, including experts in the trust management sector, about the crucial void in trained professionals in the trust management field. DWU consulted with industry leaders regarding this need and will now offer the first-ever trust management certification in the United States.
“The decision for DWU to begin offering this program came after several major banking and financial institutions identified the need for further education and tailored training in the trust management job market,” said Dr. Amy Novak, DWU president.
DWU has created a unique and comprehensive curriculum for professionals wanting to sharpen their knowledge of trusts and estates, wealth management, tax law and client relationship management. Two programs were designed--a graduate certificate in trust management and a business administration degree with a concentration in trust management for the traditional undergraduate student.
A competitive analysis of the region and the country confirmed that only two other traditional universities are currently offering coursework specific to trust management. DWU is the first to offer a graduate certificate for working professionals, with the first cohort to begin in January 2019. The traditional undergraduate concentration is offered this fall to students on the Mitchell campus. For more information, visit www.dwu.edu/trustcertificate.
Long-standing Banking Journal Adopts New Name
Beginning with its September 2018 issue, NorthWestern Financial Review magazine will adopt the name BankBeat.
The name change completes a branding transition which began earlier this year when the publication relaunched its website as BankBeat.biz, a premier source for timely or breaking community bank news. The website is the perfect complement to a monthly print magazine that provides in-depth articles that analyze and inform the most important tends, topics and issues facing commercial banking in the central and western United States.
NorthWestern Financial Review came into being in 1988 through the merger of two long-standing publications--Northwestern Banker (est. 1894) and Commercial West (est. 1901). “Proud of a heritage that reached back more a century, the name NorthWestern Financial Review was a tip-of-the-hat to our legacy and the bankers who made such an impressive history possible,” said Publisher Tom Bengtson. “Today, we are looking ahead.”
“The opportunity to rebrand is about expressing our hopeful future as we and our readers navigate the challenges and anticipate the trends that are transforming commercial banking,” said Editor-in-Chief Jacqueline Nasseff Hilgert. “Furthermore, the name change signals the magazine’s renewed commitment to people who work in banking. When something is alive, it has a beat, and we believe banking is very much alive.”
BankBeat is published by Minneapolis-based NFR Communications Inc., which also provides management services to the Bank Holding Company Association.
Early Registration Deadline Nearing for SDBA Bank Technology Conference
Register for the SDBA's Bank Technology Conference by Sept. 4 and save money. This year's conference is set for Sept. 11-12 at the Ramkota Hotel in Sioux Falls.
Dave DeFazio with StrategyCorps will kick of this year's conference with his presentation " The Amazon Prime Effect: Surviving in the New Subscription Society." Subscription services are quickly becoming the dominate strategy of today’s best retailers and have caused a monumental shift in the way people buy. Bank marketers have a duty to understand these trends and drive their banks beyond just transactions to connect better with the lifestyles of today’s modern consumers.
DeFazio works with bank clients to design, build and implement a variety of checking, marketing and training programs. He develops consumer sites and mobile apps that deliver value to bank customers, as well as analysis tools that allow clients to have a deeper understanding of customer relationships and product profitability.
See the full agenda and register to attend.
Learn About FBI's 'Imminent Threat' Warning
The FBI recently released an alert regarding “Unlimited Operation” attacks increasing against U.S. financial institutions. The Graduate School of Banking of Wisconsin-Madison is offering the hot-topic online seminar "FBI Warns of 'Imminent Threat' to U.S. ATMs" on Tuesday, Aug. 28 at 10 a.m. CDT.
Since 2016, these types of attacks have cost the U.S. 2.5 million in losses by leveraging stolen card data against an institution whose ATM systems have been compromised. The settings on these systems are altered to bypass the safety controls that limit cash withdrawals.
Join presenter Chad Knutson with SBS CyberSecurity to learn more about the heightened threat of this attack and how to mitigate the risks to your institution. “Unlimited Operation” shouldn’t be confused with the growing number of ATM Jackpotting Attacks which the U.S. Secret Service warned about earlier in 2018. Updates on Jackpotting will also be addressed in this webinar; with a review on best practices and security controls.
The cost for the webinar is $159. Learn more and register.
Question:
We have a new teller machine that we are about to make available for use. It is a virtual teller machine (VTM) where customers will be able to access a teller via video chat. The debit card would only be used for identification purposes, if at all. Sometimes, they can just verify their identity through the video chat, though. Do the Reg. E error procedure rules apply?
Answer:
Not necessarily – no. For the rules to apply, there would need to be an electronic fund transfer (EFT). In order for there to be an EFT, in the situation of a VTM, there would need to be an electronic terminal, telephone, computer, or magnetic tape. Although, this is not a totally settled point in the law, it is our interpretation that a VTM would not fall under the definition of “electronic terminal” nor “computer” for purposes of Reg. E. Further, the official commentary to Reg. E expressly excludes teller operated machines where an access device is used for ID purposes only as an “EFT.” So, there would be no EFT in this situation of a VTM. Thus, because the error resolution procedures of Reg. E (§ 1005.11) apply to EFTs, the rules encapsulated in § 1005.11 do not apply.
12 CFR § 1005.11(a)(1):
“(a) Definition of error.
(1) TYPES OF TRANSFERS OR INQUIRIES COVERED.
(i) An unauthorized electronic fund transfer;
(ii) An incorrect electronic fund transfer to or from the consumer's account;
(iii) The omission of an electronic fund transfer from a periodic statement;
(iv) A computational or bookkeeping error made by the financial institution relating to an electronic fund transfer;
(v) The consumer's receipt of an incorrect amount of money from an electronic terminal;
(vi) An electronic fund transfer not identified in accordance with § 1005.9 or § 1005.10(a); or
(vii) The consumer's request for documentation required by § 1005.9 or § 1005.10(a) or for additional information or clarification concerning an electronic fund transfer, including a request the consumer makes to determine whether an error exists under paragraphs (a)(1)(i) through (vi) of this section.”
https://www.consumerfinance.gov/eregulations/1005-11/2016-24506#1005-11-a
12 CFR § 1005.3(b)(1):
“(1) DEFINITION.
The term “electronic fund transfer” means any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account. The term includes, but is not limited to: …”
https://www.consumerfinance.gov/eregulations/1005-3/2016-24506#1005-3-b
12 CFR § 1005.2(h)-3:
“A terminal or other computer equipment operated by an employee of a financial institution is not an electronic terminal for purposes of the regulation. However, transfers initiated at such terminals by means of a consumer's access device (using the consumer's PIN, for example) are EFTs and are subject to other requirements of the regulation. If an access device is used only for identification purposes or for determining the account balance, the transfers are not EFTs for purposes of the regulation.”
https://www.consumerfinance.gov/eregulations/1005-Subpart-A-Interp/2016-24506#1005-2-h-Interp-1
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