SDBA eNews

January 13, 2022

SDBA State Legislative Day Hotel Blocks Extended

Photo of State CapitolIf you have not yet reserved your hotel room for the SDBA's State Legislative Day on Feb. 9 in Pierre, the hotel blocks have been extended. The hotel block at the Ramkota Hotel & Conference Center has been extended to Friday, Jan. 14, and the hotel block at the ClubHouse Hotel & Suites has been extended to Tuesday, Jan. 18. 

Don’t miss out on this opportunity to connect with South Dakota’s lead decision makers at the SDBA State Legislative Day. Stay up-to-date on state and federal legislation that could affect the banking industry, visit with state leaders, legislators and constitutional officers and be the voice for the banking industry. 

The day will include an SDBA Legislative Committee meeting, lunch, an SDBA update, featured speaker Keith Prather, Gov. Kristi Noem (invited), and the chance to visit with state legislators at the State Capitol. Also included during the day are special sessions specifically designed for emerging bank leaders. The day will culminate with an evening reception with state legislators and constitutional officers. 

Learn more about the event, find hotel reservation details and register to attend.

U.S. Banks Form Consortium to Support Bank-Minted Stablecoin

Five FDIC-insured banks yesterday announced the launch of the USDF Consortium, a group that was formed with the goal of building a network of banks to facilitate the adoption of USDF, a bank-minted stablecoin. The consortium’s founding members include New York Community Bank, Denver-based NBH Bank, Nashville-based First Bank, Montebello, N.Y.,-headquartered Sterling National Bank and Columbus, Ga.,-based Synovus Bank, and the group said it intends to “significantly grow its membership of FDIC-insured banks through 2022 and beyond.” Figure Technologies and JAM Fintop are also founding members.

‌USDF will operate on the public Provenance Blockchain, will be minted exclusively by U.S. banks and will be redeemable on a one-to-one basis for cash from a consortium member bank.

‌The announcement follows a report issued by President Biden’s Working Group on Financial Markets last year, which recommended that stablecoins—which are typically backed by fiat currencies and carry the expectation that they can be redeemed upon request—only be issued by insured depository institutions. Read more. For more information, contact ABA’s Rob Morgan.

Powell: Fed Will 'Make Progress' on Master Accounts for Nonbanks

Federal Reserve Chairman Jerome Powell told members of the Senate Banking Committee on Tuesday that there are “good arguments” for granting non-FDIC-insured special-purpose depository institutions (SPDI) Fed master accounts and that the Fed will “make some progress” on the issue.

Powell added that the Fed is taking time to consider the SPDI applications because of how important these applications are from a precedential standpoint. “We start granting these, there will be a couple hundred of them pretty quickly and we have to think about the broader safety and soundness implications,” said Powell.

Asked by Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) about whether a central bank digital currency should be developed to enable consumers to have retail accounts with the Fed, Powell confirmed that the Fed does not have the experience or capability to do so. If the Fed were authorized to pursue a digital currency, Powell also confirmed that it should not prevent a privately issued stablecoin from existing with the central bank digital dollar.

During the hearing, Powell also provided an update on a highly anticipated report from the Fed on central bank digital currencies (CBDCs), noting that it is “ready to go” and would be released “in coming weeks.” While Powell said the Fed “[does] take some positions” in the paper regarding CBDCs, he said it will mostly focus on asking questions and seeking input from the public. Watch the hearing.

ABA Releases Staff Analysis, FAQs for Computer Security Incident Notification Rule

The ABA has published a members-only staff analysis and more than 40 frequently asked questions on a recently-finalized joint agency rule on computer security incident notification. The FAQs address the final rule, as well as information gathered from ongoing conversations with the FDIC, Federal Reserve and OCC regarding implementation details and notice logistics. ABA continues to engage with industry stakeholders to educate banks and bank service providers about the rule in anticipation of the May 1 compliance deadline.

In response to the initial proposal, ABA convened a large, diverse working group of more than 100 member bankers to raise concerns about the rule, call on regulators to continue acknowledging the importance of voluntary notice of cyber incidents and develop flexible notice options responsive to needs of the financial system.

In November, the federal banking agencies published the final rule requiring banks to notify their primary federal regulator “as soon as possible and no later than 36 hours” after the bank “determines” that a significant “notification incident” has occurred. The rule also requires bank service providers to notify affected bank customers as soon as possible upon determining that a computer-security incident “has or is likely to materially affect customers for four or more hours.” The rule applies to third parties directly, and no contract revisions are required. 

ABA: CFPB Section 1071 Proposal Is 'Unnecessarily Far Reaching'

ABA and the state bankers associations last week raised concerns about the CFPB’s long-awaited proposed rule to implement Section 1071 of the Dodd-Frank Act, which concerns the collection of credit application data for small businesses, including women-owned and minority-owned small businesses. In an extensive comment letter, the associations said that the costs of the proposed rule could have significant effects, particularly on smaller banks and their small business customers, and recommended a broader exemption for small institutions.

“The proposed rule's scope is unnecessarily far-reaching; it would exempt very few community banks, define small businesses so broadly as to include tens of thousands of large businesses, and require institutions to collect and report data on numerous data points in addition to the congressionally-required data points,” they wrote. “All of these actions combine to negatively impact community banks and their customers, in stark contrast to Director Chopra's assertions of support for community banks and relationship banking.”

Specifically, the associations called for banks making no more than 500 small business loans in the two preceding years to be exempt from the data collection requirements and also recommended defining a “small business” for the purpose of the rule as one with gross annual revenue of $1 million or less, rather than $5 million or less as proposed. In addition, the associations urged the CFPB not to require the collection of data points that were not specifically mandated by Congress and opposed a requirement for lenders to identify the race and ethnicity of business owners “by visual observation or surname” if they decline to provide that information.

The associations also raised concerns about the rule’s potential to affect the privacy of small businesses—noting that business could be easily re-identified when the data is released to the public, as required by law—and called for a separate rulemaking regarding the modification or deletion of data prior to it becoming public. Finally, with regard to implementation, the groups called for a three-year timeline, rather than the proposed 18-month implementation period. Read the comment letter. For more information, contact ABA’s Kitty Ryan.

GSBC, Leeds School of Business Partner to Offer Executive Leadership Certificate

The Graduate School of Banking at Colorado (GSBC) has partnered with the University of Colorado Boulder Leeds School of Business to develop a new Certificate in Executive Leadership. GSBC alumni may earn this certification by attending GSBC’s Community Bankers Summit on July 25-27 during the school’s 71st annual school session in Boulder.

The first day of the Summit will be community-banking focused with GSBC faculty members discussing critical issues including how to attract and retain top talent, remaining competitive with cryptocurrency in the faster payments space, fintech strategy, gender diversity among bank leaders, and the mergers and acquisitions landscape. The remaining two days will focus on understanding the organization as a system, leading organizational change, creating an ethical climate, leading through a crisis and leader reactions.

The Certificate in Executive Leadership is available exclusively to alumni of GSBC and builds on the leadership skills gained during their time at the school. Learn more

Scholarships Available for ABA Emerging Leaders Forum During Washington Summit

The ABA is offering each state banking association $750 scholarships for two emerging leaders to attend the ABA Emerging Leaders Forum and Washington Summit on March 7-9 in Washington D.C. The ABA Emerging Leaders Forum is an opportunity to share challenges and strategies with peers as you work to cultivate a strong, dynamic and diverse banking industry for the future.

The Emerging Leaders Forum will be held on March 7 in conjunction with the ABA Washington Summit. If you are interested in applying for one of the two scholarships, contact the SDBA's Halley Lee via email or 605.224.1653 by Feb. 11. Learn more about the Emerging Leaders Forum and Washington Summit.

Meade County Gives Answers to Floodplain Questions

If you want to know if a property in Meade County is in the special flood hazard area, check out The site provides a wealth of information about the county’s flood insurance rate map including a digital copy of the special flood hazard area (SFHA) on its free mapping site, flood zones, base flood elevations (where available), floodway data, flood insurance, special rules for building in the flood plain, as well as ideas for protecting property from flood damage. It also provides additional flood hazard data not shown on the FIRM maps, where available. For floodplain questions, call Meade County Equalization & Planning at 605.347.3818. The office also has copies of FEMA elevation certificates on buildings constructed or substantially improved in the floodplain since January 2014.

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Question of the Week

Question: We are considering an arrangement with our construction builder customers where they would get a set amount of “credit” (points) for every spec loan closed with us. The points would be eligible to apply discounts associated for an annual trip with the bank’s travel club. In other words, each spec loan booked with us will give them credit to use on the trip cost. The obvious consideration here is RESPA Section 8, but I do not feel like it is applicable. Although this involves residential construction, since they will all be spec loans, these will all be commercial customers and transactions. 

Answer: The main concern here would be RESPA Section 8, but you are also correct that if these are commercial or business purpose transactions, they are exempt from RESPA. Otherwise, there is not a prohibition in a referral program for commercial loans. The bank would want to thoroughly document the program, as always, and be sure to monitor for any potential consumer loans and fair lending or UDAAP issues. 

No person shall give, and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person."

Regulation X, § 1024.14(b) –

An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by 12 CFR 1026.3(a)(1) of Regulation Z. Persons may rely on Regulation Z in determining whether the exemption applies.

Regulation X, § 1024.5(b)(2) –

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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 and ask for our Membership Team.

For timely compliance updates, subscribe to Bankers Alliance’s email newsletters.

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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.