Make Your Voice Heard at SDBA State Legislative Day

Photo of Karl Adam and Brett Koenecke SDBA President Karl Adam and SDBA Legal Counsel Brett Koenecke met with the SDBA Legislative Committee yesterday via Zoom to discuss legislation this session that could impact the banking industry and how, with a united approach, the SDBA intends to address these bills and initiatives going forward.

As part of that united approach, bankers should attend the SDBA State Legislative Day on Feb. 9 in Pierre. This daylong event is a great opportunity to stay up-to-date on state and federal legislation that could affect the banking industry, visit with state legislators and constitutional officers, and make sure our industry is heard.

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

Long-Awaited Fed Paper Highlights Risks, Potential Benefits of a U.S. CBDC

The Federal Reserve last Thursday issued a highly-anticipated report assessing the potential benefits and risks of creating a U.S. central bank digital currency, or CBDC. The paper also requests public feedback on these topics and comments will be accepted until May 20. While the Fed took no official position on creating a CBDC, the agency said it “will continue to explore a wide range of design options,” adding that it “does not intend to proceed with the issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”

The paper noted that a CBDC “would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable and identity-verified.” Among the various CBDC structures the Fed is contemplating is an intermediated model through which the private sector would facilitate the management of CBDC holdings and payments through accounts or digital wallets. Such a model “would facilitate the use of the private sector’s existing privacy and identity-management frameworks; leverage the private sector’s ability to innovate; and reduce the prospects for destabilizing disruptions to the well-functioning U.S. financial system,” the Fed said.

In an analysis of potential risks, however, the Fed acknowledged that a CBDC could—depending on its design—“fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank.” In addition, the creation of a CBDC could also have implications for monetary policy and present operational resiliency and cybersecurity challenges, among other things.

The ABA has previously weighed in on the risks associated with issuing a CBDC, warning that the issuance of a CBDC could compete with bank deposits and limit banks’ ability to power economic growth. The ABA is currently reviewing the paper and will provide feedback to the Fed in the coming days. Read the Fed's report. Read ABA's previous CBDC statement.

Nichols Urges Policymakers to Carefully Weigh CBDC Costs, Benefits

In a statement following the report’s release, ABA President and CEO Rob Nichols noted that the paper “highlights a growing recognition that a U.S. CBDC could fundamentally reshape our banking and payments system which remains the envy of the world, and these implications require a careful weighing of the real-world costs and benefits before any decision to move forward.”

Prior to such a decision, “policymakers would need to show that a U.S. CBDC would somehow improve upon this reliable, tested retail banking system that serves our communities and our economy so well, and we believe it will be very difficult to make that case,” Nichols added. “We recognize the importance and complexity of this discussion and appreciate the Federal Reserve's request for public comment on their report. We look forward to sharing the views of our members across the country.” Read Nichols’ statement.

Ag Secretary Discusses Farming and Rural Economy During House Hearing

Agriculture Secretary Tom Vilsack testified last Thursday before the U.S. House Agriculture Committee on the state of the rural economy. During the four-hour meeting, Vilsack discussed a wide range of topics, including supply chain issues, employment, exports, COVID-19 relief funding, demand and price increases, underserved rural communities, the needs of specific farming sectors and the reauthorization of the farm bill, which expires next year.

“Our farm income is as good as it has been in the last eight years. We’ve had record exports,” Vilsack said at the start of his testimony. As lawmakers begin their work on the farm bill, he urged them to focus on fixing a particular issue: the rural extraction economy. It is the “heart of the challenge” that rural farmers have faced for a long time, the secretary said.

“An extraction economy is where we … take things from the land and rather than convert them and adding value [to products] in the rural areas where the resources [are grown], they are transported long distances to where they are ‘value added’ in some other location where opportunities and jobs are created,” he said.

“We learned during the pandemic that our system isn’t as resilient as we hoped it would be,” he explained. “A way to make it more resilient is to create local and regional opportunities. That’s one of the reasons we’re focused on expanding processing capacity at the local level so our livestock producers have the choice of local facilities that create local jobs and allow revenue and wealth to stay in the community.” Watch the hearing.

FinCEN Proposes SAR Information Sharing Pilot Program

The Financial Crimes Enforcement Network on Monday issued a notice of proposed rulemaking to establish a pilot program for financial institutions to share suspicious activity reports with their foreign branches, subsidiaries and affiliates.

The limited-duration pilot program would expand the sharing of suspicious activity reports from previous guidance, which stated that the reports may only be shared internally with foreign head offices, controlling companies and domestic affiliates.

FinCEN said it expects the pilot program to provide valuable feedback as it considers longer-term approaches toward SAR sharing with foreign affiliates. The notice of proposed rulemaking seeks comment on establishing the pilot program, including input on the expected costs and benefits, technical challenges, the merits of quarterly reporting and how to protect SAR confidentiality. Comments will be due on March 28.

“ABA has long supported SAR information sharing between banks, and we look forward to working with FinCEN and our members to help make the new pilot program a success,” ABA said. “Although important steps must be taken to maintain SAR confidentiality, we believe the program will make it easier and more efficient to fight fraud and illicit finance while allowing banks to better manage enterprise-wide risk.” Read more. For more information, contact ABA's Rob Rowe.

Tax Filing Season Begins; IRS Revamps Website for Child Tax Credit

The Internal Revenue Service kicked off the 2022 tax filing season on Monday and urged taxpayers to file their tax returns electronically to help speed refunds. The tax filing deadline is April 18 for most taxpayers.

Additionally, the IRS has revamped a website to help taxpayers file their taxes and access the remainder of the expanded child tax credit or the full amount of the child tax credit. The website—ChildTaxCredit.gov—includes a tool that directs taxpayers to the best free filing options based on answers to a handful of simple questions, as well as information about the CTC, eligibility and how to get the credit. Read more about tax filing season. Visit the child tax credit website.

ABA, Trades Urge DOL to Engage with Industry Prior to Overtime Rulemaking

As the Department of Labor contemplates a new overtime rulemaking, the ABA joined 109 other trade groups in a letter urging the DOL to meet with industry groups prior to proposing a new rule.

The Biden administration’s fall 2021 regulatory agenda projected that DOL would issue a proposed rule in April 2022 that would revisit the salary level at which an employee could be exempted from federal overtime and minimum wage requirements, as well as revisit other aspects of the overtime regulatory regime. In 2019, with ABA’s support, DOL under the Trump administration issued a final rule that set the salary level at $684 per week, or $35,568 per year.

“This will be a significant rulemaking with respect to cost, difficulty in implementation and impact on the workforce, particularly given the current acute labor shortages,” said the trade groups. “Our organizations urge DOL to follow past precedents and hold meetings with the regulated community to obtain input on the potential impact of any changes to the overtime exemption requirements.” Read the letter. For more information, contact ABA’s Jonathan Thessin.

Join the SDBA for ABA Washington Summit

It's 2022, the year of the midterm—and the perfect time to make your voice heard on crucial issues facing your bank.

Join the SDBA at the ABA Washington Summit on March 7-9 for facetime with policymakers on Capitol Hill, at the regulatory agencies and at the White House. You'll also hear from these key decision makers about what's on the horizon for the industry.

Don't miss this opportunity to stay a step ahead in a pivotal year for banking. The Summit will be held live in Washington, D.C., and virtually. See the agenda and register.

The SDSBA offers a $500 stipend to help with the travel expenses of one person from each SDBA member bank to attend in person. Stipends will be paid after the event, Questions, contact the SDBA's Halley Lee.

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Question of the Week

Question: What is the current open-end threshold for partial exemptions? When does it change?

Answer: The partial exemption open-end threshold is currently 500 transactions in each of the two previous years and is not currently scheduled to change. There is currently a full reporting exemption, which is currently set at 500 transactions in either of the two previous years, but will be decreasing to 200 transactions on Jan. 1, 2022.

(3) ...an insured depository institution or insured credit union that, in each of the two preceding calendar years, originated fewer than 500 open-end lines of credit...is not required to collect, record, or report optional data as defined in paragraph (d)(1)(iii) of this section for applications for open-end lines of credit that it receives, open-end lines of credit that it originates, and open-end lines of credit that it purchases.

12 CFR 1003.3(d)(3) – https://www.consumerfinance.gov/rules-policy/regulations/1003/3/#d-3

The final rule sets the permanent open-end threshold at 200 open-end lines of credit effective Jan. 1, 2022, upon expiration of the temporary threshold of 500 open-end lines of credit.

Home Mortgage Disclosure Rule, p. 3 https://files.consumerfinance.gov/f/documents/cfpb_final-rule_home-mortgage-disclosure_regulation-c_2020-04.pdf

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