Saturday, May 25, 2024

Week of July 10

Greetings from Guy

By Guy Sims
OBA Chairman

Developing the next generation of bankers is one of the biggest challenges many of us face in our banks. Technical training, practical experience and a broad view of the banking landscape is important in developing quality bankers that will lead our banks in the future. 

Our board, both at my bank and the association, feel strongly that we need to engage, nurture and provide development opportunities for our younger successors. Not only do we believe this is a sound management plan but it will provide for greater success for our banks both short term and long term.

The OBA’s Emerging Leaders Academy provides an excellent opportunity for progressive bankers to take that step. Not only will they gain valuable leadership and banking skills, they will broaden their banking perspective through interaction with other bankers for across the state.  

Participating in the Academy will pay long term dividends for your employee, your bank and our association. I encourage you to take advantage of this great opportunity.

I’m interested in what other bankers are doing in developing our next generation of bankers.  If you would be comfortable in sharing (on a confidential basis) what’s working in your bank please contact me or Roger.

Guy Sims
OBA Chairman

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Fed researchers: Durbin Amendment led to loss of free checking

The ABA reported this morning that a recent paper from the Federal Reserve confirms what most of you already know: since the Durbin Amendment took effect, banks that have been directly impacted by its price controls were 35.2 percent less likely to offer a “free checking” product than they were before Durbin.

Two Fed researchers/employees – Mark D. Manuszak and Krzysztof Wozniak – authored this latest report. They also concluded that, without the Durbin Amendment, 65.2 percent of checking accounts at covered banks would have been offered with no monthly maintenance fees; in actuality, just 30 percent were.

The study showed a direct link between Durbin and an increase in fees on many accounts. For example, non-interest checking accounts have seen monthly fees increase by 20 percent since 2010. In addition, the minimum balance required to avoid monthly maintenance fees has increased by 50 percent – more than $400 per year for non-interest checking accounts.

While banks exempt from Durbin also raised fees as part of the competitive environment, the absence of an interchange price cap meant they raised fees by significantly less than Durbin-covered banks did.

Click the link below to read the report:

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Study suggests banks may have something in common with Blockbuster

A new study by Accenture suggests that many banks will begin to fade from the financial services scene in a few years. Rather than a seismic event, the study discussed by Allan McIntyre at Accenture in last Friday’s edition of the American Banker suggests that the current banking business model will simply become irrelevant to the next generation of consumers.

Accenture is a consulting firm in the digital and technology space, working across multiple industries around the world, including the financial services space. McIntyre posits that FinTech firms and other new technologies are changing the way consumers view the financial services world and how it does (or doesn’t) meet the consumer’s needs.  

As traditional bank models begin splintering because of low interest rates, increased regulatory costs, narrowing margins, technological advances and changing consumer expectations, McIntyre tells us “up to 35% of the (current bank) market share may migrate to nonbank players over the next five years. That isn’t a Blockbuster-type implosion, but certainly a worry for established banks …”  

Banking used to be a fairly straight-forward, vertically integrated system that was controlled by banks. That’s not the case any longer because technology has changed the manner and the speed with which information travels across various channels and has made banking very simple for customers.   

Click the link below to read the entire article:

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Bill to level playing field with FCS needs co-sponsors

Rep. Lynn Jenkins (R-KS) has introduced H.R. 2205, the “Enhancing Credit Opportunities in Rural America Act of 2017.” This bill is intended to exclude from taxation any income received by a lender on loans secured by agricultural real estate. It would also exempt interest income received on loans secured by single family residences from taxation in communities of 2,500 or less.  

Rep. Jenkins has asked Kansas and Oklahoma bankers to help her secure co-sponsors for this bill. The goal is to build momentum for adding this language to tax reform legislation that is anticipated sometime this summer.

This effort represents a realistic opportunity to eliminate at least one of the competitive advantages the Farm Credit System (FCS) currently has over community banks. We’re asking OBA-member banks to ask their House member to co-sponsor H.R. 2205.      

This bill will benefit all farmers and ranchers across the country, not just in Oklahoma. What is key to our collective argument, however, is that competitive pressure would require banks to pass along lower interest rates to our customers. In other words, don’t follow the precedent set by the “big box” stores who pushed for the Durbin amendment to be included in Dodd-Frank, and then kept the savings/money realized from the price control implemented on exchange fees.   

Moreover, community banks in rural America would be able to aggressively protect their operating model going forward, and would also help reinstitute residential mortgage lending activities in small towns. Importantly Rep. Jenkins is a member of the House Ways and Means Committee which has jurisdiction over such matters.

Please call or email your Congressman (or his Banking Legislative Assistant) and ask the Congressman to co-sponsor this measure. Here’s the necessary contact information:

Rep. Jim Bridenstine     Chief of Staff: Joe Kaufman –
216 CANNON                   Banking LA: Sheryl Kaufman –
Phone: 202-225-2211
Fax:    202-225-9187
Rep. Markwayne Mullin     Chief of Staff: Mike Stopp –
1113 LONGWORTH             Banking LA: Jonathan Gray –
Phone:  202-225-2701
Fax:    202-225-3038

Rep. Frank Lucas          Chief of Staff: Stacy Glasscock –    
2405 RAYBURN              Banking LA: Josh Mathis –
Phone: 202-225-5565   Legislative Assistant: Christian Dibblee –
Fax:    202-225-8698

Rep. Tom Cole          Banking LA: Matt Diller –
Phone: 202-225-6165
Fax:  202-225-3512

Rep. Steve Russell     Chief of Staff: Steve Moffitt –    
128 CANNON               Banking LA: Amy Baddley –
Phone: 202-225-2132
Fax:    202-226-1463

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H.R. 924 to be considered by HFSC subcommittee on Wednesday

This Wednesday the House Financial Services Subcommittee on Financial Institutions and Consumer Credit will conduct a hearing on H.R. 924, the ‘Financial Institutions Due Process Act of 2017.’

“This bill represents an idea we’ve been advocating for years,” OBA President Roger Beverage said. “It creates the ‘Independent Examination Review Panel’ for the exclusive and explicit purpose of providing bankers a process for challenging a decision made by the bank’s prudential federal regulator.

“Right now, there is no such process available,” Beverage said. “It’s true that a bank can appeal a decision up the chain of the regulatory structure, but most of us realize this isn’t really much of a choice. This bill creates a meaningful, independent process to provide redress for a bank that believes it has been judged too harshly.”  

Beverage noted that a similar provision is included in H.R. 10, the Financial CHOICE Act of 2017. That act has passed the House and is now waiting for action in the Senate.

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OCC: Compliance risk management rising as agency supervisory priority

Last Friday the OCC published its Semiannual Risk Perspective report highlighting its focus on credit risk, compliance risk and strategic risk as the agency’s top supervisory priorities at community and midsize banks. For larger banks, compliance, governance and operational risks remain dominant concerns, the agency said.

“Evolving compliance risks and increasing complexity of the risk environment present significant challenges for bank compliance risk management systems,” said the Acting Comptroller of the Currency Keith Noreika. “Some banks also face change management challenges as they adapt to new or amended consumer-focused regulations.” 

Noreika also said that, while credit risk remains high, a slow-down in loan growth has left credit risk “relatively stable overall.” He also pointed out that “[e]asing . . . underwriting standards slowed in the second half of 2016, but risk layering” continued.

The agency also expressed its concern about growing credit concentrations, especially in commercial real estate. A year after raising concerns about the “notable and unprecedented growth” in auto lending — with total loan volume growing by 50 percent since 2010 — the agency on Friday “re-characterized [auto loans] from a key risk issue to an issue warranting continued monitoring.” The higher risk is now materializing in delinquencies, the OCC reported.

Strategic risk remains high for smaller and midsize banks, which continue to struggle with increased nonbank competition (from marketplace lenders, for example), merger trends, the persistent low-rate environment and governance issues. Larger banks, however, “continue to improve the effectiveness of their processes and controls to address strategic risk,” the OCC said.

Read the Report here:

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OBA education corner …

Summer is officially here for the OBA education department, and while that means things might slow down a bit, it sure doesn’t mean they stop! Take a peek at the upcoming events:

  • Best- Ever Compliance Checklists for Consumer Loans, July 18, webinar — Colorful easy-to-use checklists lead lenders and processors through the various compliance requirements.
  • Introduction to Compliance Risk Assessments, July 19, webinar — You will be provided the knowledge to conduct a risk assessment for all key compliance areas at your bank following this program.
  • SSN, EINs and ITINs: Understanding our Job as a Withholding Agent, July 19, webinar — In this program we will review taxpayer identification numbers and W-9 and W-8BEN requirements.
  • ACH Origination, July 21, webinar — What are your responsibilities and warranties?
  • TRID Checkup: Areas of Concern and Uncertainty, July 25, webinar — This webinar is intended to review and discuss many of the major issues lenders are facing with TRID.
  • Lending to Municipalities, July 26, webinar — We will discuss credit services for municipalities and other local government organizations.
  • Advanced Commercial Loan Documentation, July 26, webinar — Everything a commercial loan officer should know about the core commercial loan documentation package.
  • 2017 OBA Compliance School, Aug. 21-25, Oklahoma City — This school is designed for those directly involved in the day-to-day compliance function as well as those who are involved in specific areas. Compliance officers, auditors, bank counsel, loan officers, cashiers and bank trainers will benefit from the courses.
  • BSA/AML, Aug. 29, Tulsa — This program is designed to assist experienced personnel in staying ahead of BSA/AML compliance steamroller.
  • BSA/AML, Aug. 30, Oklahoma City — This program is designed to assist experienced personnel in staying ahead of BSA/AML compliance steamroller.