Greetings from Guy
By Guy Sims
I spent last week attending the ABA’s Summer Leadership Meeting in Boston. The meeting provided a great opportunity to network with other bankers from across the country as well as gain additional insight into what is going on in Washington, D.C.
On the regulatory reform front, it appears work is going on behind the scenes. ABA leadership believes the CHOICE Act (H.R. 10) that has passed the house and the Fed’s Regulatory Reform paper are both excellent blueprints from which the senate can craft meaningful regulatory relief legislation.
I concur with their assessment. I also got the feeling there may be more bipartisan support for this strategy than appears from the outside. The real question is whether there will be enough time for the Senate to act before year-end because Health Care reform will continue to eat up the clock and tax reform is next on the agenda.
As was previously discussed, the tax reform debate deserves our full attention. I think we all support tax reform that is fair, simplifies the process and promotes economic growth.
The treatment of debt and interest expense deductibility will be key issues in this debate and the outcome could have a significant impact on our industry. We will need to watch this carefully as it unfolds.
Another issue that was brought up in Boston was the CFPB’s plan to begin collecting information on business loans. As I understand it, it would resemble HMDA-like reporting. This has the potential to be another compliance nightmare for our industry. Both Roger and I will keep you informed as we learn more.
As you can see our industry has numerous issues on its plate. This fall will be a critical period for the banking industry on several fronts:
- Our Annual Washington Visit is scheduled for Oct. 1-3. Be There!
- Our Congressional delegation needs to hear from bankers on these important issues, and how this regulatory avalanche has smothered banks in paperwork and made access to credit nearly impossible for most consumers;
This is our time to make our collective voices heard! I urge you to make plans now to join us in Washington.
On another note, we need your help. Next week on Monday, the OBA and a dozen other state bankers associations are scheduled to meet with the CFPB to discuss the Bureau’s proposal dealing with “small business lending” proposal. The story below outlines the CFPB’s Request for Information and I’m asking you to help us better understand how this proposal will likely impact your bank.
We’re on a very short time-table – we’re supposed to be in Washington then, and we just had this appointment pop up. Please e-mail Roger (firstname.lastname@example.org) with any thoughts and comments you have about this issue.
Section 1071 of the Wall Street Reform and Consumer Protection Act, (Dodd-Frank) requires banks and other financial institutions to report details that involve credit applications that come from small business owners, including separate data on women- and minority-owned businesses.
What’s really going on is “they” (the Washington bank police) are trying to lay the ground work for allegations of (future) fair lending violations. It also, indirectly, seeks to identify the needs and opportunities for these same kinds of small businesses.
Section 1071 was always one of the more troublesome provisions included in Dodd-Frank when we were trying to kill it in the Senate in 2010. The reason is it clearly reveals a bank’s regulatory compliance nightmare was about to get worse. Big time.
The Consumer Financial Protection Bureau has published a request for information that is part of requiring banks and other financial institutions to identify, compile, maintain, and report information concerning credit applications made by women-owned, minority-owned and small businesses.
Specifically, the CFPB wants to learn more about the small business financing market as a whole. That means a close examination of the various products and services that are being offered to women-owned and minority-owned and offered to other small businesses, and what you’re doing to make certain this mandate is carried out.
But wait – there’s more! They also want to snoop around in your business without actually being (or having the authority to be) in your bank. They want “to learn more about the business-lending data that currently is used and may be maintained by financial institutions in connection with credit applications made by small businesses, including women-owned and minority-owned small businesses.”
But in fairness, they also ask about the cost and added complexity of these new reporting requirements, although not in a way that convinces anyone that they’re serious and really care about the bank’s operation. At least they haven’t been in the past and we see no reason why things may have changed.
Click here for the details of the proposal.
Existing law already defines what constitutes a “small business.” It incorporates “size” and other parameters used by the SBA and some other Federal agencies have been developed by the North American Industry Classification System.
Here are some of the data points (with the understanding the Bureau may well add other data to this list if the Bureau thinks it will help fulfill the Congressional intent in adding Section 1071 to the Act:
- Application number;
- The date the application was made;
- What was the purpose of the loan – what type of financing were they trying to get;
- How much money was requested in the application;
- How much did the bank approve, if any;
- What type of action was taken and what was the date of that action;
- Where is principal place of business located;
- Before the application was filed, what was the gross annual revenue of the business over the past year;
- Specify the race, sex, and ethnicity of the business’s principal owners.
They also want to know what you do now, today, in making one of these kinds of loans. How do you integrate the information you obtain into the loan approval process? How do you verify the information? And on and on.
Here’s the point: What impact do you think these new requirements will have on your customers? On your bank? Higher compliance costs and higher costs for credit come readily to mind, but what else? We REALLY want to know what you think! Email Roger (email@example.com) or call him at 405-424-5252 or 405-850-0695.
ABA President Rob Nichols responded to a nasty editorial in The New York Times suggesting our (bankers’) current effort to enact regulatory relief was merely an attempt to “turn back the clock by rolling back the rules.” What a crock.
Click here to read the Times editorial.
Anyway, Nichols thought the Times was flat wrong and something needed to be said to correct the effort:
Instead of “knee-jerk deregulation,” banks are seeking sensible, targeted adjustments to rules put in place by Dodd-Frank seven years ago, so they can do even more to help grow the economy and create jobs.
We’re guessing the writer(s) of the Times editorial wouldn’t know a community bank if it bit them on the backside.
They certainly would not know anything about what it means when a bank serves consumers of states like Oklahoma (not that they care all that much about those of us who choose to live in “flyover country.”)
Click here to read Rob’s letter.
We just learned a House appropriations bill might subject the OCC, the FDIC’s supervisory division and the Federal Reserve’s supervisory functions to the Congressional appropriations process. This provision is also part of the CHOICE Act authored by Rep. Jeb Hensarling (R-Texas) who chairs the House Financial Services Committee.
“What’s the big deal and why should I care?” you may ask.
Well, for one thing it could mean higher costs for examination and supervision by these federal banking regulators. At least that’s what CSBS has suggested to us.
CSBS argues, at a minimum, the Fed language will result in additional fees for state member banks and BHCs because assessments are “required.” Similarly, the FDIC could be incentivized to charge exam fees on state non-member banks to cover their supervisory costs.
Part of this effort is rooted in the fact that Chairman Hensarling has for some time argued that federal regulatory agencies should be subjected to Congressional oversight and, accordingly, subject to the appropriations process.
“Based on what my friend James Ballentine says, it doesn’t seem likely at this point that the Senate will include this provision in any regulatory relief bill,” OBA President and CEO Roger Beverage said.
Ballentine is the ABA’s executive vice president and director of congressional relations & public policy.
“That seems right to me, at least at this point,” Beverage said. “I have not spoken directly with Commissioner Thompson or John (Ryan, president of the Conference of State Bank Supervisors) but have seen some of the messages from CSBS. I’ll keep you informed when I know something more about this important issue.”
According to the temperature outside and the calendar, summer is still here. And, while that means things might slow down a bit for the OBA education department, it sure doesn’t mean they stop! Take a peek at the upcoming events:
- Regulation by Enforcement, Aug. 2, webinar — This program reviews many of the recent consent orders dealing with compliance-related matters.
- Phishing Trip, Aug. 3, webinar — This discussion will review strong risk management processes and identify critical elements for building layered information security controls into your security program.
- Residential Construction Lending, Aug. 3, webinar — Many problems can occur during construction that can leave lenders highly exposed unless they are unwritten properly.
- Introduction to ACH (part one of three-part series that can be attended individually), Aug. 4, webinar — The ACH Basics and Overview is designed as an introduction to ACH processing. You will gain a broad understanding of the Automated Clearing House Network and the processes the network follows.
- Home Equity Lines of Credit, Aug. 8, webinar — Get a great overview of all aspects of Home Equity Lines of Credit (HELOC).
- Advanced Cash Flow Analysis, Aug. 8, webinar — This webinar will explore multiple models of both business and personal (business owner) cash-flow analyses.
- 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.
- Loan Doc for Real Estate Secured Commercial Lending, Sept. 7 – Tulsa; Sept. 8 – Oklahoma City — Attend this proactive seminar and receive a thorough overview of commercial lending “loan documentation” with an emphasis on “commercial real estate” transactions.
Finally, take note the OBA 2017-18 Emerging Leaders Academy is currently accepting applications. We’re looking for the best and brightest bankers who seek to sharpen their leadership skills. The Academy will help you reach new heights with powerful speakers offering information leaders need for effectively maneuvering in today’s business climate. Each session helps participants become true leaders by understanding those around you through non-traditional methods.
There are six sessions to the Academy: Sept. 29, Oct. 13, Nov. 9, Jan. 26, Feb. 20, March 16.