Week of Sept. 18

Greetings from Guy

By Guy Sims
OBA Chairman

This week we begin our Bankers’ Night Out series with events scheduled for Lawton and Woodward. The last two days have brought beneficial and timely rains, which always brings a smile to those of us with ties to that part of the state. I look forward to seeing the bankers in western Oklahoma.

As expected, Gov. Fallin called the legislature into special session beginning Sept. 25 to address the budget shortfall and pay raises for teachers. Budget shortfalls and pay raises seems like an odd combination of issues, but that’s Oklahoma politics. 

I did have the opportunity to hear Speaker Charles McCall speak this past week and it seemed clear from his comments the cigarette tax will be back on the agenda for a revenue source. Listening to the Speaker, I got the feeling the cigarette tax will ultimately go to a vote of the people as getting the three-fourths majority needed in the legislature will be difficult.

On the national level, an appropriations bill (H.R. 3354) was passed by the House of Representatives Thursday has some disturbing language in it. As I understand it, the provision calls for the Federal Reserve and the FDIC to be subjected to the congressional appropriations process. (You can read more in the story immediately below).

What it means is banks that pay their examination fees can and probably will see those fees being used to fund costs of government functions other than examinations, which is well beyond the reason for our payments in the first place. The net effect of this provision might be to subject state-chartered banks (and perhaps bank holding companies) to new or increased assessments for the purposes of examination and supervision!

To make matters worse, credit unions were specifically exempted from the fee. It is my understanding the entire Oklahoma delegation voted for the bill! 

Please be aware this is not law as it still has to pass the Senate and be signed by the president. According to Roger’s sources, they do not think the provision will pass in the Senate. We will let you know more as we learn more about the issue. This issue shows why it is important to stay involved and attuned to what is going on in Washington. 

Thanks to all who are signed up for our Washington Visit in October. As of this writing, we have 67 bankers attending, as well as vendors and OBA staff. We have two full days scheduled, including meetings with the ABA, U.S. Chamber of Commerce, FDIC, Federal Reserve, OCC, CFPB and the Oklahoma congressional delegation.  

I want to close by recognizing Jill Castilla, who served as chairwoman of the CBAO for past year, and Mike Stidham, who is serving as the new chairman. Congratulations to both of these bankers and thank you for taking the time to serve our industry.   


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Background on subjecting banks to congressional appropriations process

(Thanks to the ABA’s James Ballentine for providing us with this information)

OBA Chairman Guy Sims wrote a great explanation above about something that happened last week that caught most of us by surprise. It deals with subjecting the FDIC’s and the Federal Reserve’s supervisory functions only.

The Financial CHOICE Act (H.R. 10) includes language that would subject the federal banking regulatory agencies – the OCC, CFPB, NCUA, Federal Reserve, FDIC and FHFA – to the congressional appropriations process, as noted above by Chairman Sims. This same language was included in the House FSGG appropriations bill, H.R. 3354, which was passed by the House late last week.  

The language of the amended proposal “requires” the Fed to assess banks and BHCs to offset the appropriations. Similarly, the FDIC’s supervisory functions contains similar language that requires the FDIC to lower insurance premiums by the amount of any new fees charged to banks.        

Our friends at the Conference of State Bank Supervisors argues the Fed language will result in additional fees for state member banks and BHCs because assessments are “required.” Similarly, although the provision does not require it, CSBS argues the FDIC could be incentivized to charge exam fees on state non-member banks to cover their supervisory costs. It also says that the net impact of the provision is unclear, however, because of the premium offset and other provisions.

From ABA’s perspective, the appropriations language continues to raise concerns about unintended consequences. Hill feedback suggests it was not intended to change the method by which or the amount institutions are assessed; rather, the language at best is unclear and could lead to the possibility of new or additional assessments or other fees from the regulatory agencies, and in particular the Fed and the FDIC, either now or in the future.            

House Financial Services Committee Chairman Hensarling (R-Texas) has deeply-held and long-standing views that Congress must exercise greater oversight over federal regulatory agencies and hold them accountable for their actions via Congress’ “power of the purse.” H.R. 10 has already passed the House and this same language can be found in Sections 361-365 of that bill.  

It is doubtful the Senate would give serious consideration to including this controversial provision and other CHOICE provisions in any final appropriations package. Senate Democrats will likely express “grave concern” over Congress’ ability to underfund bank regulatory supervision, and thus (we anticipate) will strongly oppose the provision. 

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Information on small business data collection, Sec. 1071 of Dodd Frank

Wednesday, your OBA submitted a comment letter in response to the Consumer Financial Protection Bureau’s request for information concerning Sec. 1071 of the Wall Street Reform and Consumer Protection Act of 2010. That section mandates the CFPB is to collect at least nine fields of data on commercial loans, with a special focus on women-owned, minority-owned and other small businesses.  The reason for this requirement is to provide additional information the government can use in investigating allegations of fair lending violations. 

“This process was at the heart of our discussions with the CFPB at the end of July of this year,” OBA President and CEO Roger Beverage said. “There were 15 or 16 Bureau employees who also attended our meeting. What stood out about those employees (with one exception) is they don’t bring any real-world business experiences with them. I thought at the time that these guys have no understanding about business in general, let alone community banks.

“They did pay attention, so it wasn’t totally pointless, but it’s clear to me they have not thought through the unintended consequences of this proposal if it’s approved in its present form. We filed a comment letter, and you can see a copy of it by clicking here.

Beverage said while most of these employees mean well, they have a significant misunderstanding of how the commercial lending process works in real time with real consumers.

“Small business lending at banks is highly individualized,” he said.  “Most of the Bureau’s employees just assumed it was like consumer loan – somewhere there’s a standardized, one-page application for a commercial loan. And we explained there isn’t one, and commercial loans require much, much more underwriting and interaction between the borrower and the loan officer.  

“The ABA hit the nail on the head when they wrote as follows:”

… underwriting and loan pricing (of a commercial loan) depend on many heterogeneous variables that are inherently unsuitable for mass-data fair lending analysis. …  [T]he great variations and unique attributes of individual small business loans will make legitimate comparisons excessively difficult, if not impossible. Moreover, once such a database is established, its inherent exposure to statistical manipulation could be used to contrive assertions of discrimination in small business lending.

Another point we made is it’s named the Consumer Financial Protection Bureau,” Beverage said. “Using that word doesn’t square with what the Bureau is trying to accomplish with this ‘business’ of making commercial loans, not consumer loans over which the Bureau has clear jurisdiction.”  

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OBA education corner …

Labor Day weekend is behind us and so is the summer. Ahead of us? Well, take your pick of Oklahoma weather conditions, but one thing is certainly in front of us: more OBA educational offerings! Take a peek at the upcoming events:

  • Fair Lending Risk Assessment, Sept. 25, Oklahoma City — To keep you out of the fair lending abyss, we will use recent enforcement actions to help augment your understanding.
  • Mortgage Servicing Compliance, Sept. 26, webinar — We’ll focus on critical areas as well as the new rules and provide practical advice on how to meet both regulatory and borrower expectations.
  • Debt Collection Review & Update, Sept. 27, webinar — This two-hour webinar explains the current FDCPA requirements, recent enforcement actions and the direction of proposed changes.
  • 10 Do’s and Don’t for Social Security and VA Accounts, Sept. 27, webinar — This webinar will cover the accounts that receive government benefits, such as social security and veterans accounts.
  • Buiding an Effective IT Audit Program, Oct. 3, webinar — This session will examine in more detail how the IT Audit Program integrates with the Information Security Program.
  • ARM Disclosures: Review & Update, Oct. 4, webinar — This two-hour program explains how to develop, maintain and audit ARM disclosures.
  • Legal Essentials for Lenders, Oct. 4, webinar — This program covers important legal issues and concepts which must be understood and consistently applied to avoid litigation and better serve customers.
  • The ACH Audit & Risk Assessment, Oct. 5, webinar — Spend two hours with an ACH Auditor and hear what she looks for when performing the ACH Audit and ACH Risk Assessment.
  • Introduction to Internal Audit, Oct. 5, webinar — This program will discuss the changing role of internal audit and how internal audit may add value in today?s complex banking environment.
  • IRA Basics Seminar and IRA Update/Review Seminar, Oct. 31, Tulsa, Nov. 1, Tulsa, Nov. 2, Oklahoma City and Nov. 3, Oklahoma City — There are so many pieces to building the IRA foundation of knowledge that it takes a lot of nuts and bolts and “brain-power” to hold it all together. Just when you finally grasp it, they change the rules again! The goal of these two days at each location is to raise your comfort level if you are a rookie and to reinforce your knowledge if you have a higher level of experience.

Also, the dates and locations for the 2018 Senior Management Conference and the 2018 OBA Convention have been set. The 2018 SMC will take place on April 8-10 at the Four Seasons Resort in Las Vegas. The convention will be held on May 21-23 at the Hard Rock in Tulsa. More details will be coming soon!

With these dates in mind, if you or your company would like to propose a speaker for any of these events, you can download the OBA’s Speaker Proposal Form by clicking here.