Thursday, August 18, 2022

Executive News: What else should we be considering?

As I write this month’s column, OBA Chairman Sandy Werner and I are in Washington with the State Chamber for its Annual Washington Visit.

The most “interesting” thing going on is we’re right in the middle of the Senate Judiciary Committee hearing to confirm Brett Kavanaugh’s nomination to the U.S. Supreme Court. I assure you, it is as chaotic and ugly as you are seeing on television, and it’s a disgusting spectacle.

Photo of Roger M. Beverage
Roger Beverage, OBA President and CEO

In the past we have frequently come to Washington at the same time as the State Chamber and joined forces with our delegation. Sept. 11, 2001, was such an occasion. But this year we’re coming back at the end of this month to talk about some of the key issues impacting your business in some way, and I’m interested about what you think those issues should be. Here’s what I’ve identified so far:

Marijuana — Federal law makes it a crime to grow, possess, transfer, sell or use marijuana in any way, shape or form. What are the chances of changing the status of marijuana from a Schedule I drug to a different schedule? I’m guessing slim to none, which doesn’t help member banks.

H.R. 4545; S. 2237 — Exam Fairness: creating a new process to give banks the due process they deserve to challenge the findings of an examination. Banks do not have that right today, and we believe it is of critical importance to provide a process that allows an independent administrative law judge to review the results of an examination without bringing the bias of the regulatory agency into the process.
CECL implementation — Not only is CECL an idea in search of a problem as it applies to traditional community banks, at least one other concern is the extent to which federal banking regulators have looked at this issue from a fiduciary standpoint. It’s certain that the FASB has not.

Particularly for smaller traditional community banks this fiduciary issue is larger than one might think. Directors should be asking themselves, “Why would I vote to approve a loan request when I must also assume that a portion of that specific loan will not be repaid?”

BSA/AML reforms — A number of reforms dealing with the anti-money laundering and Bank Secrecy Act rules are underway. Bankers want to use these reforms to help restore the partnership between banks and law enforcement agencies. They don’t need to be “deputized” to get fraudsters, crooks and terrorists out of the financial system. This is particularly true given the recent enactment of a state question that “legalizes” medical marijuana.

S. 2155 and the “leverage ratio” — Section 201 of S. 2155 directs federal banking regulators to develop a leverage ratio for traditional community banks that’s between 8 and 10 percent (capital to unweighted assets) to be considered “well-capitalized.” What is the timeline to complete this process and what can bankers do to help expedite finalizing the rule?

CRA reform — The OCC has been leading the effort to modernize regulations under the Community Reinvestment Act. The agency has asked for banker and the general public’s comments and suggestions to help it identify the best ways to modernize the framework implementing the 1977 act. The industry has changed significantly since the original rules were implemented, and the OCC wants to know how those rules should be updated to reflect today’s banking reality.

Cybersecurity and fraud issues — Fraud losses are increasing daily. As an example, global hackers have recently begun focusing on introducing malware of some sort to attack the new mobile banking apps. Account takeover fraud has become the biggest source of losses for U.S. banks as more than half of Americans now use their mobile phone as their “bank.”

FinTech and other non-bank lenders — Nonbank lenders have taken about 10 percent of today’s financial services marketplace. As banks continue to fight the regulatory battle daily, FinTech firms, credit unions, the Farm Credit System and other entities are slowly acquiring market share. Many of the rules and tax realities provide these entities with several competitive advantages and they have collectively increased lending by 40 percent since 2014.

What do you think are other issues in need of adjustment, change, consideration, critiquing or we need to make certain Oklahoma lawmakers and federal banking regulators know about? Please call (405-424-5252), email (roger@oba.com) or text me (405-850-0695) and let me know what you think. Your views are always, always welcome, no matter what.