Saturday, August 17, 2019

Week of Aug. 5

In This Issue…

Update on CECL delay requests

Just an update on the status of our requests that members of the Oklahoma delegation sign on as a co-sponsor of a bill that would delay the implementation of CECL, pending the results of a quantitative impact study about what it may mean, particularly for community banks.

In the House, three of the five members have signed on as co-sponsors to H.R. 3182: Reps. Tom Cole, Frank Lucas and Kendra Horn. In the Senate, Sen. Inhofe has signed on as a co-sponsor of the Senate version of this bill, S. 1564.

“We’ll continue to work on Reps. Hern and Mullin,” OBA President and CEO Roger Beverage said. “I can’t imagine that Rep. Hern will not sign on as a co-sponsor, unless he just doesn’t do that sort of thing. I’m not sure about Rep. Mullin, however. Either way, I’ll keep (you) posted.”

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OCC consolidates supervision support functions, announces new units

On Friday, the Office of the Comptroller of the Currency announced it has created two new supervisory unions and realigned some 150 staff members to operate them. The announcement will serve to consolidate bank supervision support, risk analysis, and oversight of national trust banks and significant service providers.

“This realignment will improve the agency’s ability to supervise the federal banking system by aligning like work, eliminating redundancies, and ensuring the OCC presents a single voice to supervised institutions,” Comptroller of the Currency Joseph Otting said. “In addition, this work will contribute to our strategic goal of operating the agency as effectively and efficiently as possible.”

This announcement follows several months of work by cross-functional teams, analyzing functions and looking for opportunities to enhance support provided to OCC bank supervision.

The first unit, Supervision System and Analytical Support, will pull together supervisory information system teams, data management, business intelligence, risk analysis and supervision risk management staff from other OCC supervisory and policy units. The team will provide support across the agency and provide broad national perspective to the agency’s work. Bob Phelps, who currently serves as the deputy comptroller for Supervision Risk Management, will head this new unit.

The second unit, Systemic Risk Identification Support and Specialty Supervision, will bring together lead experts from Large Bank Supervision and Midsize Bank Supervision as well as teams responsible for the supervision of trust companies from the Northeastern District National Trust Banks team and significant service providers from Bank Supervision Policy. The agency has not yet identified the person to fill this deputy comptroller role.

While both units will report to the chief operating officer, the OCC’s Committee on Bank Supervision will provide strategic direction and oversight to both units, and will review and approve strategic plans and initiatives, annual business plans or operating plans, and major projects and initiatives. This will promote greater coordination and collaboration across the supervision business units.
The Committee on Bank Supervision is made up of senior executives who oversee OCC units that supervise the majority of institutions that make up the federal banking system. Strategic direction from the Committee on Bank Supervision ensures the units’ activity supports the supervisory needs of the federal banking system.

Although this realignment consolidates certain supervision and supervision-support functions, Midsize and Community Bank Supervision and Large Bank Supervision will retain primary responsibility for overseeing the banks, savings associations, and federal branches and agencies of foreign banks that compose the federal banking system.

The vast majority of employees who will make up the new units will be reassigned from other OCC divisions. A limited number of new positions will be advertised later this year. These changes take effect Oct. 1, 2019.

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HUD proposal would align ‘disparate impact’ rule with court ruling

The Department of Housing and Urban Development has announced it will propose a new standard for bringing “disparate impact” claims under the Fair Housing Act, according to proposal text obtained late last week by several news outlets.

HUD is issuing the proposed rule — currently under review by Congress prior to being publicly issued — to conform its 2013 disparate impact rule with the Supreme Court’s 2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project. That decision recognized that a disparate impact analysis to demonstrate discrimination claims under the FHA can be utilized, but added key limitations to ensure the burden of proof in disparate impact cases is with the plaintiffs.

HUD is proposing to add five elements that must be included in disparate impact claims under the FHA. Specifically, plaintiffs would be required to plead that a challenged practice is arbitrary, artificial and unnecessary. Plaintiff must also allege there’s a “robust causal link” between the challenged policy or practice and the disparate impact that comes about because of that link.

Plaintiffs will also be required to explain how the challenged policy or practice has a harmful effect on a protected class, that the disparity is significant and an injury is directly caused by the challenged policy or practice.

HUD’s proposed rule would also provide three methods for defendants to rebut disparate impact claims, including showing that a challenged policy or practice is required to comply with law, regulation or court order, and that a challenged policy or practice relies on a sound algorithmic model. Comments on the proposed rule will be due 60 days after it is published in the Federal Register.

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Annual Washington Visit scheduled

The OBA’s Annual Washington Visit has been scheduled for Sept. 15-17, 2019, and the hotel will be the Trump International Hotel Washington D.C.

Additionally, NEW this year, we are offering an offsite excursion to Mount Vernon that will include transportation, private tour (of the historic area, mansion & tomb), lunch and free time to explore the grounds.

Registration information should be hitting your bank shortly, but you can also download the registration and information form, and get more info on the hotel, by clicking here.

If you have any questions, contact Adrian Beverage or Megan McGuire at the OBA.

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Fed announces it will develop real-time payments system

The OBA has been at the forefront of a nationwide effort to encourage the Fed to decide whether it would develop its version of a real-time payments in the U.S.

We’ve made the position known since last year and, like our colleagues, we believe every bank in the country and their customers will benefit from a seamless, ubiquitous real-time payments system.

On Monday, the Fed announced it plans to build and operate such a system and, thus remain an active participant in the payments process. The Fed will have a hands-on role in implementing its new system that will give smaller community banks a choice about which system to utilize. We hope today’s decision to create the Fed’s own real-time payments network will speed that transition.

The decision is only the beginning of the effort to create an alternative to the only RTPS available today through The Clearing House. The Fed estimates that its process – called FedNow – will be completed sometime in 2023 or 2024, which is well behind a Fed Task Force projection to have such a system in place by next year.

The reality is for at least the next three to four years, The Clearing House is the only game in town. It’s limited to federally insured financial institutions, something that may well differentiate the TCH operation from anything the Fed creates, which may be open to FinTech firms like Amazon, Facebook and other non-bank competitors.

We join with our colleagues in encouraging all banks to consider whether it makes sense for an individual bank to connect to the existing real-time payments network offered by The Clearing House. Any system created by the Fed must be fully interoperable with the RTP network. Moreover, we believe it should be accessible only to federally insured financial institutions, and not to non-bank entities. In addition, we believe the Fed’s system must also be available through all core processing companies and without volume discounts that disadvantage smaller banks.

We also encourage the Fed to create the liquidity management tool it proposed last fall. In doing so, we believe this new tool will enable our member banks and other financial institutions to better manage fund balances used to settle faster payment transactions. In other words, the Fed’s new system must be truly meaningful to the nation’s 4,000-plus community banks. The Fed should launch the LMT quickly and independently of any other actions it may take.

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OBA education corner …

These are what they call the “dog days” of summer. There’s still several weeks of hot weather in front of us, and autumn seems impossibly far away. Take advantage, however, of these days that seems to barely drag along and use a few spare hours on continuing education from the OBA! Take note of the following:

  • Call Report – Lending Schedules for Banks, Aug. 13, webinar — This webinar will help you learn the classification priority for reporting loan information correctly and will provide detailed information on correctly reporting unused commitments, interest rate lock commitments and insider loans.
  • Do’s and Don’t on Power of Attorney Documents, Aug. 13, webinar — This program will look at power of attorney “dos and don’ts” and how to prevent your institution from making costly mistakes in handling these high-risk documents. We will also provide you with some guidance about what procedures you should have in place for handling POAs.
  • Providing Accurate and Timely Adverse Action Notices, Aug. 14, webinar — Both the Equal Credit Opportunity Act and the Fair Credit Reporting Act contain requirements for providing notice of action taken. This webinar reviews the requirements of both laws and covers common violations and provides solutions.
  • Marketing & Advertising Compliance, Aug. 14, webinar — As the compliance environment becomes more complex, your marketing department must stay on top of all the rules and regulations. This session can help.
  • Vendor Management – How Model Risk Fits In, Aug. 15, webinar — You will walk away with a clearer understanding of where vendor management and model risk management fit in within your ERM program.
  • 2019 OBA Compliance School, Aug. 19-23, 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 course.
  • Endorsements – Consumers, Businesses and Fiduciaries, Aug. 20, webinar — The information provided will produce confidence and a thorough understanding of the legal issues of endorsements.
  • ACH Audit & Risk Assessment: What You Need to Know, Aug. 21, webinar — Join us to learn the difference between an ACH assessment and an audit, what you’re looking for when completing both and how to avoid common mistakes and violations.
  • SSAE18, SOC 1, SOC 2 – What Do I Need?, Aug. 21, webinar — Each of our regulators say this in a similar way: We must understand the security controls of a third party “to the same extent” as we understand our own internal controls.
  • Accounting Basics, Aug. 23, webinar — This course provides participants with a sound understanding of the fundamentals of accrual accounting and how it differs from cash accounting.
  • 2019 Ag Credit Seminar, Sept. 12, Oklahoma City — his is specifically designed for ag lenders who want to sharpen their skill base concerning ag lending.
  • 2019 ACH Processing & Compliance Seminar, Sept. 24, Oklahoma City — Get more information on the important ACH processing and compliance work done in your bank.
  • 2019 OBA Consumer Lending School, Oct. 7-11, Oklahoma City — The total program of this school exposes students to major issues consumer credit managers face. It provides a framework for examining a bank’s consumer credit programs, policies and procedures.

Finally, save the date and plan ahead now! The dates and site for the 2020 OBA Convention are set! The Convention will take place May 18-20 at the Doubletree-Warren Place in Tulsa. Keep an eye out in the upcoming months for more information!

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