STATE GOVERNMENT RELATIONS
Crouch Announces 14 Communities to Receive Indiana Main Street Designations
Lt. Gov. Suzanne Crouch and the Indiana Office of Community and Rural Affairs announced 14 organizations will be provided with a formal certificate, access to Main Street America and Indiana Main Street training, networking opportunities with other regional and statewide programs, a resource toolbox unique to their needs and more.
Safety Leaders Highlight Need for Preparedness, Patience during Solar Eclipse
Public safety leaders stressed preparedness and patience during the total solar eclipse that will darken skies across the state on April 8.
IEDC Launches Federally Funded $29M Loan Program to Help Entrepreneurs, Small Businesses
The Legend Fund, fueled by federal funding awarded to Indiana through the State Small Business Credit Initiative, will distribute $29 million to local lenders to increase lending to Hoosier small businesses, with an added focus on those that have been historically underserved, a news release stated.
Below are bills the IBA is tracking as we move to the close of Session.
- Senate Bill 188 – Actions on deposit accounts.
- House Bill 1284 – Deposit account agreements.
- House Bill 1183 – Foreign ownership of agricultural land.
- House Bill 1084 – Privacy of firearms financial transactions.
FEDERAL GOVERNMENT RELATIONS
Bowman Shares ‘Significant Concerns’ About Possible Liquidity Regulation
Liquidity regulation has the potential to impose significant costs and limit the lending capacity and business operations of banks, which must be taken into account before imposing any new requirements, Federal Reserve Governor Michelle Bowman said Thursday. In a speech to the New Jersey Bankers Association, Bowman said she has “significant concerns” about possible regulatory reforms involving liquidity requirements. Fed Chairman Jerome Powell told Congress this week that regulators are working on a package of measures related to liquidity in response to last year’s bank failures.
“Liquidity requirements, if not appropriately designed and calibrated, could trap resources that would otherwise be put to better use, like lending to bank customers,” Bowman said. “Before moving forward, we need to identify gaps in the current framework and build a foundation for any proposed changes that is based on research, evidence and data.”
Revisions to the liquidity framework should be coordinated to ensure that reform efforts are complementary and can support the banking system's liquidity needs, Bowman added. “When considering new liquidity requirements, we must think about not only calibration and scope, but also the unintended consequences of any such requirements and whether these measures will be effective during stressed conditions.”
Powell: Broad Changes Likely Coming to Basel Endgame Proposal
Federal Reserve Chairman Jerome Powell said Wednesday that he expects there will be “broad and material” changes to the proposed Basel III endgame capital standards before they are finalized, although he was unsure whether the Fed would re-propose the rule to kick off a second round of public comment and analysis.
Powell appeared before the House Financial Services Committee for the first of two Fed reports to Congress this week. Questioned by committee Chairman Patrick McHenry, R-N.C., about public comments from a broad range of interests expressing concern about the proposed standards, Powell said the Fed has just reached the stage where it can begin making decisions about how to proceed but not on the substance of the proposal itself.
“We do hear the concerns, and I do expect that there will be broad and material changes to the proposal,” Powell said. “I'll add that I am confident that the final product will be one that has broad support both at the Fed and in the broader world.”
When asked if the Fed would repropose the rule if substantial changes are made, Powell said that was a “very plausible” option. “It will depend on how things lie at the time when we reach that point,” he said.
Watch a recording of the hearing
Powell: Fed Will ‘Carefully’ Review Input on Debit Interchange Proposal
Fed Chairman Jerome Powell said Wednesday during a House Financial Services Committee hearing that the agency will “carefully” review all public comments it receives about its proposal to lower the cap on debit card interchange fees, with the comment period recently extended to May 12. Committee member Rep. Blaine Luetkemeyer, R-Mo., questioned Powell about the potential for the rule change to harm low- to moderate-income individuals by making it more difficult for banks to provide affordable banking services. In response, Powell said the rule is still out for public comment, and federal law requires the Fed to make a decision on the cap.
“This is the obligation that Congress has bestowed upon us, not something we sought, but that's our obligation under the law,” Powell said. “And we don't know what else to do than to keep doing it for as long as that's our assignment.
SEC Approves Climate Disclosure Rule
The Securities and Exchange Commission voted 3-2 Wednesday to approve new climate disclosure requirements for publicly traded companies. Among other provisions, the rule requires companies to disclose material climate-related risks, activities to mitigate or adapt to such risks, and information about the board’s and management’s oversight of risks. The final rule also requires disclosure of Scope 1 and Scope 2 greenhouse gas emissions by certain large companies, although they remove a requirement from the original proposal to require companies to report Scope 3 emissions, which include “financed emissions” that are within bank lending portfolios. Finally, companies must disclose capitalized costs, expenditures expensed, charges and losses incurred as a result of “severe weather events and other natural conditions.”
The SEC first began exploring a climate disclosure rule two years ago. In that time, the agency received more than 24,000 comment letters on the proposal, according to the agency. The final rule includes a phased-in compliance period starting in 2026, with the compliance date dependent on the company’s filer status and the content of the disclosure.
Read an SEC fact sheet on the rule
Bipartisan Group of Lawmakers: Lowering Debit Fees Could Harm Financial Inclusion
A Federal Reserve proposal to lower debit interchange fees could make Bank-On-certified accounts too costly for banks to offer their customers, undercutting an essential financial tool for low- and moderate-income consumers, a bipartisan group of 38 members of Congress wrote Tuesday in a joint letter to the Fed.
In a letter co-led by Reps. Nikema Williams, D-Ga., and Blaine Luetkemeyer, R-Mo., the lawmakers noted that the number of Bank-On-certified accounts has grown from 40 in 2019 to nearly 450 today. However, the Fed proposal to revise Regulation II to lower the cap on debit card interchange fees threatens to undo that progress, they said. “We are concerned that the proposed nearly 30% cut in debit interchange rates could upend the economics that enable financial institutions of all sizes to offer Bank-On-certified accounts in a sustainable manner, thereby limiting consumers' ability to access affordable banking products.”
“Banks and credit unions offering Bank-On-certified accounts, in partnership with trusted community-based organizations and local governments, provide consumers with an essential onramp to mainstream financial markets,” the lawmakers said. “These accounts have a demonstrated track record of reaching unbanked and underbanked communities – and are the starting point for the ongoing work of true financial inclusion and aid in a wider mission of closing the racial wealth gap.”
Rep. McHenry: Fed Blundered Policy Response to Bank Failures
Federal Reserve regulators get “a failing grade” for their policy response to last year’s bank failures, pushing for new capital requirements when that wasn’t the issue that brought down Silicon Valley Bank and two other institutions, House Financial Services Committee Chairman Patrick McHenry, R-N.C., said Tuesday. During a Q&A at a Brookings Institution event on lessons learned from the bank failures, McHenry was critical of both the Basel III endgame capital proposal and what he labeled the Fed’s “self-reverential” review on its supervision of SVB, which he said attempted to justify the policy change.
“The response is to raise more capital for institutions that were not affected by this and actually performed quite well in a moment of trepidation and crisis last year,” McHenry said.
McHenry was also critical of what he labeled as the Fed’s antiquated systems for discount window borrowing, noting it slowed the ability of troubled banks to quickly raise capital. “On the front end of this, you have a bank run based off consumer tech, which is how we live, and on the back end, banks are getting provisions of capital the way they did in the 1940s…It should be a push of a button rather than phone calls, and it should be in an instant rather than days,” he said. “That piece [regulators] didn’t fix.”
Finally, McHenry said that lawmakers need to learn more about the “FDIC tapping the Fed to bail out the FDIC. We need more information from the Fed and the FDIC on that decision making,” McHenry said.
Growing Number of Lawmakers Seek Investigation of Navy Federal Credit Union
Two dozen House lawmakers last week called on federal regulators to investigate the nation’s largest credit union following reports of racial disparities in its lending practices, adding their voices to a growing number of members of Congress demanding answers from the institution.
In a joint letter, 21 members of the New Democrat Coalition and Congressional Hispanic Caucus urged regulators to ensure that Navy Federal Credit Union is adhering to fair lending laws following a CNN report that concluded the institution rejected minority applicants for conventional home purchase mortgages at a much higher rate than white applicants. They also sent a letter to former Navy Federal CEO Mary McDuffie asking a series of questions about the credit union’s fair lending processes. (McDuffie stepped down at the end of February and was succeeded by Dietrich Kuhlmann.)
In a separate joint letter last week, Reps. Emanuel Cleaver, II, D-Mo., ranking member of the House Financial Services Subcommittee on Housing and Insurance; Steven Horsford, D-Nev., chairman of the Congressional Black Caucus; and Sydney Kamlager-Dove, D-Calif., urged the Consumer Financial Protection Bureau and National Credit Union Administration to investigate Navy Federal’s lending practices.
The letters represent only the latest calls from lawmakers for a wider probe of Navy Federal. House Financial Services Committee Ranking Member Rep. Maxine Waters, D-Calif., and six committee Democrats in February requested that committee Chairman Rep. Patrick McHenry, R-N.C., hold a hearing on the credit union. In addition, the Congressional Black Caucus in January requested a meeting with McDuffie to discuss the alleged disparities.
Read the New Democrat Coalition and Congressional Hispanic Caucus letters
Read the joint letter from the three lawmakers
Report: FOMC Sees Progress in Inflation Fight
At 5.25-5.5%, the target range for the federal funds rate has likely reached its peak in a cycle of policy tightening that began in early 2022, the Federal Reserve said last Friday in the first of its biannual reports to Congress on monetary policy. At the same time, the report noted that the Federal Open Market Committee does not expect to reduce the target range until committee members have greater confidence that inflation is moving sustainably toward 2%.
The report also noted that stress in the banking system has receded since the bank failures last year, and that banks’ regulatory risk-based capital ratios remained solid and increased broadly, as bank profits were robust and banks reduced capital distributions. Still, it cautioned that vulnerabilities in the financial sector remain “notable,” as losses in the fair value of long-dated bank assets remain significant.
“In terms of funding risks, liquidity remains ample, and deposits have stabilized recently,” the Fed said. “The number of banks with large declines in fair value relative to their regulatory capital and heavy reliance on uninsured deposits has declined significantly since March 2023. Overall, banks’ reliance on short-term wholesale funding remained much lower than the typical range before the banking reforms of the previous decade.”