STATE GOVERNMENT RELATIONS
Register for Fort Wayne Regional Meeting
Join the IBA, banking peers and local legislators in northeast Indiana for the Fort Wayne regional meeting on Oct. 25. The IBA has implemented these meetings in an effort to facilitate grassroots communication between the bankers we serve and the legislators who serve our state. The meetings include an hour-long update on the IBA, including legislative information and advocacy opportunities. Following the update, local legislators from the Indiana General Assembly will meet for lunch with bankers from the community.
FEDERAL GOVERNMENT RELATIONS
Action Alert: Urge Lawmakers to Oppose New IRS Reporting Rules
The Biden Administration is proposing a sweeping expansion of tax information reporting aimed at raising revenue to help offset the cost of additional spending programs in the American Families Plan. While the initial draft of the Biden administration’s $3.5 trillion spending plan currently does not include the IRS reporting proposal, the language could be added over the coming weeks as the current package is debated. We must continue our grassroots efforts to ensure that this provision stays out of future drafts of the bill.
Contact your lawmakers today to express your opposition to any new IRS reporting that leads to increased compliance costs, damages your customer relationships and threatens customer privacy. In addition to the current action alert seeking bank employee participation, we have created an action alert with messaging specifically designed for bank customer engagement. Please consider sharing this unique action alert link so they may urge Congress protect their financial privacy!
Sen. Crapo Calls for Release of Details on IRS Reporting Proposal
In a letter to Treasury Secretary Janet Yellen on Wednesday, Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) called for more details on the updated information reporting proposal that was announced on Tuesday. The controversial proposal would require financial institutions to report information on gross inflows and outflows for all accounts above a revised $10,000 de minimis threshold, with certain carve-outs – though no details were provided on how flow calculations would work.
Crapo emphasized that “Republicans have not seen legislative text or even so much as an outline” on the revised proposal and requested that Treasury confirm the reporting threshold and articulate which inflows and outflows will be carved in or carved out, among other provisions.
“Closing the tax gap is a worthwhile endeavor, but not at the cost of invading Americans’ privacy using a scheme that only one political party has seen,” Crapo said. “Rather than sweeping all American taxpayers into an all-encompassing financial-activity reporting dragnet, efforts to close the tax gap focused on taxpayer service would be a better approach.”
As lawmakers continue to consider the proposal, the IBA is calling on all bankers to redouble their advocacy efforts to oppose it by calling lawmakers to express opposition.
Sen. Young Speaks Out Against IRS Proposal
On Wednesday, Indiana Sen. Todd Young spoke against the IRS inflow/outflow data collection proposal during a press conference with other Republican senators.
“At a time when the American people have lost so much trust in the leaders of our major institutions, and the institutions themselves, including government, I couldn’t think of a worse idea for our national Democrats to embrace. Nancy Pelosi was asked whether she intends to include this in Democrats’ $3.5 trillion boondoggle the other day, and her response was: ‘Yes. Yes. Yes. Yes.’ Well, I’ve consulted with so many people as I travel the highways and byways of Indiana, and what I am consistently hearing is: ‘No. No. No. No,’” said Sen. Young.
Federal Banking Regulators Urge Continued Transition Away From Libor
In a joint statement on Wednesday, the federal and state banking regulators emphasized that supervised institutions are expected to continue to transition away from Libor ahead of the scheduled Dec. 31 sunset of several Libor tenors. “Failure to adequately prepare for Libor’s discontinuance could undermine financial stability and institutions’ safety and soundness and create litigation, operational and consumer protection risks,” according to the statement.
The Office of the Comptroller of the Currency, Federal Reserve, and Federal Deposit Insurance Corp. previously indicated that supervised institutions should stop entering into new contracts that use Libor as a reference rate “as soon as practicable,” but no later than Dec. 31, and that supervised institutions may use any reference rate for loans that they determine to be appropriate based on customer need and their funding models.
The statement includes a number of considerations that banks should take into account when selecting a reference rate, such as understanding how the chosen reference rate is constructed and being aware of any fragilities associated with it and the markets that underlie it. The agencies also noted that banks should develop and implement a transition plan for communicating with consumers, clients and counterparties, as well as ensure that systems and operational capabilities will be ready for transition to a replacement reference rate after Libor’s discontinuation.
Going forward, the regulators said, supervised institutions are encouraged to include fallback language in new or updated contracts that provides for using “a strong and clearly defined fallback rate” when the initial reference rate is discontinued.
Montana Democrat ‘Concerned’ About OCC Nominee
Sen. Jon Tester (D-Mont.) this week expressed hesitation about the Biden administration’s nominee, Saule Omarova, to serve as the next comptroller of the currency. “I want to give her a fair shake, but I do have concerns,” Tester told Politico, though he declined to comment further “until after I meet with her.”
Over the course of her career, Omarova – who is currently a professor at Cornell Law School – has advocated for a number of policies that would radically transform the bank regulatory landscape. She has previously proposed – among other provisions – that community banks “pass through” their deposits to the Federal Reserve, undermining the valuable role community banks play in their communities; to abolish the Federal Deposit Insurance Corp. as deposit insurer and supervisor of state-chartered institutions, effectively ending the dual banking system; and to break up regional and large banking organizations.
Quarles: Crypto Assets, Climate-Related Financial Risk on FSB’s Radar
As the Financial Stability Board looks to refresh its work plan after COVID-19, FSB Chairman Randal Quarles on Monday said it would continue to focus on non-bank financial intermediation, along with other emerging issues that pose threats to financial stability, including climate-related financial risk, crypto assets and stablecoins.
With regard to crypto, “We need to be mindful of whether our regulatory and supervisory approaches appropriately address risks while preserving the benefits that innovation can bring,” Quarles noted. “As these continue to develop, we continue to explore difficult questions. Are these digital assets currencies? Or securities? Deposits? They don't fit neatly into our regulatory buckets, and they operate in the digital ether where they can easily cross national borders.”
FSB last month released a new surveillance framework for monitoring and assessing vulnerabilities, which “will better account for resilience, our capacity to absorb shocks, in order to better appraise net vulnerabilities and identify gaps,” Quarles added. “It will also systematically scan the financial landscape to better capture new and emerging vulnerabilities and emphasize those that may prompt cross-border spillovers.”
OCC Outlines Supervision Priorities for 2022
The Office of the Comptroller of the Currency last Friday released its bank supervision operating plan for fiscal year 2022, identifying what each of the agency’s supervisory operating units will focus on for the new federal fiscal year that started Oct. 1. The OCC indicated supervision efforts will focus on the impacts of the pandemic and the resulting economic, financial, operational and compliance implications.
The OCC also will focus on oversight of third parties and related concentrations; Bank Secrecy Act/anti-money laundering compliance management; fintech partnerships for potential cryptocurrency-related activities and the transition to alternative reference rates with the end of Libor. The agency added that “in addition to the baseline supervision to assign ratings, examiners will focus on the safety and soundness of strategic and operational planning.”
Other risk areas include climate change risk management, consumer compliance management systems and fair lending risk.
OCC Reports on Interest Rate Risks
The Office of the Comptroller of the Currency has published its fall 2021 report on interest rate risk data gathered during examinations of midsize and community banks and federal savings associations. The Interest Rate Risk Statistics Report provides data on risk exposures and limits for banks by asset size and charter type, including minority depository institutions.