STATE GOVERNMENT RELATIONS
Lawmakers Meet to Discuss Pandemic-Focused Bill
In a rare move, both the House and Senate rules committees met on Tuesday to debate Preliminary Draft 3651. The legislative draft addressed two main issues: enacting changes needed for federal funding and vaccinations for children 5 to 11 and new requirements on employers that elect to mandate the vaccine as a condition of employment. The legislative changes regarding securing continued federal funding and vaccinations for children would be needed in anticipation of the governor ending the long-standing public health orders that have been in place since the onset of the pandemic. Employer vaccine requirements are separate and would create new protections and standards employers must adhere to when mandating the vaccine for employees.
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!
House Clears Spending Bill
By a vote of 220 to 213, the House on Friday morning passed President Biden’s $1.7 trillion spending bill, the Build Back Better Act. One Democrat, Rep. Jared Golden (D-Maine), opposed the package, as did all House Republicans. The bill now moves to the Senate, where additional changes are expected.
Among the provisions that are of note to the banking industry are several tax changes, including the addition of a book based minimum tax, expansion of the net investment tax on certain owners of S banks, an excise tax on stock buybacks and others related to retirement accounts and affordable housing; funding for a new Small Business Administration direct lending program; a new program to provide direct grant to businesses and nonprofits in low-income communities; and changes to the National Flood Insurance Program.
Absent from the House bill was the controversial proposal that would require financial institutions to report information on gross inflows and outflows for all accounts above a certain de minimis level – something the IBA and other banking trade groups strongly opposed.
NCUA Approves Field of Membership Rule
The National Credit Union Administration on Thursday unanimously approved – with changes – a final rule expanding field of membership requirements for multiple common bond federal credit unions. The final rule did not include some of the most controversial elements of the proposal. Many in the industry criticized the rule on the basis that it would undermine congressional intent to demand a heightened standard of in-person service for underserved communities and has no basis in law or regulation.
The Independent Community Bankers of America, American Bankers Association and the National Community Reinvestment Coalition sent a letter earlier in the week calling on lawmakers to schedule an oversight hearing on the NCUA in light of this and other rulemakings that they said are undermining “important statutory guardrails designed to protect low-income consumers.” An NCUA-specific oversight hearing has not occurred since 2015.
Biden Taps Powell for Second Term as Fed Chair, Brainard for Vice Chair
President Biden announced Monday that he will re-nominate Federal Reserve Chairman Jerome Powell to serve a second term as head of the central bank. Powell – who has served on the Fed board since 2012 – was nominated to serve as chair during the last administration and was confirmed by a bipartisan Senate vote in 2018.
President Biden also announced that he has selected Fed Governor Lael Brainard to serve as vice chair. Brainard has served on the Fed board since 2014. “Governor Brainard brings a wealth of experience and understanding of the economy to this critically important position,” Nichols added. “She also understands the essential role banks of all sizes play in the economy. We look forward to continuing to work with Governor Brainard, Chair Powell and their colleagues at the Federal Reserve to grow the economy and expand opportunities for all Americans.”
Three seats on the Fed board still remain vacant, including the vice chair for supervision. President Biden signaled he will make those appointments “beginning in early December.”
OCC Interpretive Letter Addresses Crypto Activities, Chartering of Trust Banks
In an interpretive letter issued Tuesday, the Office of the Comptroller of the Currency confirmed that national banks and federal savings associations may engage in certain cryptocurrency activities but added a note of caution that banks would be required to “demonstrate, to the satisfaction of its supervisory office, that it has controls in place to conduct the activity in a safe and sound manner.”
Among the legally permissible activities – as articulated in previously issued interpretive letters – are the provision of cryptocurrency custody services; the holding of dollar deposits serving as reserves to back stablecoins in certain circumstances; acting as nodes on an independent node verification network to verify customer payments; and engaging in certain stablecoin activities to facilitate payment transactions on a distributed ledger.
The interpretive letter also addressed the OCC’s standards for chartering, or approving the conversion to, a national trust bank, noting that “the OCC retains discretion to determine if an applicant’s activities that are considered trust or fiduciary activities under state law are considered trust or fiduciary activities for purposes of applicable federal law.” The OCC emphasized that “an applicant’s activities will not automatically be deemed to be trust activities – or to be fiduciary activities – solely by virtue of state law.”
Regulators Planning Crypto Guidance for Banks
Banks can expect additional guidance from regulators over the next year clarifying the types of crypto-related activities they may be permitted to engage in, the agencies announced in a joint statement yesterday. As a result of a recent “crypto sprint,” the Federal Deposit Insurance Corp., Federal Reserve and Office of the Comptroller of the Currency unveiled a crypto-asset roadmap that will guide their work in 2022.
Specifically, the agencies said that they will issue guidance related to crypto-asset safekeeping and traditional custody services; ancillary custody services; facilitation of customer purchases and sales of crypto-assets; loans collateralized by crypto-assets; the issuance and distribution of stablecoins; and activities involving the holding of crypto-assets on a bank’s balance sheet. In addition, the agencies indicated they will also evaluate how to apply bank capital and liquidity standards to crypto-assets.
During the crypto sprint, regulators said they developed a common vocabulary regarding the use of crypto-assets, identified and assessed key risks – including those related to safety and soundness, consumer protection and compliance – and analyzed the applicability of existing regulations to identify potential gaps.