FEDERAL GOVERNMENT RELATIONS
FDIC Announces Details of Deposit Insurance Special Assessment
The Federal Deposit Insurance Corp. board Thursday voted 3-2 to propose a special assessment to make up for losses to the Deposit Insurance Fund caused by regulators’ decision to declare a systemic risk exception in the failures of Silicon Valley Bank and Signature Bank. Starting the first quarter of 2024, the FDIC would impose a special assessment on the excess of an independent bank’s estimated uninsured deposits in excess of $5 billion as of last December, or the same for bank holding companies’ consolidated estimated insured deposits (allocated over the subsidiary banks).
The assessment rate will be approximately 12.5 basis points. The special assessment would be collected over eight quarters, based on the estimated cost of the systemic risk declaration. However, the $15.8 billion estimate – lower than originally estimated – would be adjusted quarterly as assets from SVB and Signature are sold and receivership expenses are recovered, which could result in changes to the assessment rate or period.
FDIC staff determined that 113 banking organizations would be subject to the assessment – none with less than $5 billion in assets; 65 between $5 billion and $50 billion; and 48 larger institutions. Those larger than $50 billion would pay more than 95% of the assessment. FDIC staff estimated that, if the special assessment were imposed in one quarter only, the affected banks’ income would be reduced by an average 17.5% and capital would be reduced by less than 1%.
Read the FDIC's notice of proposed rulemaking
Read an FDIC fact sheet on the assessment
FHFA Rescinds Industry-Opposed DTI Ratio-Based Fee
Following advocacy noting the operational challenges associated with it, the Federal Housing Finance Agency Wednesday announced that it is rescinding a new debt-to-income ratio-based fee. The upfront fee – announced in January and scheduled to go into effect on Aug. 1 – was part of a broader set of changes to the single-family guaranteed fee pricing framework and would have applied to certain borrowers with a debt-to-income ratio of above 40%.
The FHFA decision does not address broader changes to loan-level price adjustment fees that took effect May 1 that have generated significant debate on Capitol Hill and in the media.
Bipartisan ACRE Legislation Introduced in the House
Reps. Randy Feenstra, R-Iowa, and Wiley Nickel, D-N.C., Wednesday introduced the Access to Credit for our Rural Economy Act of 2023, or ACRE, to benefit farmers, ranchers and rural communities by providing flexibility to more financial institutions to offer affordable credit to agricultural borrowers. ACRE would reduce interest payments, increasing the cash flow for agricultural operations and reducing the need for off-farm income.
ACRE – introduced in previous Congresses as ECORA – would amend IRS code to level the playing field for community banks to administer agricultural real estate loans by granting them tax-exempt status on earned interest. The same exemption already applies to farm credit institutions. The exemption also would apply to single-family home mortgage loans in rural communities with fewer than 2,500 residents and for mortgages less than $750,000. Some estimate that the legislation would expand access to affordable agricultural and home loans to more than 4,000 rural communities. ACRE would deliver approximately $1.4 billion in annual interest expense savings to farmers and ranchers in 2023 – approximately $950 million in annual interest expense savings for loans secured by farmland and $450 million for rural mortgages.
CFPB Warns Banks Against Reopening Deposit Accounts Without Permission
The Consumer Financial Protection Bureau Wednesday issued a circular stating that a bank may violate federal law if it unilaterally reopens a deposit account to process transactions after a consumer has closed the account. In a statement, the agency claimed it has received complaints about banks reopening closed accounts and then assessing overdraft and nonsufficient funds fees, as well as maintenance fees. The bureau indicated that such practices may violate the Consumer Financial Protection Act’s prohibition on unfair acts or practices.
The overdraft could occur if the institution re-opens an account to process debits, but also if it reopens an account to process a deposit, giving creditors the opportunity to initiate debits and draw down the funds. The CFPB noted that deposit account agreements allow financial institutions to "return any debits or deposits to the account that the financial institution receives after closure and faces no liability for failing to honor any debits or deposits received after closure."
"Consumers may incur overdraft, nonsufficient funds or monthly maintenance fees when a closed account is reopened by the bank," the CFPB said. "This practice may also enable third parties to access a consumer’s funds without consent. If reopening the account overdraws the account, banks may also furnish negative information to consumer reporting companies if consumers do not settle negative balances quickly."
Committee Continues Inquiry into Recent Bank Failures
The House Financial Services Committee continued the congressional inquiry into the failures of Silicon Valley Bank and Signature Bank of New York with a hearing focusing on the federal response.
During the Subcommittee on Financial Institutions and Monetary Policy hearing, lawmakers debated the Federal Reserve and Federal Deposit Insurance Corp.’s internal reports on the bank failures, the risks that new regulations would be counterproductive, whether the FDIC should fully insure transaction accounts, and discussion draft legislation to expand transparency at the FDIC and Federal Reserve.
House Committees Debate Crypto Asset Oversight
Members of the House Financial Services and Agriculture committees held a joint hearing to continue the debate over how to regulate crypto assets.
During the hearing, lawmakers debated whether crypto assets are securities or commodities – and should thus be subject to oversight by the Securities and Exchange Commission or Commodity Futures Trading Commission, respectively. Committee members also discussed whether lawmakers need to establish a new regulatory framework dedicated to crypto.
SBA 7(a) Changes Receive More Bipartisan Congressional Criticism
An industry-opposed Small Business Administration rule that reforms the agency’s 7(a) program continued to face bipartisan congressional criticism during a House Small Business Committee hearing.
At the hearing, Chairman Roger Williams, R-Texas, said the rule – which lifts the moratorium on the number of non-federally regulated institutions that can make loans under the program – throws out underwriting standards and will put taxpayers at risk. Ranking Member Nydia Velazquez, D-N.Y., said she is concerned about new SBA licenses being granted to fintechs that lack experience in 7(a) program lending and had a high rate of fraudulent loans during the pandemic.
Wednesday’s hearing was the latest in a series of House and Senate hearings at which lawmakers have criticized the rule for including riskier non-federally regulated fintechs and have raised questions about whether the SBA will be able to manage the increase in program participants.