STATE GOVERNMENT RELATIONS
Indiana Attorney General Releases Legal Opinion on ESG
On Thursday Indiana Attorney General Todd Rokita released an 18-page legal opinion regarding environmental, social, and governance (ESG) considerations in state investments. The memo provides a legal argument for the investment managers of the Indiana Public Retirement System to not invest in funds that use ESG as a part of their strategy.
New Albany Regional Meeting
One regional meeting remains in New Albany, rescheduled for Oct. 17. Join us to facilitate grassroots communication between the bankers we serve and the legislators who serve our state. The meeting will 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 join bankers for lunch. The meeting will begin at 11:00 a.m. local time.
New Albany – October 17
The Exchange Pub
118 W Main Street
New Albany, IN 47150
FEDERAL GOVERNMENT RELATIONS
OCC to Lower Assessments Next Year
The Office of the Comptroller of the Currency will lower assessments in 2023 as part of an effort to close the pricing differential between state and federal charter assessments, Acting Comptroller of the Currency Michael Hsu said Thursday during remarks to the Texas Bankers Association. Effective in March, the agency will make a 40% reduction in assessments for a bank’s first $200 million in total balance sheet assets. It will also make a 20% reduction for bank assets between $200 million and $20 billion. The cuts will result in a $41.3 million reduction in assessments for community banks next year, Hsu said.
“The purpose of this adjustment is to level the playing field with the cost of supervision compared to state community bank charters,” he said. “The recalibration will not reduce the quality of OCC supervision or the resources available to community banks. I am hopeful that this reduction will provide community banks with extra breathing space and capacity to invest and seize opportunities related to digitalization, compliance, cybersecurity and personnel.”
Hsu announced other agency actions designed to help community banks, which he praised as vital members of the communities they serve. The OCC is working to streamline the licensing process for community banks, clarify the agency’s standards and coordinate with the Federal Deposit Insurance Corp. and Federal Reserve to minimize redundancies and support a revitalization of de novo activity, he said. The agency is also updating its approach to risk-based supervision and is continuing a realignment of midsize and community bank supervision.
“During the pandemic, we learned a lot about the importance of community banks and your role in getting relief funds into the hands of small-business owners nationwide,” he said. “On June 30, 2020, community banks held 41%, or $198 billion, of the market of Paycheck Protection Program loans. ... Your customers are not likely to forget how you stepped up in their time of need.”
FHFA to Review Federal Home Loan Bank System
The Federal Housing Finance Agency announced Wednesday it will conduct a “comprehensive review” of the Federal Home Loan Bank System beginning later this month. The agency plans to host two public listening sessions and a series of regional roundtable discussions to consider and evaluate the mission, membership eligibility requirements and operational efficiencies of the FHLBanks, according to a statement.
The first listening session will be held in-person in Washington, D.C., on Sept. 29, with the option to participate virtually. The agency is seeking public feedback in six areas: FHLBanks’ general mission and purpose in a changing marketplace; FHLBank organization, operational efficiency and effectiveness; the banks’ role in promoting affordable, sustainable, equitable and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services and collateral requirements; and membership eligibility and requirements. Written comments will also be accepted through Oct. 21.
Register to attend or speak at the Sept. 29 session
Mester Sees FOMC Raising Rates Above 4%
Loretta Mester, president of the Federal Reserve Bank of Cleveland, predicted during a speech Wednesday that it will be necessary to raise the federal funds rate to “somewhat above 4%” by early next year and hold it there. She added that she does not anticipate cutting the fed funds rate target next year.
The Federal Open Market Committee has raised the rate four times this year and will meet again on Sept. 20-21. In her remarks, Mester said despite a recent slowdown in the pace of inflation, “it is far too soon to conclude that inflation has peaked, let alone that it is on a sustainable downward path to [the Fed target of] 2%.” She anticipated monetary policy needed to move “into a restrictive stance” but shied away from committing to any specific action at the next FOMC meeting.
“While it is clear that the fed funds rate needs to move up from its current level, the size of rate increases at any particular FOMC meeting and the peak fed funds rate will depend on the inflation outlook, which depends on the assessment of how rapidly aggregate demand and supply are coming back into better balance and price pressures are being reduced,” she said.
FedNow Instant Payments Service to Launch by July
The Federal Reserve indicated Monday that its FedNow service will launch mid-year 2023, targeting May to July as the production rollout window for the anticipated instant payments service. The pilot program is slated to enter technical testing next month.
More than 120 organizations are taking part in the pilot. FedNow will be accessible to financial institutions of any size, and participants will be able to provide businesses and consumers with the ability to send and receive instant payments efficiently and securely, and payment recipients will have full access to funds immediately, according to the Fed.
“The Federal Reserve has made a substantial commitment to the FedNow platform, which has benefited from the innovative technologies and approaches proven by global technology companies that are vital for today's always-on digital economy,” Fed Vice Chair Lael Brainard said Monday during an address to a FedNow Early Adopter Workshop. “Our cloud-first design, unique among central bank instant payment services, positions us for the future by enabling not only the throughput and scalability required for high-volume retail transactions but also broad geographic points of resiliency to ensure continuous service.”
Participants in the FedNow pilot will complete a certification process to ensure operational and messaging readiness and then move into production once the service is launched. As the pilot program moves into the testing phase, the Fed will engage nonpilot financial institutions and service providers interested in being early adopters.
Fed Report: Digital Assets Prone to Vulnerabilities
Stablecoins engage in the same type of maturity and liquidity transformation as banks or money market funds but without the same safeguards or regulations, according to a new report from Federal Reserve Board researchers. The report on the financial stability implications of digital assets concludes that the crypto ecosystem is prone to building up financial vulnerabilities, reflecting the lack of a strong regulatory framework and novel risks associated with new technologies.