STATE GOVERNMENT RELATIONS
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 Strategic Plan Calls for Promoting Community Banks
The Office of the Comptroller of the Currency has released a strategic plan for fiscal years 2023-2027 that calls on the agency to diversify its workforce, prioritize safeguarding public trust and enhance the implementation of risk-based supervision. The 11-page document also directs the OCC to promote strengthening and modernizing community banks, with a focus on small businesses and underserved communities.
The strategic plan outlines broad goals over the coming five fiscal years. Priorities include creating a workforce culture that attracts diverse talent and enhancing communications with the public. At the same time, the agency seeks to continue to be a leader in traditional and emerging bank supervision issues. In terms of action, the OCC plans to support effective execution of risk-based supervision, such as through timely adaptation to changing risks, technologies and priorities.
The OCC will also reinforce its commitment to community banks, including minority depository institutions, mutual savings associations and federal savings associations, the agency indicated. The plan directs the agency to develop guidance and outreach to facilitate community banks' digital transition, minimize the regulatory burden on banks as much as possible and facilitate de novo community bank activity, particularly to reach unbanked and underbanked customers.
Hsu: Community Banks Voice Concerns About Climate Risk Regulation
Acting Comptroller of the Currency Michael Hsu said Wednesday that community banks and their state trade associations have raised concerns about the Office of the Comptroller of the Currency’s supervisory and regulatory actions related to climate change in "every meeting" he has had with them.
"I want to acknowledge those concerns and commit to continued open dialogue and constructive engagement as we move forward," Hsu said. "In the coming weeks, I will be traveling to Lubbock and Midland, Texas, to meet with local OCC-supervised community banks and hear directly from them about the risks and issues impacting their communities. I intend to listen actively and to provide more clarity on the commonsense approach we are taking to climate-related risk management."
Under Hsu's leadership, the agency has published a draft set of principles for climate risk management for large banks. Hsu noted that "two imperatives for large banks have become much clearer to me over the past year: one, the need for coordination and harmonization across jurisdictions, and two, the need to operationalize scenario analyses and to prioritize diverse approaches to such efforts over one-size-fits-all stress tests." He also signaled plans to appoint a new climate risk officer to head up the agency's recently formed Office of Climate Risk in the coming weeks.
OCC's Hsu: Bank-Fintech Alliances May Pose Systemic Risk
Acting Comptroller of the Currency Michael Hsu says relationships between banks and fintechs "have been growing at exponential rates and have gotten more complicated" as banks turn to fintechs for digital innovation and fintechs value the credibility they gain from associating with established banks. Noting that the phenomenon is not limited to the larger banking groups, Hsu expressed concern that the relationships could ultimately present systemic risks and said they need to be more closely scrutinized.
Barr Signals Fed Climate Exercises to Start in 2023
The Federal Reserve will launch a "pilot micro-prudential scenario analysis exercise" next year "to better assess the long-term, climate-related financial risks facing the largest institutions," Michael Barr said Wednesday in his first speech as Fed vice chairman for supervision. Barr did not offer additional details beyond the timing but added that the Fed is also planning to work with the other banking agencies "to provide guidance to large banks on how we expect them to identify, measure, monitor and manage the financial risks of climate change." During the Q&A after his remarks, Barr also noted that "with respect to community banks, we are quite a way from even being able to offer even good advice to community banks on the issue of climate change."
Outlining his overall priorities, Barr noted his preference for a "risk-focused" regulatory capital framework, but said that non-risk-based approaches, including leverage ratios, "also serve an important role in this framework." He additionally advocated for tiered requirements for firms as they increase in complexity and systemic importance. Turning to resolvability, he signaled that the Fed would begin "looking at the resolvability of some of the other largest banks as they grow and as their significance in the financial system increases."
Barr also touched on several other priorities, including reviewing the Fed's existing guidelines for mergers and acquisitions and supporting responsible innovation while balancing risk. Regarding digital assets, he emphasized that "banks engaged in crypto-related activities need to have appropriate measures in place to manage novel risks associated with those activities and to ensure compliance with all relevant laws, including those related to money laundering," and also expressed the view that "Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter."
Fed Expected to Raise Rates Additional 75 Basis Points
Markets expect the Federal Reserve to add 0.75 percentage points to its key interest rate this month, based on a pledge from Chair Jerome Powell to cut inflation, even if it increases unemployment. Fed officials have not publicly contradicted the rate-increase expectation, and futures market pricing indicates traders expect a 0.75-percentage-point increase at the central bank's next meeting.