STATE GOVERNMENT RELATIONS
IBA Op-Ed Touts Bank Community Service
On Monday, The Journal Gazette in Fort Wayne published an op-ed, “Communities bank on more than financial influx,” authored by IBA President and CEO Amber Van Til. The op-ed was in response to an opinion piece bylined by the Indiana Credit Union League, which in turn was a response to an article submitted by the National Taxpayers Union.
Van Til’s op-ed approaches the issue of credit union acquisition of banks from the perspective of community service. Additionally, in September an opinion piece written by IBA Chairman Lucas White, “Credit unions have unfair advantage over banks,” was published in the Indianapolis Business Journal.
Indiana Stage 5, Mask Requirement Extended
During a press conference on Wednesday, Gov. Eric Holcomb announced that Indiana is to remain in Stage 5 of the Back on Track plan through Nov. 14. The extension applies as well to Indiana’s face covering requirement.
Travel Restrictions Involving Indiana
Residents of the following neighboring cities/states have been advised to self-quarantine after travel to Indiana, among other designated states, to prevent the spread of the COVID-19 virus:
• The Chicago Department of Public Health issued an emergency travel order, updated Oct. 13.
• The Kentucky Department for Public Health issued a travel advisory on July 20.
• The Ohio Department of Health issued a travel advisory on Oct. 14.
Several other states have issued travel advisories, as well. For example the Wisconsin Department of Health Services indicates that “Some cities and counties in Wisconsin may require you stay at home, or self-quarantine for 14 days after your travel.”
Chicago Emergency Travel Order
Kentucky Travel Advisory (scroll down)
FEDERAL GOVERNMENT RELATIONS
SBA Offers EIDL Info on PPP Platform
Information on Economic Injury Disaster Loan advances is now available on the Paycheck Protection Program Forgiveness Platform for submitted decisions, the SBA wrote in a letter to lenders with several updates on processing forgiveness payments.
According to the letter, lenders can see if the SBA will deduct an EIDL advance from final forgiveness payments.
While borrowers may receive up to a $10,000 advance payment under the EIDL program, those funds will be deducted from PPP loan forgiveness, leaving some borrowers with a substantial unforgiven balance that must be repaid.
Industry advocates have urged the SBA to not deduct EIDL advances from PPP loan-forgiveness amounts, which is imposing unexpected debts on small-business borrowers.
The arrangement is proving to be a surprise for many given previous SBA guidance indicating EIDL advances do not have to be repaid, but not spelling out the impact on PPP forgiveness.
Financial Trade Groups Oppose Proposed Payments Charter Changes
The American Bankers Association, Independent Community Bankers of America and five other financial trade groups on Tuesday indicated that they oppose the Office of the Comptroller of the Currency’s “effort to grant commercial companies like Amazon or Facebook a national payments charter to access the Federal Reserve payments system and safety net.”
In a letter to Congress, the groups wrote that they “oppose any effort by the OCC to offer a payments charter, particularly one that would ultimately grant these companies access to the Federal Reserve payments system – the most critical part of our country’s financial infrastructure – and its corresponding federal safety net without protecting the financial system and consumers from the concomitant increase in systemic risk.”
FinCEN Issues Advisory on COVID-19 Insurance Fraud Scam
The Financial Crimes Enforcement Network on Tuesday issued an advisory alerting banks to unemployment insurance fraud scams associated with the coronavirus pandemic. The advisory describes associated red flags and how and when to report suspicious activity.
Specific types of insurance fraud observed during the pandemic include fictitious employer-employee fraud, employer-employee collusion fraud, misrepresentation of income fraud, insider fraud and identity-related fraud.
SBA Clarifies Expiration Date on PPP Forgiveness Forms
In a new addition to its Paycheck Protection Program loan forgiveness FAQs, the Small Business Administration on Tuesday clarified that borrowers may submit a loan forgiveness application at any time before the loan matures. SBA issued the FAQ in response to questions about the expiration date of Oct. 31, 2020, which appeared on its forgiveness application forms (3508, 3508EZ and 3508S). The date reflects Paperwork Reduction Act requirements and will be extended when the forms are approved with a new expiration date, the SBA indicated.
Agencies Grant Exemption for Premium Finance Loans
The federal banking agencies and the Financial Crimes Enforcement Network last Friday announced an exemption from Customer Identification Program rules for bank loans to all customers to facilitate the purchase of property and casualty insurance policies, otherwise known as premium finance loans.
In 2018, the agencies and FinCEN granted an exemption from CIP requirements for premium finance loans to commercial customers only.
The order concluded that there is a “valid basis for an exemption to apply to all customers of premium finance lending” because premium finance loans present a “low risk of money laundering or terrorist financing” and is “consistent with safe and sound banking.
Regulatory Capital Rule: Community Bank Leverage Ratio Framework
The Office of the Comptroller of the Currency, along with the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corp. (Agencies), published a final rule in the Federal Register on Oct. 9, 2020, that adopts without change two interim final rules: “Temporary Changes to the Community Bank Leverage Ratio Framework” and “Transition for the Community Bank Leverage Ratio Framework.” ¹
Consistent with the interim final rules, the final rule implements a temporary change to the community bank leverage ratio (CBLR) framework, pursuant to section 4012 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and provides a graduated increase from the temporary 8% CBLR requirement to the 9% CBLR requirement as established under the CBLR final rule published in 2019. ² The final rule is effective Nov. 9, 2020.
This bulletin replaces and rescinds OCC Bulletin 2020-33, “Community Bank Leverage Ratio: Interim Final Rules.”
Note for Community Banks: This final rule applies to qualifying community banks ³ with less than $10 billion in total consolidated assets that meet other prudential criteria and opt into the CBLR framework. Highlights: The CBLR framework provides a simple measure of capital adequacy for certain community banking organizations. In 2019 the Agencies issued a final rule establishing the CBLR framework, which became effective Jan. 1, 2020. The final rule published Oct. 9, 2020, adopts the two interim final rules without change and provides that, for purposes of the CBLR framework:
• The leverage ratio requirement is –;
o 8%, effective the second quarter of 2020.
o 8.5%, effective Jan. 1, 2021.
o 9%, effective Jan. 1, 2022.
• A bank that elects to use the CBLR framework but temporarily fails to meet all of the qualifying criteria, including the leverage ratio requirement, has a grace period of two calendar quarters to return to compliance, provided that the bank maintains a leverage ratio greater than –
o 7 percent, effective the second quarter of 2020.
o 7.5 percent, effective Jan. 1, 2021.
o 8 percent, effective Jan. 1, 2022.
• A bank that has a leverage ratio equal to or less than the grace period minimums must immediately apply the risk-based capital standards.
For more information, please contact the following at the OCC:
- Benjamin Pegg, Risk Expert, or JungSup Kim, Risk Specialist, Capital Policy, 202-649-6370; or
- Carl Kaminski, Special Counsel, or Daniel Perez, Counsel, Chief Counsel’s Office, 202-649-5490.
A related link, “Regulatory Capital Rule: Temporary Changes to and Transition for the Community Bank Leverage Ratio Framework” (PDF), is available through the Federal Register, Vol. 85, No. 197, page 64003.
Footnotes:
¹ Refer to 85 Fed. Reg. 22924 (April 23, 2020) and 85 Fed. Reg. 22930 (April 23, 2020).
² Refer to OCC Bulletin 2019-55, “Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations: Final Rule.”
³ “Banks” refers to national banks and federal savings associations.
See Related Link From Federal Register
Announcing the FedNow Pilot Program
The Federal Reserve has announced the creation of the FedNow Pilot Program to support development, testing and adoption of the FedNow Service. Because the engagement of Community members provides valuable input to the FedNow Service, financial institutions – well as the service providers and payment processors that partner with them – have the opportunity to participate in the pilot program. Participation benefits include:
• Opportunities to help shape service features, the user experience, onboarding and support processes and future product releases;
• Inclusion in select FedNow press releases, web articles and email communications published by the Federal Reserve;
• Collaboration through FedNow testing and the implementation processes.
If your organization is interested in participating in the FedNow Pilot Program, submit the expression of interest form by Nov. 16 to be considered. Participants will be selected from the pool of interested organizations, seeking to ensure the program is representative of various types of institutions and service providers, connection types and settlement arrangements.
Additional participants may be added in later phases of the program to address evolving needs. Organizations that are not selected will have opportunities to provide input into the FedNow Service through their participation in FedNow Community roundtables, working groups and surveys and may elect to become an early user of the service upon general availability.
For more information:
- A 60-minute FedNow Pilot Program Webinar is scheduled for Oct. 29 at 11 a.m. ET to address program phases, participant responsibilities and expectations.
- Email questions about the Community, working groups or the role as a Community member to: SYSFedNowCommunity@chi.frb.org.
Read the FedNow Pilot Program Overview
Submit Expression of Interest Form
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.