STATE GOVERNMENT RELATIONS
Indiana Lawmakers Set to Return Jan. 6
The Indiana General Assembly is scheduled to convene the 2020 legislative session on Jan. 6. This coming year’s session is considered a short session, with all legislative activity to end on or before March 14. This schedule leaves just over two months for members of the General Assembly to pass any legislation into state law. The IBA GR team will provide information related to industry-notable bills starting the second week of January.
IBA Legislative Briefing & Reception
Register for the 2020 IBA Legislative Briefing & Reception, scheduled for Jan. 15 at the Hyatt Regency Indianapolis. As the first IBA grassroots advocacy event of the new year, this is a prime opportunity to get your bank involved in 2020. The evening will include an in-depth discussion of current legislative issues, an entertaining panel featuring WFYI’s Indiana Week in Review team and valuable networking time to connect with banking peers and Indiana legislators. The deadline to make hotel reservations is Dec. 15.
FEDERAL GOVERNMENT RELATIONS
IBA Annual Washington Trip - July 26-28
Mark your calendars for July 26-28 and join us next year for this important IBA grassroots event. Usually scheduled in the fall, this trip is being moved to the summer to accommodate the 2020 elections to ensure the effectiveness of legislative meetings. In addition, we are thrilled to share that the IBA has reserved space in one of Washington's most historic hotels, The Willard InterContinental. Watch for more information to be released in early 2020. For questions, contact Josh Myers at 317-333-7165.
Amid Strong Performance, OCC Flags Credit, Cyber Risks for Banks
Amid strong financial performance by banks during the longest U.S. economic expansion on record, the Office of the Comptroller of the Currency flagged credit, operational and interest rate risks for bankers' radar screens in its Semiannual Risk Perspective on Tuesday. "Banks should prepare for a cyclical change while credit performance remains strong," the agency advised, noting that "[c]redit risk has accumulated in many portfolios." The agency additionally reported that banks "have largely maintained a disciplined approach in their underwriting," competing with nonbanks' growing share in mortgages and commercial lending could pose risk as well.
The OCC also cautioned banks about interest rate risk driven by recent volatility in repo markets, as well as increasing challenges in asset/liability management from recent yield curve inversions. The agency indicated it is “increasing regulatory oversight” of banks' transition away from the London Interbank Offered Rate, which is no longer guaranteed to be available after 2021. "Examiners will evaluate whether banks have begun to assess their exposure to Libor in assets and liabilities to determine potential impacts and develop risk management strategies," the agency reported.
Operational risk remains elevated amid an increasingly complex environment of cybersecurity threats, third-party risk management and fraud. As it has done before, the agency singled out cybersecurity for special attention, calling on banks to focus on patch management, network configuration, access rights, phishing, compromised credentials and ATM exploits, among other threat vectors.
The risk outlook comes against the background of historically high capital levels, returns on equity above the pre-crisis highs for the first time and 25-year lows in past-due loans.
ABA & ICBA Urge Committee Approval for Minority Banking Bills
Ahead of a House Financial Services Committee vote on Tuesday, the American Bankers Association and the Independent Community Bankers of America expressed support for legislation that addresses the decline in minority depository institutions and creates opportunities for community development financial institutions.
Both organizations called for passage of H.R. 5322, a bill introduced by Rep. Gregory Meeks (D-N.Y.) that would expand on existing programs to support minority banks. Among other provisions, the bill would create a minority depository institutions advisory committee at each agency and expand the Department of the Treasury’s mentor-protégé program between large financial institutions and MDIs and CDFIs. They also offered support for H.R. 5315, a bill introduced by Rep. Joyce Beatty (D-Ohio), that would expand the Treasury's work by establishing a new financial agent mentor-protégé program. The program would allow financial agents and large financial institutions to serve as mentors to community and minority banks.
OCC, FDIC Propose New Regulatory Framework for CRA
The OCC and the FDIC yesterday proposed major changes to the regulations implementing the Community Reinvestment Act. The proposal would clarify which activities count for CRA credit, update where CRA performance is assessed, revise how CRA performance is measured and make CRA data reporting more transparent. Banks with less than $500 million in assets would be able to choose to remain under the current CRA framework.
Specifically, the proposal would require regulators to publish a non-exhaustive list of pre-approved CRA activities—and to create a process by which stakeholders can recommend new items to include. The proposal would reflect present-day practices in mobile and online banking by expanding assessment areas. In addition to using geographies based on bank facilities, the agencies would also assess performance in areas where banks conduct a substantial volume of retail lending and deposit-taking.
The proposal would introduce two performance standards to evaluate banks’ CRA performance—measuring both the share of retail lending to low-to-moderate-income individuals and areas, as well as the impact of that activity. Together, this “presumptive rating” could be adjusted by examiners based on performance context and other factors. Banks would report CRA data annually, and the agencies said that the data-based evaluation method would reduce the lag time in preparing CRA exam reports.