STATE GOVERNMENT RELATIONS
Indiana Small Business Restart Grant Program
The Indiana Small Business Restart Grant Program is now operational with the signature of Gov. Holcomb enacting HEA 1004 into law. To learn more about the Indiana Small Business Restart Grant Program, click the button below for a summary from the April 30 edition of IBA E-News.
FEDERAL GOVERNMENT RELATIONS
IBA Washington Trip - July 18-20
Register now for the IBA Annual Washington Trip, scheduled for July 18-20. Join with fellow Hoosiers as we travel to our nation’s capital to tell the story of Indiana banking to elected officials and regulators. This is an opportunity to discuss the impact legislation has had or may have on your bank, and how currently proposed policies could influence your customers and communities. It is more important now than ever to engage in grassroots advocacy as you share your concerns, your successes and what you believe will allow you to better serve your communities. We look forward to seeing you in Washington!
OCC's Hsu Says Fintech Firms Should Be Chartered in ‘Safe and Sound Way’
Testifying before the House Financial Services Committee on Wednesday, Acting Comptroller of the Currency Michael Hsu said that the Office of the Comptroller of the Currency needs to determine how to charter fintech firms in a “safe and sound way, where we can adapt to the innovation.”
“Some are concerned that providing charters to fintechs will convey the benefits of banking without its responsibilities,” Hsu said. “Others are concerned that refusing to charter fintechs will encourage growth of another shadow banking system outside the reach of regulators. I share both of these concerns. We must find a way to consider how fintechs and payment platforms fit into the banking system, and we must do it in coordination with the FDIC, Federal Reserve, and the states.”
The OCC has been focusing on encouraging innovation through initiatives such as updating the framework for chartering national banks and trust companies, Hsu said, but added that his “broader concern is that these initiatives were not done in full coordination with all stakeholders. Nor do they appear to have been part of a broader strategy related to the regulatory perimeter.”
Meanwhile, Rep. French Hill (R-Ark.) pressed FDIC Chairman Jelena McWilliams on the issue of credit union acquisitions of community banks, which have resumed after an M&A lull during the pandemic. “We always have a lot of questions when there’s an acquisition of a community bank, especially when that community bank is located in a rural area,” McWilliams responded. “My concerns have not changed.”
OCC to ‘Reconsider’ CRA Revamp; Pauses Compliance for Certain Provisions
The Office of the Comptroller of the Currency indicated on Tuesday indicated that it will formally “reconsider” the agency’s June 2020 final rule revising the agency’s Community Reinvestment Act rules, and that banks subject to the rule may pause efforts to comply with it. “While this reconsideration is ongoing, the OCC will not object to the suspension of the development of systems for, or other implementation of, provisions with a compliance date of Jan. 1, 2023, or Jan. 1, 2024, under the 2020 CRA rule,” the agency reported.
However, covered banks must continue to comply with provisions of the CRA modernization rule that had a Oct. 1, 2020, compliance date, the agency said. These provisions were explained and interpreted in a 2020 OCC bulletin.
The OCC added that it does not plan to finalize a December 2020 proposed rule on how the agency will evaluate CRA compliance under the new rule, and that it will discontinue the CRA data collection published that month.
OCC’s Hsu Warns Against ‘Complacency’ as Recovery Revs Up
With projected economic growth expected to create a positive environment for bank performance in the remainder of 2021 and 2022, according to the OCC’s newly released Semiannual Risk Perspective, newly appointed Acting Comptroller Michael Hsu Tuesday said: “It’s critical that bankers and their regulators guard against complacency.”
“Banks do deserve credit for having weathered the pandemic fairly well, in terms of capital and liquidity levels, continuing to work with borrowers and lending [and]maintaining operations while everyone was working from home,” Hsu said, adding that “there is a risk of a bit of overconfidence from that … as we enter a growth phase.”
Key risk themes highlighted by the OCC included credit, interest rate, operational and compliance risk. In particular, the decline in interest rates and the Federal Reserve’s long-term low-rate policy put downward pressure on net interest margins, pushing banks to respond through reducing costs and extending durations. Should yields rise, “credit quality trajectory is critical to supporting earnings that could be realized from the steepening curve,” according to the report.
While “credit risk never really materialized the way we thought it would last spring and through the fall,” according to a senior OCC official during a press briefing, the OCC noted that commercial credit risk remains elevated, especially in commercial real estate. Operational risks remain elevated, with ransomware attacks increasing in every sector, and the OCC noted that third-party risk management continues to be an area of “heightened supervisory focus.”
Fed Survey: Even Amid Pandemic, Unbanked Share Dips
The share of unbanked American adults dipped to 5% in 2020, according to the Federal Reserve’s annual Report on the Economic Well-Being of U.S. Households released Monday. The figure was down from 8% in 2015 and 6% in 2019. Based on a survey fielded in late 2020, the report showed the share of adults considered “fully banked” – that is, who had bank accounts and also did not use a number of nonbank financial alternatives – rose to 81% in 2020.
The survey also saw savings practices hold steady in the aggregate. Sixty-four percent (up 14 points from 2013) said they could cover a $400 emergency expense in cash, a benchmark often cited by policymakers. The figure reached as high as 70% in surveys fielded in July 2020, when many had received EIPs, enhanced unemployment or other relief funds. The survey found that 26% of non-retired respondents reported having no retirement savings or pension, the same as in 2019 but marking progress from previous years.
While the headline figure showed that three quarters of U.S. households surveyed last fall said they are “doing OK” or “living comfortably” – identical to figures from 2018 and 2019 and up 13 percentage points from 2013 – it masked a divergence for those laid off during the coronavirus crisis. The share of those not laid off who were at least doing OK rose, but it fell two points among those who were laid off but since found new work, and 14 points for those laid off who were still not working. Overall, the share of Americans reporting that they were worse off financially from a year before shot up 10 points to 24% in 2020.
Fed Extends Rule Allowing Directors, Shareholders to Apply for PPP Loans
The Federal Reserve last Friday said it would extend a temporary exemption from Regulation O to allow bank directors and shareholders to receive Paycheck Protection Program loans from their related banks. Reg O generally limits lending activity to bank directors, shareholders, officers and businesses owned by these persons.
The exception – which applies only to PPP loans – will be extended through June 30, 2021. The Fed also noted that the rule change “will continue to apply if the PPP is extended, with the change ultimately sunsetting on March 31, 2022.”
The Fed added that any PPP loans extended to bank directors and shareholders must conform to SBA’s guidance, which states that the eligible business must follow the same process as any similarly situated customer or account holder and must not receive favoritism from the bank.
CFPB Issues Updated TRID FAQs
The Consumer Financial Protection Bureau last Friday published an updated fact sheet for lenders addressing housing assistance loans under the TILA-RESPA integrated disclosure rule. The CFPB added several new questions to its TRID FAQs regarding housing assistance loans, and how the Building Up Independent Lives and Dreams Act affects the TRID rule requirements for certain housing assistance loans.
IBA COVID-19 Updates
The IBA has several COVID-19 resources and updates available at our website.