STATE GOVERNMENT RELATIONS
IBA Regional Meeting Dates
It’s not too late to register for this summer’s IBA regional meetings! Make plans to join your banking peers and local lawmakers for lunch and conversation at one of three remaining regional meetings. The IBA is delighted to host this important grassroots advocacy series once again in the cities of Merrillville (July 18), New Albany (July 29) and Bloomington (July 31). For more information click here or contact Michelle Long at 317-333-7148.
FEDERAL GOVERNMENT RELATIONS
IBA Annual Washington Trip Registration Open
Don’t miss out on the 2019 IBA Washington Trip, Oct. 20-22! The IBA Annual Washington Trip affords bankers the opportunity to talk with legislators and regulators about the successes and concerns of Indiana's banking industry. These officials need to hear your ideas firsthand in order to produce workable laws and regulations. This is your chance to tell policymakers face-to-face why the regulatory burden imposed on banks is too heavy and to make suggestions for modifications to burdensome rules. For more information and to register, click here or contact Michelle Long, 317-333-7148.
Powell: Trade Uncertainties, Slowing Global Growth Pressuring U.S. Economy
Testifying before the House Financial Services Committee, Federal Reserve Chairman Jerome Powell said he doesn't "expect a severe downturn" in the near future, but warned that a "cross-current" of trade uncertainties and slowing global growth could require a more accommodative monetary policy stance. Powell’s remarks come ahead of a Federal Open Market Committee meeting this month that could see the Fed’s first interest rate cut in a decade.
During his testimony, Powell also addressed the ongoing effort to transition away from the London interbank offer rate, noting that the Fed has been increasing its focus particularly on the retail side to ensure that contracts have appropriate fallback language in the event Libor is discontinued. "The situation we’re aiming for is one in which people have either moved their obligations to [the Secured Overnight Financing Rate] or some other rate, or, failing that, they have a rate in their contract where if Libor is no longer published, the other rate seamlessly falls into place."
Powell also echoed comments made this week by Fed Vice Chairman Randal Quarles regarding the need to evolve large bank stress tests. While he assured lawmakers that the Fed has no interest in making the tests easier, "there is a risk that if we don’t continue to adapt to the markets and to the institutions and to the state of the economy, that they will become stale and people will become complacent."
Action Alert: Ask Lawmakers to Support CECL Stop-and-Study Bills
Given the significant operational challenges and potential economic consequences arising from the current expected credit loss standard, the IBA is calling on members to contact their lawmakers immediately in support of legislation that would delay CECL’s implementation.
Congress is currently considering two bills—S. 1564 and H.R. 3182—that would delay the standard so that a quantitative impact study can be conducted to determine the full implications CECL will have on the availability of credit in communities nationwide. Nationally, concerns have been expressed to both lawmakers and the Financial Accounting Standards Board about the procyclical nature of CECL, warning that it could have adverse effects on lending, particularly during an economic downturn.
Agencies Finalize Volcker Rule Exemption for Community Banks
The five federal financial regulatory agencies Tuesday finalized a rule implementing a section of the S. 2155 regulatory reform law that grants an exclusion from the Volcker Rule for certain community banks. The rule will take effect upon publication in the Federal Register.
To qualify for the exemption, community banks and their controlling entities must have $10 billion or less in total consolidated assets and total trading assets and liabilities equal to 5 percent or less of total consolidated assets.
The agencies confirmed that securities appropriately classified as available-for-sale and excluded from trading assets on the call report will not count toward an institution’s trading assets and liabilities threshold.
OCC Issues Resources on HOLA Flexibility Final Rule
As the OCC’s long-awaited HOLA flexibility rule took effect last week, the agency issued several documents to help bankers understand the new rule and provide guidance to institutions wishing to elect to become "covered associations."
Under the final rule, federal savings associations with total consolidated assets of $20 billion or less as of Dec. 31, 2017, may at any time elect to become covered associations. Making this election will remove portfolio asset restrictions that have limited some banks’ ability to respond to changing needs in their communities. It will also subject those institutions to the same duties, restrictions, penalties, liabilities, conditions and limitations that apply to national banks without requiring a charter conversion.
The OCC issued a set of FAQs about the final rule, as well as a document outlining key differences among requirements for national banks, federal savings associations and covered savings associations. The agency also published a chart summarizing the powers of national banks and federal savings associations.
Read the final rule and access the FAQs.
Agencies Finalize Capital Simplification
Federal regulators issued a final rule simplifying risk-based capital rules for community banks that hold mortgage-servicing assets, deferred-tax assets, and insignificant investments in the capital of unconsolidated financial institutions, such as trust-preferred securities.
Under the new rule taking effect April 1, 2020, community banks will only have to deduct from their capital MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions like TruPS if they individually exceed 25 percent of the bank's common equity tier 1 capital.
This rule is different from the proposed Community Bank Leverage Ratio, which is expected to be approved later this year and would allow certain community banks to opt in to a new, simpler capital framework provided they meet the required CBLR.