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 two remaining regional meetings. The IBA is delighted to host this important grassroots advocacy series once again in the cities of 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.
FASB to Delay CECL Implementation for Some Institutions
In a significant move, the Financial Accounting Standards Board on Wednesday voted to propose a delay for the implementation of the current expected credit loss standard until January 2023 for certain companies. The delay would apply to small reporting companies (as defined by the Securities and Exchange Commission), non-SEC public companies and private companies.
It is important to note, however, that the delay would not apply to all banks. For larger public companies, the standard would still take effect in January 2020. Bills have been introduced in both the House and Senate to "stop and study" the standard and its effect on the economy.
Read ABA statement.
Read ICBA statement.
Crapo Renews Push to Expand Basel III Relief
During the Senate Banking Committee hearing last week, Chairman Mike Crapo (R-Idaho) renewed his calls for federal regulators to maximize community bank relief from risk-based capital rules, including Basel III.
In his opening statement, Crapo called on regulators to implement an 8% Community Bank Leverage Ratio, which was authorized by the S. 2155 regulatory relief law and would exempt more community banks than the 9% threshold proposed by the agencies. Crapo has previously called for an 8% threshold in joint Senate letters to the agencies and in hearings featuring agency heads.
Congress Questions Facebook on Libra Plan
Senators expressed serious concerns with Facebook’s proposed Libra cryptocurrency during a hearing featuring Facebook executive David Marcus.
At the Senate Banking Committee hearing, Chairman Mike Crapo (R-Idaho) cited concerns with how the payment system will work, what consumer protections will apply, and how the system will protect user data and privacy. Ranking Member Sherrod Brown (D-Ohio) questioned whether consumers could trust Facebook with their finances.
Marcus testified over the course of two days before the House Financial Services Committee.
House Financial Services Committee Advances Credit Reporting Bills
The House Financial Services Committee last week approved several bills that would amend the Fair Credit Reporting Act and make changes to the credit reporting process. The two bills – H.R. 3622 and H.R. 3642 – could make credit reports less accurate and potentially reduce access to credit.
The House committee also advanced H.R. 3614, the Restricting Use of Credit Checks for Employment Decisions Act and H.R. 3618, the Free Credit Scores for Consumers Act.
Ohio Supreme Court Reverses Harmful Foreclosure Ruling
In a significant legal victory, the Supreme Court of Ohio recently ruled in a favor of a community bank whose foreclosure and subsequent sheriff’s sale of the property was errantly invalidated by the Second District Court of Appeals.
In the case of Farmers State Bank v. Sponaugle, et al., the appeals court vacated the New Madison, Ohio-based community bank’s sale of the home 16 months after it was confirmed. The court ruled that a failure to specifically describe the amounts due to junior lienholders in the foreclosure decree rendered the sale invalid. It also held that Farmers State Bank was not eligible for protections for good-faith foreclosure purchasers.
On June 27, the state supreme court unanimously ruled that the Second District Court of Appeals erred in its decision. The high court held that there was no requirement under Ohio law to specifically identify the amounts due to junior lienholders so long as the amounts could be determined via other documents.
Agencies Propose Capital Rule on Land-Development Loans
Federal regulators have invited public comment on a proposal to clarify the treatment of land-development loans under the agencies’ capital rules. This proposal expands on the agencies’ September 2018 proposal to revise the definition of high-volatility commercial real estate (HVCRE) as required by the S. 2155 regulatory relief law.
The land-development proposal would clarify that loans that solely finance the development of land for residential properties would meet the revised definition of HVCRE, unless the loan qualifies for another exemption. Comments will be accepted for 30 days after publication in the Federal Register.
SEC Urges Market Participants to Prepare for Libor Transition
The Securities and Exchange Commission last Friday issued a statement warning of the potential consequences for financial markets if the London Interbank Offered Rate, or Libor, is discontinued. Underscoring the need for preparation by market participants including public companies, investment advisers, investment companies and broker dealers, the SEC reported it is "actively monitoring the extent to which market participants are identifying and addressing these risks."
While the SEC indicated it would not endorse any one particular reference rate, it noted that "the Commission staff is monitoring whether the adoption of a variety of replacement rates for USD Libor instead of the emergence of a dominant successor could limit the effectiveness of all replacement benchmarks." The Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate, or SOFR, as the preferred alternative for U.S. dollar Libor.
The SEC urged companies to review existing contracts and determine their Libor exposure, ensure that new contracts include effective fallback language and evaluate additional effects that the discontinuation of Libor could have on their businesses.
FinCen Warns Banks of Business Email Compromise Scams
Business email compromise schemes (BECs) – though which fraudsters target businesses and their fund transfers – generated more than $300 million a month in illicit revenue during 2018, the Financial Crimes Enforcement Network has reported. As it works to combat this type of fraud, the agency issued a trend analysis of BEC schemes, as well as an updated advisory for financial institutions.
The trend analysis showed that BEC schemes were most often targeted at the manufacturing and construction sectors, according to Suspicious Activity Report filings from 2017 and 2018. FinCen noted that the nature of BEC schemes continues to evolve; for example, the agency indicated that the number of schemes involving the impersonation of a CEO or other high-ranking official declined between 2017 and 2018, while the usage of fraudulent vendor or client invoices rose during that period.
The updated advisory includes operational definitions for email compromise fraud, provides information on the targeting of non-business entities and data by email compromise schemes, highlights general trends in BEC schemes, and alerts financial institutions to risks associated with the targeting of vulnerable business processes.