Archive for month: September, 2022

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Executive Letter: Fending Off Interchange Restrictions

Rose Oswald PoelsBy: Rose Oswald Poels

As many WBA members know, our Association has been fighting off proposed interchange regulation for over a year. At the state level, WBA and banking advocates from throughout Wisconsin successfully halted AB 587/SB 572, which called for the prohibition of interchange fees on the tax portion of a transaction. While grassroots involvement by Wisconsin bankers has helped us clear one hurdle, it is clear that retailers and legislators alike are prioritizing moving this issue forward at both the state and federal levels.

In late July, Sen. Dick Durbin (D-IL) and Sen. Roger Marshall (R-KS) introduced the bipartisan Credit Card Competition Act of 2022 (S.4674). The proposed legislation — which is largely opposed by members of the American Bankers Association (ABA), Independent Community Bankers Association (ICBA), and banking trade associations from across the U.S. including WBA — would require banks exceeding $100B to offer customers at least two networks to process credit cards — one of which is required to be a provider other than Visa or Mastercard. According to Durbin, this proposed legislation “injects competition into the Visa-Mastercard duopoly.”

Last week, the House companion to the Credit Card Competition Act of 2022 (H.R.8874) was introduced by Rep. Peter Welch (D-VT) and Rep. Lance Gooden (R-TX). Again, legislators claim that this proposal will cut costs for businesses and families.

Although Wisconsin’s community banks are not the current target of this proposed legislation, the Credit Card Competition Act of 2022, active now in both the U.S. Senate and House, will require a complete and costly overhaul of the U.S. payment system that every consumer and institution will feel the impact of.

In addition, credit card merchants would be given the ability to force transactions to cheap, less secure networks; more Americans would lose access to valued cash-back and reward programs that drive spending or credit altogether; and with an increase in regulation, the independence and competitiveness of community banks is put at risk.

For the sake of our current financial system, the security and choice of all consumers, and the continued prosperity of community banks across the state and country, I encourage you to join WBA in opposing these two proposed legislative actions.

Grassroots advocacy is a critical component of WBA’s advocacy efforts as we need banker involvement to help ensure the industry’s voice is heard. Please make time to call your House Representative or email them a message — let them know that you stand with the best interest of our communities and customers in mind. You can easily take action now on ICBA’s website and ABA’s website. Your engagement has time and time again proven vital and highly effective in fending off threats to our industry. Thank you in advance for your help informing our congressional delegation of these concerns.

If you have any questions regarding how these proposals will impact Wisconsin community banks or wish to designate an Advocacy Officer to assist the Association in coordinating regulatory, legislative, and community advocacy efforts, please contact WBA Vice President – Government Relations Lorenzo Cruz or me.

ABA Website ICBA Website
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Legal Q&A: How Should Your Bank Approach Contracting With Minors?

Bank policies, procedures assist in determining the risk associated with minors

By Scott Birrenkott

Q: Can Banks Contract with Minors

A: Yes, depending on policies and procedures.

WBA frequently receives questions regarding the ability of minors to enter into a contract. No rule or regulation prohibits a bank from contracting with a minor. However, a minor can escape liability under the contract. Meaning, a minor could avoid liability from a bank seeking to hold a minor accountable for terms under the contract. Thus, banks are free to enter into contracts with minors, but must decide so as a matter of risk.

The ability of a minor to escape liability or void a contract is often referred to as the doctrine of incapacity. This is a common law term, meaning, generally, a concept under the law that is derived from judicial precedent rather than statute. As such, there is no specific rule governing contracting with a minor. It also means that there is no specific point at which a minor is deemed “competent.” If a minor attempts to escape liability under contract, it would be up to the bank to attempt to enforce the contract against the minor, and up to a court to decide.

It is important to understand the theory behind the doctrine of incapacity. Generally speaking, the theory is that a minor has not developed enough to understand the significance of contracting and thus may potentially escape liability. Because it is not readily defined, a court could find that someone who has attained the age of 18, or older, still hasn’t matured enough to understand that significance and might be permitted to void the contract.

When it comes to minor accounts, WBA generally recommends that banks consider the use of a WUTMA account. A WUTMA account is created under Wisconsin’s Uniform Transfers to Minors Act, which provides certain requirements, procedures, and responsibilities. Thus, it creates a means for a bank to open an account with an understanding of what rules apply to the relationship between the minor, the adult custodian, and the bank. While WUTMA provides for this certainty, banks should be careful before opening custodial accounts that are not governed by WUTMA, as it would leave questions as to how the account would be handled.

As a result, banks must decide, as a matter of business and policy, whether they are willing to contract with minors. This includes both deposit and loan account relationships. For the above reasons, financial institutions should consult with their policies and procedures regarding contracting with minors.

For any questions on this, or other matters, you may reach WBA legal at wbalegal@wisbank.com or 608-441-1200.

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Executive Letter: A Sneak Peek at the Society of Bank Executives

Rose Oswald PoelsBy Rose Oswald Poels

The Society of Bank Executives, a nationwide organization for building new connections and accessing accelerated programing related to leadership, is looking ahead to the official launch in January 2023. Currently, the Society is comprised of over 120 executives from 15 states, including several from Wisconsin, and these bankers are participating in the pre-launch cohort this fall.

As I have announced in previous publications, the Society was established by several banking trade groups across the country — including WBA — to promote individual professional development. The initiative focuses specifically on granting C-suite bankers the opportunity to network among peers, attend relevant and flexible education seminars by experts, and enhance critical leadership competencies and skills.

As we all work to navigate within our ever-evolving industry, I encourage you to consider the importance of taking part in opportunities such as the Society of Bank Executives. Unlike other leadership seminars, the program offers bankers not just the education, but the relationships and soft skills necessary to masterfully lead our banks. In addition to studying, analyzing, and applying knowledge learned during the four-month program, bank executives will form invaluable networks among peers outside of our markets.

Although the pre-launch session is in full swing, Wisconsin bankers are invited to join the Society during its third meeting in Sun Valley, Idaho. The three-day event focuses specifically on the power of peer groups, and will kick off on October 19. I encourage bank executives who have not already registered for Society membership to consider utilizing this opportunity to garner a sneak peek of what’s in store for programing as the initiative formally launches in January.

Thank you to those Wisconsin bankers who have already registered as a member the Society. If you would like to learn more about the Society and how its program could impact your bank, please visit executives.bank/home. Additionally, if you are interested in taking part in the Society’s upcoming in-person educational event in Sun Valley, please click here for details on how to register.

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September 2022 Compliance Journal

The September 2022 WBA Compliance Journal is now available. In this edition, WBA Legal covers Part 1 of a two-part series regarding contracting with minors. In this first part, readers will find a series of Q&As regarding WUTMA accounts and a new reference chart. The publication also includes a summary of recently published agency rules and notices and other important compliance-related updates for bankers.    

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Regulators Look to Mitigate Climate-Related Financial Risk

Wisconsin bankers prepare for forthcoming legislation, guidance

By Hannah Flanders

An increasing number of Wisconsinites are growing concerned about climate change and its effects on the state’s key economic sectors — agriculture and forest product, fisheries, and outdoor tourism and recreation. Each year, these sectors continue to be negatively impacted as a result of increasing temperature, humidity, precipitation, and extreme weather events.

In an effort to preserve America’s unique, natural resources, promote public health and safety, and extend the positive growth in our economies, regulators across the country have turned their focus to understanding climate-related financial risks. In January 2021, President Joe Biden issued an Executive Order relating to protecting public health and the environment. As a result, many key banking regulators and Wisconsin officials have announced advisories, statements, and proposals of their own to aid banks and other industries in mitigating the effects of climate change on the economy.

Ensuring Consistency

As sectors and jurisdictions in the financial system become increasingly more intertwined and supervisory and regulatory authorities continue to assess climate-related financial risks, the Financial Stability Board (FSB) has published draft recommendations in an effort to promote consistency throughout the financial system as well as to assist financial institutions in managing and mitigating climate-related risks. Final recommendations from the FSB are expected in the fourth quarter of 2022.

The Financial Stability Oversight Council (FSOC), in addition to establishing the Climate-related Financial Risk Committee (CFRC) which assists in identifying, assessing, and mitigating climate-related risks to the financial system and developing common approaches and standards, the Council has recently released recommendations to FSOC members — including the U.S. Securities and Exchange Commission (SEC), the Federal Reserve Board (FRB), and the Federal Housing Financing Agency (FHFA) — regarding their action on climate change data, disclosure, and scenario analysis.

While several agencies, including SEC and the Office of the Comptroller of the Currency (OCC), have already acted on risks related to climate change, Acting Director of the FHFA Sandra L. Thompson said in a statement released in December 2021 that FHLBanks are encouraged to designate climate change as a priority and actively consider its effects in their decision
making. The FHFA also created a new Conservatorship Scorecard which assesses Fannie Mae, Freddie Mac, and Common Securitization Solutions on their ability to promote sustainable and equitable access to affordable housing while operating in a safe and sound matter.

Proposed Federal Legislation

Both the OCC and the Federal Deposit Insurance Corporation (FDIC) have issued draft principles that provide framework for the management of climate-related financial risks by banks with more than $100 billion in total consolidated assets.

Although either draft has yet to be finalized, the Wisconsin Bankers Association (WBA) issued a comment letter in June to members of the FDIC warning of the potential negative impact this draft may unintentionally have on smaller, community banks and the communities they serve.

In addition to commenting on the FDIC’s draft principles, WBA joined the Independent Community Bankers of America (ICBA) and several state banking associations from around the country in expressing concerns related to the FDIC’s proposed statement of principles highlighting the effects of large financial institutions being pressured or required to “de-risk” their loan portfolios. The ruling in its current state has the potential of excluding lawful but climate disfavored customers or industries from the financial system.

This year, the SEC has also proposed two climate-related disclosure rulings that Wisconsin bankers should consider for investment purposes. The first proposal — the Enhancement and Standardization of Climate- Related Disclosures for Investors — focuses specifically on requiring registrants to include certain climate-related disclosures in their registration statements and periodic reports.

While the approach to release climate-related disclosures through existing SEC requirements is appreciated, in its comments, WBA highlighted that Wisconsin’s financial institutions, publicly traded or not, have successfully managed credit-based risk for decades and that this proposal is primary built on supplying non-financial information that many businesses do not have the resources to provide.

In addition to recommending that SEC repeal said proposal in its own comments, the Association joined nearly 100 supporting groups in signing onto the House Small Business Committee’s Republican-led letter to SEC demanding the rescission of the proposed ruling.

The second — Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance (ESG) Investment Practices — amended the ruling and forms under the Investment Advisors Act and the Investment Company Act. This would require certain advisers, investment companies, and business development companies to provide additional information regarding their ESG investment practices. Comments on this ruling were due August 2022.

Wisconsin-Specific Efforts

In Wisconsin, Governor Tony Evers has highlighted combatting climate change is a key priority for the administration. Earlier this year, the Governor’s Task Force on Climate Change — a coalition of representatives from industries and communities across the state — recommended the creation of the Office of Environmental Justice within the Department of Administration (DOA).

The Office, supported by the first state-level chief resilience officer (CRO) in the Midwest — now serves as the state’s principal office in coordinating agency frameworks, strategies, and policymaking to ensure state action does not have an adverse or disparate environmental effect on under-resourced communities.

Additionally, the Wisconsin Department of Financial Institutions (DFI) has so far only released an ESG investing advisory which includes an overview of its effects and what investors should consider. However, as climate-related risk becomes an increasing concern for industries and communities across the state, Wisconsin bankers should expect that state-level advisories, guidance, or legislation may be forthcoming.

While no hard and fast ruling yet stands for banks related to climate-related risk disclosures either at the federal or state levels, WBA advises bankers to be aware of the potential for upcoming regulation on the topic.

View WBA’s recent comment letters by visiting wisbank.com/CommentLetters. For questions on legal developments or regulations related to climate change or other compliance matters, please reach out to WBA legal at wbalegal@wisbank.com or 608-441-1200.

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2022 WBA Management Conference Recap

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Community Advocate of the Month: Dan Klahn, Community First Bank, Boscobel

The following is a brief interview between WBA President and CEO Rose Oswald Poels and Community First Bank President/CEO Dan Klahn.

Rose: How did you first get into the banking industry?

Dan: After graduating from college with a degree in economics, I began working in a sales and lending position with a finance company. I discovered I really enjoyed the customer contact and finding ways to help meet customer needs. While working there, I was able to see the positive effect that community banks have on their customers and communities. This led me to join a small community bank in southwest Wisconsin. A few years later, I joined Community First Bank in Boscobel, where I have been for the last 33 years of my career. Working in a smaller community bank has given me the opportunity to learn and grow as one must wear many hats and do a little bit of everything. This eventually led to my current role as president and CEO.

What is your favorite aspect of your role at your bank?

My favorite aspect of my role at the bank is the ability to positively affect people’s lives. I have been fortunate to be able to develop relationships with individuals and businesses that have lasted 30+ years. This includes being there for them through the good times and bad. Some of these long-term relationships began as start-up businesses that have grown and prospered and are now major employers in the communities we serve.

Another favorite part of my job has been mentoring employees and being able to watch them learn and grow within our organization. Community First Bank has had a number of employees who started with us in high school or college and have now grown into leadership positions within the bank.

What do you wish the general public understood about the banking industry?

I wish the general public better understood the commitment and contributions that community banks and their employees make to their customers and communities every day. We truly have a vested interest in helping our communities thrive as our employees and their families live, work, and go to school in the communities they serve. I believe we’ve “gained some ground” through the pandemic as the extraordinary efforts put out by the banking industry to help our customers was more visible and recognized. However, we as an industry need to continue to educate the general public about the positive effects we have on the economy and the communities we serve.

Where do you believe the industry’s greatest challenges are in the next three to five years?

I think one of community banking’s greatest challenges over the next 3 to 5 years will be related to keeping up with rapidly evolving cybersecurity risks, technology, and complying with the ever increasing regulations. Our industry will need to continue to focus on ways to manage these challenges as we go into the future. In Wisconsin, we are fortunate to have a very strong trade group in the Wisconsin Bankers Association (WBA) to lead advocacy efforts and help us manage some of the challenges we face.

Please share one of your more rewarding or memorable experiences with us.

I think the most rewarding experiences for me in my career revolve around participating and watching our employees step up to the plate when our communities needed us most. A couple of examples of this include watching our employees fill and deliver sandbags to businesses during the 2008 and 2018 floods in Reedsburg and assisting in cleanup efforts for the tornado that hit Boscobel in 2021. It was also extremely rewarding to serve witness to the Community First Bank team working tirelessly to help our customers by quickly processing hundreds of PPP loans during the pandemic in 2020 and 2021.

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A Guide to Joining a Community Bank’s Board

Responsibilities, benefits new board members can expect

By Hannah Flanders

Community banks serve a unique and important purpose in every Wisconsin community by directly supporting the growth and stability of small businesses and families. With a mission of reinvestment, it is critical that Wisconsin’s community banks are led by individuals who share similar values to the institution, are knowledgeable of the community, and have experience in banking or local business.

As community banks across the state look to recruit new board members and enhance their strategic planning for the coming year, an increasing number of community leaders who are recruited for their knowledge and skills are curious — and rightfully so — of what responsibilities they will take on as a member of the board.

Key Responsibilities

Like any commitment, joining a bank board leaves individuals to consider many aspects of their willingness to engage with the organization, its shareholders, and bank employees; their understanding of (or desire to learn about) bank policy and regulation as well as the national and local economy; and what skills or experiences make them a qualified leader.

A strong board member adds diversity to the table — be it through their experience or their perspective — and ultimately aids in the growth of the bank.

According to the Federal Deposit Insurance Corporation (FDIC), a bank’s board of directors is responsible for overseeing the institution’s business performance, selecting and retaining competent management, establishing the institution’s long- and short-term business objectives, adopting operating policies to achieve objectives in a legal and sound manner, monitoring operations to ensure that they are controlled adequately and are in compliance with laws and policies, and ensuring the institution helps to meet its community’s credit needs.

Joining a community bank’s board is a substantial commitment to not only the bank, but the community as well. It is essential that responsibilities, such as regularly attending board and board committee meetings, are a top priority of every member of the board.

Benefits for Community Leaders

The benefits new members experience upon joining the board of directors for a community bank range from building connections within the banking industry and expanding skills and knowledge to staying updated on local and national issues. In addition, this unique opportunity allows leaders to give back to their communities and promote economic growth and prosperity.

To many, being elected as a community bank’s board member highlights those who have proven themselves as trustworthy, knowledgeable, and active leaders both in their business and throughout the community. By joining as a board member, community leaders contribute significantly to shaping the local economy and expanding the legacy of Wisconsin’s community banks.

 

What to Consider Before Joining a Bank’s Board of Directors

  • Commitment to:
    • Professional development
    • Community growth
  • Engagement with:
    • The bank (shareholders, other directors, committee members, staff)
    • The community
  • Experience in:
    • Business, banking,
      or leadership
    • Also includes education or financial/business connections
  • Desire to learn about:
    • Bank regulations
    • National and local economy
  • Fiduciary responsibility:
    • Trustworthy, objective, responsible, and efficient

Bank Director Resources:

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questions@wisbank.com

608-441-1200

4721 S Biltmore Ln.
Madison, WI 53718

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