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Wisconsin Banks Strong Heading into 2022

Rose Oswald Poels

Banks well-positioned to help customers navigate any economic headwinds

By Rose Oswald Poels, WBA President and CEO

As we continue to navigate the evolving health pandemic heading into 2022, Wisconsin banks are well-positioned to serve the varying needs of their customers and communities. Through the third quarter of 2021, Wisconsin’s 176 headquartered banks are financially strong with continued high levels of liquidity that will allow them to meet their customers’ various borrowing needs.

The continued resiliency of the industry was evident in the Federal Deposit Insurance Corporation’s (FDIC) third quarter numbers. Nearly all of the industry is profitable and more than 72% of Wisconsin banks saw earnings gains and good credit quality through the third quarter of 2021. Wisconsin banks also saw a slight increase in net loans in the third quarter compared to the prior quarter, led largely by residential real estate lending; however, on a year-over-year (YoY) basis, lending was down 2.44%.

Overall, loan demand throughout last year was weak, and I expect that to continue for at least the first six months of 2022 and perhaps longer. Commercial loan demand was particularly low as Wisconsin banks saw a more than 23% decline in commercial and industrial loan portfolios in the third quarter of 2021 compared to the same quarter the prior year. This is largely attributed to factors, such as workforce shortages and supply chain issues, that will persist into 2022. These two factors alone have stunted growth in the business sector as many retail businesses are forced to alter their hours of operation and manufacturers to cut back production, all of which results in lower loan demand. In addition, many of these businesses received one or more forms of government stimulus or low-cost emergency loans, resulting in lower demand for traditional loans from banks as their balance sheets remained financially healthy.

The agricultural sector is expected to have a growth in profitability in the coming year in part to having received government stimulus or low-cost emergency loans over the last few years as well as having experienced a strong year last year. Farmland loans remained at nearly the same levels in the third quarter of 2021 compared to both the prior quarter and the same period in the previous year. Farm loans rose by 3.26% compared to the prior quarter but were down 7.83% compared to the third quarter in 2020. According to the national Fall 2021 Agricultural Lender Survey produced jointly by the American Bankers Association and Farmer Mac, agricultural lenders expect 70% of their borrowers to be profitable through 2022.

Wisconsin banks continue to be a safe place for consumers to keep their money, as evidenced by a 10.42% YoY climb in deposits from the third quarter of 2020 compared to the third quarter of 2021. I expect these deposit balances to remain high as economic headwinds in 2022, notably inflation and the Omicron variant of COVID-19, will likely cause stock market fluctuations that often make investors nervous.

Despite these economic challenges, I expect the Federal Reserve to raise interest rates only once during 2022, which will impact the banking industry’s profitability. With continued weak overall loan demand and the prolonged low interest rate environment putting pressure on the net interest margin of Wisconsin banks, 2022 could be a more difficult year for the banking industry. Nonetheless, with the industry’s strong financial condition, banks are positioned well to weather the upcoming year.

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Founded in 1892, the Wisconsin Bankers Association (WBA) is the state’s largest financial industry trade association, representing more than 200 commercial banks and savings institutions and over 21,000 employees.

The Association represents banks of all sizes from banks in rural Wisconsin to the state’s largest financial institution in Green Bay, and nearly 98 percent of banks in the state are WBA members.

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Agencies Release Final Computer-Security Incident Notification Requirements Rule

The federal banking agencies (FRB, FDIC, and OCC) have issued their final rule to require banks to notify their primary federal regulatory of any “computer-security incident” that rises to the level of a “notification incident”, as soon as possible and no later than 36 hours after the bank determines that a notification incident has occurred.  

The rule defines a “computer-security incident” as an occurrence that results in actual harm to the confidentiality, integrity, or availability of an information system or the information that the system processes, stores, or transmits.  

“Notification incident” is defined as a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, a banking organization’s: 

(i) Ability to carry out banking operations, activities, or processes, or deliver banking products  and services to a material portion of its customer base, in the ordinary course of business;  

(ii) Business line(s), including associated operations, services, functions, and support, that upon  failure would result in a material loss of revenue, profit, or franchise value; or  

(iii) Operations, including associated services, functions and support, as applicable, the failure or  discontinuance of which would pose a threat to the financial stability of the United States.  

The final rule is effective April 1, 2022 and has a compliance data of May 1, 2022. The full final rule may be viewed here.

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Executive Letter: Advocating for Wisconsin Banks in Washington D.C.

Rose Oswald PoelsBy Rose Oswald Poels

Last week for the first time in two years, I was back in Washington D.C. with a small group of nine bankers from Wisconsin for meetings with banking regulators and a few members of Congress. Joining WBA was a delegation of six bankers and two staff from the Illinois Bankers Association. While our meetings with regulators were still virtual, all meetings were productive affording the smaller group of bankers ample time to ask questions and hear directly from senior officials about a wide variety of issues.

We began the first day in the afternoon with briefings from the FDIC and OCC. FDIC Board Director Martin Gruenberg led the conversation highlighting the fact that while the FDIC anticipated stress in the banking system heading into the pandemic that did not materialize and notably, there have not been any bank failures in 2021. Areas of focus for the FDIC remain on commercial real estate, tailoring climate change risk concerns based on the impact to different markets and/or the size of the institution, and on the impact of non-bank companies to the financial system. OCC Acting Director Michael Hsu led the discussion with bankers emphasizing his support for community banks, his understanding of the need to tailor regulation to the size and complexity of each institution, and robust discussions around both FinTechs and climate change.

The next day featured conversations with FinCEN and CFPB. Naturally, the discussion with FinCEN was largely around the status of their development of a beneficial ownership registry which remains in process. Until one is finally launched, banks will still have to follow the current beneficial ownership rules. A representative from FinCEN’s Financial Intelligence Division indicated that they have seen an increase in all types of crime notably COVID-19 fraud, work at home scams, cyberthreats of all types (e.g. ransomware and account takeovers), and illicit use of cryptocurrency. The primary focus of our conversation and questions with the CFPB was around the upcoming Section 1071, small business data collection proposal. The bankers took turns stressing the hardships of the current proposal and asking for an extension of the comment period deadline so that the industry had adequate time to respond to the many issues raised in the over 900-page document. CFPB staff indicated that they have been in meetings with the core providers on this proposal already to help prep them ahead of time so that data collection would be easier once the proposal is finalized.

These meetings are impactful largely due to the proactive engagement of the bankers in the room. I encourage you to take advantage of these opportunities as they arise and be involved because each regulator we met with unequivocally stated they want to hear directly from bankers about the impact proposals have on their operations. While WBA certainly represents the industry’s concerns, bankers truly make the best advocates in sharing specific examples about the impact on the operations of individual banks.

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FDIC Quarterly Numbers Show Rebound in Economy

Statement on the release of first-quarter 2021 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association

  • The numbers demonstrate banks' financial strength and an improving economy.
  • Wisconsinites continue to save money as deposits have increased over the prior year (17%) and loan volume grew slightly.
  • A decrease in noncurrent loans and leases compared to last year (11%) shows more customers are up to date on their payments.
  • Banks continue to demonstrate their health through strong earnings and positive growth.

“Wisconsin banks maintained a strong financial position throughout the last year as they assisted with the financial stresses of their customers through the pandemic. Commercial and industrial loans grew nearly 20 percent year over year in part due to Paycheck Protection Program (PPP) lending, providing businesses with critical money to ensure employees were paid. Looking ahead, strong capital and liquidity levels position Wisconsin banks well to respond to customers' lending needs.” 

FDIC-Reported Wisconsin Numbers*  

  

 3/31/2021

 3/31/2020

 YoY Change 

Net loans and leases  

 92,216,891

 88,536,369

 +4.16%

Total deposits  

 111,104,235 

 94,965,014

 +16.99%

Commercial and industrial loans  

 18,592,639

 15,494,730

 +19.99% 

Residential loans  

 22,702,118

 24,007,126

 -5.44%

Farmland loans  

 3,490,057

 3,568,243

 -2.19%

Farm loans  

 3,690,631

 3,970,903

 -7.06%

Total assets  

 136,441,222

 121,634,760 

 +12.17%

Noncurrent loans and leases  

 610,802

 689,260

 -11.38%

 * dollar figures in thousands 

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About the Wisconsin Bankers Association
Founded in 1892, WBA is the state’s largest financial industry trade association, representing more than 200 commercial banks and savings institutions, their branches, and over 21,000 employees. The Association represents banks of all sizes in Wisconsin, and nearly 98 percent of banks in the state are WBA members. 

By, Cassie Krause

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FDIC Chair States Legacy Systems as Top Concern for Banks

On Wednesday, April 14, Federal Deposit Insurance Corp. (FDIC) Chair Jelena McWilliams stated her top concern for the sector is banks’ reliance on outdated legacy systems. 

During a virtual conference hosted by the Consumer Bankers Association, McWilliams was asked – if given a “magic wand” – what about the banking system she would change. Her response pointed to the possibility of banks’ outdated internal processes and legacy software that “frankly are impeding their ability to move forward” and threatening the resiliency of the sector.  

“There are several things I would like to see done differently within the banking system,” McWilliams said, “but I will say No. 1 is something that concerns me on a longstanding basis, which is the legacy systems.” 

Pam Kelly, president of Financial Institution Products Corporation (FIPCO), agreed that banks’ reliance on legacy systems is a significant hurdle in a digital transformation. 

“Part of the challenge in leaving legacy behind is legacy systems contain a significant amount of data banks need to drive insights and make decisions today,” Kelly said. “Careful planning and development of a road map can help determine what systems to replace or where a wrapper or API could play a role in the modernization plan.” 

Creating a modernization plan is an important step in promoting new technologies and, as McWilliams stated, can lead to greater concerns within your organization down the road.  

“It becomes very complicated when you're bogged down by legacy systems and an ongoing contract that you have, whether it's with your core processor or other entities, or simply the legacy computer systems you have within your organization,” McWilliams continued. “It becomes really difficult to manage all that in a safe and sound manner and not have any issues.” 

Kelly further noted that the improvement of a technology ecosystem, digital or not, should help transform a business and help them “achieve new and improved services and experiences.” It is a plan that should be well thought out and a process that should be carefully considered. 

“Often, we see a new technology and think – ‘we need that,’” said Kelly. “Yet, instead of focusing upfront on the technology, focus on the what the bank wants to accomplish with their business and then determine the how.” 

Click here to learn more about FIPCO, a wholly-owned WBA subsidiary, and its services.  

By, Alex Paniagua

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FDIC Brokered Deposits and Interest Rate Restrictions

This article originally appeared in the January 2021 edition of the WBA Compliance Journal, click here to view the full edition.

On December 15, 2020, the Federal Deposit Insurance Corporation (FDIC) finalized rules designed to modernize its existing brokered deposit rules. Brokered deposits are funds managed by a deposit broker. Meaning, an individual who accepts and places funds in investment instruments at financial institutions, on behalf of others. 

The final rule establishes a new framework for determining who is a “deposit broker.” It also amends the methodology for calculating the national rate, national rate cap, and the local market rate cap. Lastly, it explains when nonmaturity deposits are accepted and when nonmaturity deposits are solicited for purposes of applying the brokered deposits and interest rate restrictions. This article provides background information on what brokered deposits are, and focuses on two aspects of the final rule: the definition of “deposit broker” and interest rate restrictions.

Background

Significance of Regulation under Current Rules

Brokered deposits are a significant source of assets for some institutions. However, despite being a potential source of liquidity, many institutions avoid brokered deposits entirely due to complex regulation that often renders them impractical despite their utility as a deposit tool.

Application of the brokered deposit regulation is sweeping and complex, including sub-categories such as sweep programs, reciprocal deposits, and general purpose prepaid cards. FDIC has broad discretion in application of its rules, which involves complex methodologies for determining and adjusting rates. Furthermore, during the period of rulemaking, FDIC issued nearly 100 interpretations, advisories, and studies attempting to clarify who is a deposit broker. 

As technologies continue to evolve, and the financial industry follows those trends, the brokered deposit regulation, designed before the age of online banking, has become outdated. For example, the sweeping coverage of the regulation means institutions seeking deposits through the internet could be subject to interest rate caps.

At first glance, the regulation’s rate cap limitations may only seem to harm community banks, but it is an issue that affects banks both small and large. On the community bank side, FDIC bases the caps on what larger banks offer. In reality, the result can easily become a cap based on factors beyond what the community bank may be able to offer. By rule, the rate caps only apply to less than well capitalized institutions. However, regulators have looked to the limits during exams, regardless of capital levels, pointing to potential volatility. Furthermore, under its 2009 calculation method, current rate caps lag behind what a customer may obtain from other sources, such as the Treasury.

Legal Background

As a matter of statutory framework, Section 29 of the Federal Deposit Insurance Act (FDI Act) restricts the acceptance of deposits by certain insured depository institutions (IDIs) from a deposit broker. In summary, the law’s original restrictions include:

  1. Limiting acceptance of brokered deposits to well capitalized IDIs.
  2. Less than well capitalized institutions may only offer brokered deposits under certain circumstances, and with restricted rates.

The inception of brokered deposits came with the ability to transfer funds electronically. Technologies made it quick, easy, and cheap to access un-reached markets. With brokered deposits came greater bank liquidity and growth. After the 1980 financial crisis, FDIC’s study of brokered deposits lead to rules written in 1989 and amended in 1991 as the product and its use was believed to be riskier than traditional core deposits. 

In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act amended Section 29 of the FDI Act to except a capped amount of certain “reciprocal deposits” from treatment as brokered deposits. On February 6, 2019, FDIC published an advance notice of proposed rulemaking and request for comment on unsafe and unsound banking practices: brokered deposits and interest rate restrictions (ANPR). A proposed rule followed on February 10, 2020. WBA commented on both the ANPR and the proposed rule. FDIC has now issued a final rule. The final rule takes effect on April 1, 2021, with mandatory compliance by January 1, 2022.

Summary of Final Rule

The final rule establishes a new framework for analyzing certain provisions of the “deposit broker” definition, including “facilitating” and “primary purpose.” In the final rule, FDIC designates certain business relationships as meeting the primary purpose exception and allows IDIs and third parties that wish to utilize the primary purpose exception but do not meet one of the designated exceptions to apply for a primary purpose exception.

The final rule’s interest rate restrictions relate to less than well capitalized IDIs. Under the final rule, FDIC amended the methodology for calculating the national rate and national rate cap for specific deposit products. The national rate would be the weighted average of rates paid by all IDIs on a given deposit product, for which data are available, where the weights are each institution’s market share of domestic deposits. 

Definition of “Deposit Broker”

Section 29 of the FDI Act provides that a person is a “deposit broker” if they are engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with IDIs or the business of placing deposits with IDIs for the purpose of selling interests in those deposits to third parties. The definition also includes an agent or trustee who establishes a deposit account to facilitate a business arrangement with an IDI to use the proceeds of the account to fund a prearranged loan. The statute does not further define the categories that make up the definition of “deposit broker.” The final rule defines “deposit broker” as follows:

  • Any person engaged in the business of placing deposits of third parties with IDIs; 
  • Any person engaged in the business of facilitating the placement of deposits of third parties with IDIs;
  • Any person engaged in the business of placing deposits with IDIs for the purpose of selling those deposits or interests in those deposits to third parties; and
  • An agent or trustee who establishes a deposit account to facilitate a business arrangement with an IDI to use the proceeds of the account to fund a prearranged loan.

The discussion below elaborates on the first three bullet points of the final rule’s definition of deposit broker.

Engaged in the Business of Placing Deposits

The amended definition provides that a person is engaged in the business of placing deposits of third parties if that person receives third party funds and places those funds at more than one IDI. FDIC considers a person to be engaged in the business of placing deposits if that person has a business relationship with its customers, and as part of that relationship, places deposits with IDIs on behalf of the customer. Thus, the final rule amended the first bullet point of the “deposit broker” definition by providing that the person must have a business relationship with its customers, and as part of that relationship, receive customer funds and place those funds with IDIs on behalf of the customer. 

Engaged in the Business of Facilitating the Placement of Deposits

The “facilitation” part of the definition refers to activities where the person does not directly place deposits on behalf of its customers with IDIs. Under the final rule, a person is engaged in the business of facilitating the placement of deposits of third parties with IDIs, by, while engaged in business, with respect to deposits placed at more than one IDI, engaging in one or more of the following activities: 

  • The person has legal authority, contractual or otherwise, to close the account or move the third party’s funds to another IDI; 
  • The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account; or 
  • The person engages in matchmaking activities.

The activities that result in a person being “engaged in the business of facilitating the placement of deposits” is intended to capture activities that indicate that the third party takes an active role in the opening of an account or maintains a level of influence or control over the deposit account even after the account is open. Having a certain level of influence over account opening or retaining a level of control over the movement of customer funds after the account is open, indicates that the deposit relationship is between the depositor and the person rather than the depositor and the IDI.

It is worth discussing a portion of the proposed rule to better understand why FDIC has finalized certain aspects of the rule as discussed above. Under the proposed rule, a number of entities, such as financial technology companies that partner with financial institutions through the regular course of business including data processing, web servicing, consulting, and advertising would have met the “deposit broker” definition. A number of groups, including WBA, commented that inclusion of such businesses would be inappropriate. In the final rule, FDIC agreed this was an unintended consequence. 

Thus, under the final rule, any person that has an exclusive deposit placement arrangement with one IDI and is not placing or facilitating the placement of deposits at any other IDI, will not be “engaged in the business” of placing, or facilitating the placement of, deposits and therefore will not meet the “deposit broker” definition. FDIC notes that under these arrangements, the third party has developed an exclusive business relationship with the IDI and, as a result, is less likely to move its customer funds to other IDIs in a way that makes the deposits less stable.

Engaged in the Business of Placing Deposits with IDIs for the Purpose of Selling Interests

This part of the definition specifically captures brokered certificates of deposit (CDs). These are typically deposit placement arrangements where brokered CDs are issued in wholesale amounts by an institution seeking to place funds under certain terms and sold through a registered broker-dealer to investors, typically in fully insured amounts. 

FDIC noted in the final rule that it intends that third parties that assist in the placement of brokered CDs, or any similar deposit placement arrangement with a similar purpose, will continue to be considered deposit brokers under this part of the deposit broker definition, regardless of any future innovations or re-structuring in the brokered CD market.

Exceptions to the Definition of “Deposit Broker”

FDI Act Section 29 provides nine statutory exceptions to the definition of deposit broker and FDIC has previously established one regulatory exception to the definition. Originally, FDIC had proposed revisions to the following two exceptions:

  • The exception for an IDI, with respect to funds placed with that depository institution (IDI exception). 
  • The exception for an agent or nominee whose primary purpose is not the placement of funds with depository institutions (primary purpose exception).

The final rule takes a different approach than the proposed rule, as discussed below.

IDI Exception

The final rule did not adopt the proposed changes to the IDI exception. However, the final rule does provide some discussion with regard to why, including treatment of “dual-hatted” employees, which is worth noting.

The IDI exception excludes an IDI from the definition of deposit broker when it, or its employee, places funds at the institution. FDIC proposed changes to expand the IDI Exception to permit wholly owned subsidiaries that meet certain criteria to be eligible for the exception. As discussed above, the final rule’s definition of deposit broker does not include third parties that have an exclusive deposit placement arrangement with one IDI. Thus, wholly owned subsidiaries that would have met the proposed IDI exception, will not meet the “deposit broker” definition under the final rule. Thus, FDIC determined that expansion of the IDI exception was no longer necessary.

However, FDIC did take a moment in the final rule to discuss applicability of the IDI exception to “dual-hatted” or “dual” employee. FDIC noted that the statutory “employee” exception applies solely to an “employee” who satisfies the definition of an employee provided by the statute. The statute defines an “employee” as any employee: 

  • Who is employed exclusively by the IDI; 
  • Whose compensation is primarily in the form of a salary; 
  • Who does not share such employee’s compensation with a deposit broker; and 
  • Whose office space or place of business is used exclusively for the benefit of the IDI, which employs such individual.

FDIC stated that the exception does not apply to a contractor or dual employee because they are not employed exclusively by IDIs. The exception would, however, apply to “dual-hatted” employees that are employed exclusively by the institution so long as the employees meet each of the other statutory elements of the “employee” definition.

Primary Purpose Exception

Under the final rule, the primary purpose exception applies when, with respect to a particular business line, the primary purpose of the agent’s or nominee’s business relationship with its customers is not the placement of funds with depository institutions, and whether an agent or nominee qualifies for the primary purpose exception will be based on analysis of the agent’s or nominee’s relationship with those customers.

The final rule also identifies a number of specific business relationships, known as “designated business exceptions,” as meeting the primary purpose exception. Additionally, businesses that do not qualify for a designated exception may submit an application to FDIC for consideration under the primary purpose exception. Please refer to the final rule for the full list of business relationships that qualify for the designated exceptions.

Interest Rate Restrictions

Under Section 29 of the FDI Act, well capitalized institutions are not subject to any interest rate restrictions. However, the statute imposes interest rate restrictions on IDIs that are less than well capitalized, as defined in Section 38 of the FDI Act. The statutory interest rate restrictions generally limit a less than well capitalized institution from offering rates on deposits that significantly exceed rates in its prevailing market.

Under current regulations, an institution that is not well capitalized generally may not offer deposit rates more than 75 basis points above the national rate for deposits of similar size and maturity. The national rate is currently defined as a simple average of rates paid by all IDIs and branches that offer and publish rates for specific products. If an institution believes that the posted national rates do not represent the actual rates in the institution’s local market area, the institution may present evidence to FDIC that the prevailing rate in a particular market is higher than the national rate. If FDIC agrees with the evidence, the institution would be permitted to pay as much as 75 basis points above the local prevailing rate for deposits solicited in its local market area. 

The final rule amends FDIC’s methodology for calculating the national rate, the national rate cap, and the local rate cap. The final rule also provides a new simplified process for institutions that seek to offer a competitive rate when the prevailing rate in an institution’s local market area rate exceeds the national rate cap. The following highlights changes made by the final rule.

National Rate Methodology and National Rate Cap

The final rule adopts the national rate methodology generally as proposed but revised it to include the rates offered by credit unions. 

The national rate cap now is the higher of: 

  1. The national rate (weighted average of rates paid by all IDIs and credit unions on a given deposit product, where the weights are each institution’s market share of deposit deposits), plus 75 basis points; or
  2. 120 percent of the current yield on similar maturity U.S. Treasury obligations, plus 75 basis points, or in the case of nonmaturity deposits, the federal funds rate plus 75 basis points. 

Local Market Rate Cap

The final rule adopts a local market rate cap of 90 percent of the highest offered rate in the institution’s local market geographic area. A less than well capitalized institution would be permitted to provide evidence that any bank or credit union with a physical presence in its local market area offers a rate on a particular deposit product in excess of the national rate cap. The local market area could include the State, county, or metropolitan statistical area, in which the IDI accepts or solicits deposits. 

The final rule also eliminates the current two-step process where less than well capitalized institutions request a high rate determination from FDIC and, if approved, calculate the prevailing rate within local markets. Instead, a less than well capitalized institution would be required to notify FDIC that it intends to offer a rate that is above the national rate cap and provide evidence that an IDI or credit union with a physical presence in the less than well capitalized institution’s normal market area is offering a rate on a particular deposit product in its local market area in excess of the national rate cap.

Conclusion

The final rule represents long-awaited changes to brokered deposit rules. As discussed above, the final rule establishes a new framework for the definition of who is a “deposit broker” and methodology for calculating the national rate and national rate cap for certain deposit products. 

The final rule is effective on April 1, 2021. The mandatory compliance date is January 1, 2022. Entities may begin relying upon the provisions of the final rule as of April 1, 2021, and will have to comply with any applicable reporting requirements. It is also worth noting that the mandatory compliance date of January 1, 2022, permits entities to continue reliance upon existing staff advisory opinions or other interpretations until that date. However, upon January 1, 2022, previous staff advisory opinions will be moved to inactive status.

It is also important to note that due to the recent change in the federal administration, it is possible a delay in the implementation of the final rule may occur as a result of the new administration reviewing the rule. The review of a rule that has been finalized but not yet published, or is not yet effective, is a routine review any time there is a change in administration. WBA will continue to monitor the status of this and other rules under review. The notice may be viewed at: www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/regulatory-freeze-pending-review/ 

The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2021-01-22/pdf/2020-28196.pdf

By, Ally Bates

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FDIC Survey: How America Banks

A recent survey published by the FDIC highlights the changes in how Americans use banks. The changes in this report range from banking methods to the frequency of visits to a teller. Below is a summary of how bank usage varies among banked households. 

Banking Methods 

Regarding the primary method that banked households have used in the past 12 months to access their accounts, mobile banking has increased the most. Accessing banks via mobile devices rose notably over the course of five years, from 9.5% in 2015, 15.6% in 2017, and 34.0% in 2019.  Part of this shift is due to the growth of younger banked households where mobile banking as a primary means of access has almost doubled between 2017 and 2019. 

The increase in mobile banking has overthrown online banking as the most prevalent method of accessing accounts. In fact, online banking decreased substantially while the use of bank tellers, ATMs, and telephone banking declined only modestly. Despite these recent declines, online banking, kiosks, and tellers are still prominent methods of access for banked households. For more on this, WBA freelance writer Paul Gores has written an article detailing the switch from in-person to virtual banking. 

Branch Visits 

The FDIC notes that 83% of banked households visited a branch within the last 12 months, a number which is down by 3% from 2017. Nine in ten rural households visited a branch at some point throughout the year. Among the surveyed population that visited a branch ten or more times include approximately four in ten rural households and nearly 60% of banked households that used bank tellers as their primary method. 

Customer Satisfaction 

Also addressed in the survey is customer satisfaction with their primary bank and their beliefs of how clearly their bank communicates account fees. 

In 2019, three in four banked households claimed to be satisfied with their bank, while less than 3% were either not very satisfied, not satisfied, or did not know. Two in three customers thought their banks communicated fees clearly. Overall, the large majority of banked households were satisfied with the way their banks operated and communicated.  

The full report breaks down these changes further based on factors such as family income, education, and age group.  

View the full report. 

By, Ally Bates

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WBA Files Comment Letter on CRA

On April 8, 2020 WBA filed comments on the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation’s (agencies) proposed revisions to the Community Reinvestment Act (CRA) regulations (proposed rule). The agencies proposed to clarify which activities qualify for CRA credit, update where activities count for CRA credit, create a new method for measuring CRA performance, and new CRA-related data collection, recordkeeping, and reporting requirements. 

WBA commented that while banks remain committed to the CRA goals, the regulation has become overly complex, unpredictable, and not kept pace with modern trends and technology. In the letter, WBA requested additional clarity on various aspects of the methods mentioned above, recommended changes, and highlighted the need for significant reduction in burden by providing examples of costs. Lastly, WBA urged all three banking agencies—the OCC, FDIC, and Federal Reserve—to develop a final CRA rule that is issued on an interagency basis.

View the Comment Letter.

By, Ally Bates

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January 2020 Compliance Journal: Regulatory Spotlight

The below article is the Regulatory Spotlight section of the January 2020 Compliance Journal. The full issue may be viewed by clicking here.

Agencies Finalize Regulatory Capital Treatment for High Volatility Commercial Real Estate (HVCRE) Exposures.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) are adopting a final rule to revise the definition of “high volatility commercial real estate (HVCRE) exposure” in the regulatory capital rule. This final rule conforms this definition to the statutory definition of “high volatility commercial real estate acquisition, development, or construction (HVCRE ADC) loan,” in accordance with section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The final rule also clarifies the capital treatment for loans that finance the development of land under the revised HVCRE exposure definition. The final rule is effective 04/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-13/pdf/2019-26544.pdf. Federal Register, Vol. 84, No. 240, 12/13/2019, 68019-68034.

Agencies Finalize Amendment to Community Reinvestment Act Regulations.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) are amending their Community Reinvestment Act (CRA) regulations to adjust the asset-size thresholds used to define “small bank” or “small savings association” and “intermediate small bank” or “intermediate small savings association.” As required by the CRA regulations, the adjustment to the threshold amount is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). The rule is effective 01/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-27288.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71738-71740.

Agencies Propose Community Reinvestment Act Regulations.

The Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) propose regulations that could encourage banks to provide billions more each year in Community Reinvestment Act-qualified lending, investment, and services by modernizing the Community Reinvestment Act (CRA) regulations to better achieve the law’s underlying statutory purpose of encouraging banks to serve their communities by making the regulatory framework more objective, transparent, consistent, and easy to understand. To accomplish these goals, this proposed rule would strengthen the CRA regulations by clarifying which activities qualify for CRA credit, updating where activities count for CRA credit, creating a more transparent and objective method for measuring CRA performance, and providing for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and reporting. Comments are due 03/09/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-09/pdf/2019-27940.pdf. Federal Register, Vol. 85, No. 6, 01/09/2020, 1204-1265.

Agencies Announce Review of Definitions in Credit Risk Retention Regulations.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency (OCC), the Department of Housing and Urban Development (HUD), the Federal Housing Finance Agency (FHFA), and the Securities and Exchange Commission (SEC) are providing notice of the commencement of the review of the definition of qualified residential mortgage; the community-focused residential mortgage exemption; and the exemption for qualifying three-to-four unit residential mortgage loans, in each case as currently set forth in the Credit Risk Retention Regulations as adopted by the agencies. Comments on the review are due 02/03/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-20/pdf/2019-27490.pdf. Federal Register, Vol. 84, No. 245, 12/20/2019, 70073-70076.

Agencies Extend Comment Period for Application of the Uniform Financial Institutions Rating System.

The Board of Governors of the Federal Reserve System (FRB), and the Federal Deposit Insurance Corporation (FDIC) published a request for information (RFI) in the Federal Register on 10/31/2019 seeking information and comments from interested parties regarding the consistency of ratings assigned by the agencies under the Uniform Financial Institutions Rating System (UFIRS). The agencies have determined that an extension of the comment period until 02/28/2020, is appropriate. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-27/pdf/2019-27848.pdf. Federal Register, Vol. 84, No. 248, 12/27/2019, 71413-71414.

Agencies Extend Comment Period for Margin and Capital Requirements for Covered Swap Entities.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Federal Housing Finance Agency (FHFA), and the Farm Credit Administration (FCA) are reopening the comment period for the notice of proposed rulemaking published in the Federal Register on 11/07/2019, to amend the agencies’ regulations that require swap dealers and security-based swap dealers under the agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Proposed Swap Margin Amendments). Reopening the comment period that closed on 12/09/2019, will allow interested persons additional time to analyze and comment on the Proposed Swap Margin Amendments. The new comment due date is 01/23/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28052.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71833-71834.

CFPB Issues Fall 2019 Supervisory Highlights.

The Bureau of Consumer Financial Protection (CFPB) is issuing its twentieth edition of its Supervisory Highlights. In this special issue of Supervisory Highlights, CFPB reports examination findings in the areas of consumer reporting and furnishing of information to consumer reporting companies, pursuant to the Fair Credit Reporting Act and Regulation V. The report does not impose any new or different legal requirements, and all violations described in the report are based only on those specific facts and circumstances noted during those examinations. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-11/pdf/2019-26669.pdf. Federal Register, Vol. 84, No. 238, 12/11/2019, 67725-67732.

CFPB Amends Official Commentary on Regulation C.

CFPB is amending the official commentary that interprets the requirements of CFPB’s Regulation C (Home Mortgage Disclosure) to reflect the asset-size exemption threshold for banks, savings associations, and credit unions based on the annual percentage change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). Based on the 1.6 percent increase in the average of the CPI–W for the 12-month period ending in November 2019, the exemption threshold is adjusted to $47 million from $46 million. Therefore, banks, savings associations, and credit unions with assets of $47 million or less as of 12/31/2019, are exempt from collecting data in 2020. The commentary is effective 01/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-20/pdf/2019-27522.pdf. Federal Register, Vol. 84, No. 245, 12/20/2019, 69993-69995.

CFPB Amends Official Commentary of Regulation Z.

CFPB is amending the official commentary that interprets the requirements of the Bureau’s Regulation Z (Truth in Lending) to reflect a change in the asset-size threshold for certain creditors to qualify for an exemption to the requirement to establish an escrow account for a higher-priced mortgage loan. This amendment is based on the annual percentage change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). Based on the 1.6 percent increase in the average of the CPI–W for the 12-month period ending in November 2019, the exemption threshold is adjusted to $2.202 billion from $2.167 billion. Therefore, creditors with assets of less than $2.202 billion (including assets of certain affiliates) as of 12/31/2019, are exempt, if other requirements of Regulation Z also are met, from establishing escrow accounts for higher-priced mortgage loans in 2020. The commentary is effective 01/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-23/pdf/2019-27523.pdf. Federal Register, Vol. 84, No. 246, 12/23/2019, 70410-70413.

CFPB Issues Semiannual Regulatory Agenda. 

CFPB published its agenda as part of the Fall 2019 Unified Agenda of Federal Regulatory and Deregulatory Actions. CFPB reasonably anticipates having the regulatory matters identified below under consideration during the period from 10/01/2019, to 09/30/2020. The next agenda will be published in spring 2020 and will update this agenda through spring 2021. Publication of this agenda is in accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The information is current as of 07/25/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-26636.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 71232-71236.

FSOC Finalizes Interpretive Guidance on Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies. 

The Financial Stability Oversight Council (FSOC) issued a final interpretive guidance, which replaces FSOC’s existing interpretive guidance on nonbank financial company determinations, describes the approach FSOC intends to take in prioritizing its work to identify and address potential risks to U.S. financial stability using an activities-based approach, and enhancing the analytical rigor and transparency in the processes FSOC intends to follow if it were to consider making a determination to subject a nonbank financial company to supervision by the Board of Governors of the Federal Reserve System (FRB). The guidance is effective 01/29/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-27108.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71740-71770.

FRB Issues Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies.

The Board of Governors of the Federal Reserve System (FRB) is providing notice of the 2019 aggregate global indicator amounts, as required under FRB’s rule regarding risk-based capital surcharges for global systemically important bank holding companies (GSIB surcharge rule). The aggregate global indicator amounts are in the table in the notice. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-19/pdf/2019-27414.pdf. Federal Register, Vol. 84, No. 244, 12/19/2019, 69744-69745.

FRB Issues Correction to Capital Simplification for Qualifying Community Banking Organizations.

FRB issued a notice regarding a final rule published in the Federal Register on 11/13/2019 that provides for a simple measure of capital adequacy for certain community banking organization. The final rule had two erroneous amendment instructions. The notice corrects those errors. The correction is effective 01/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27717.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 70887.

FDIC Proposes Amendments to Policy Regarding Requests for Participation in the Affairs of an Insured Depository Institution by Convicted Individuals.

The Federal Deposit Insurance Corporation (FDIC) proposes to revise the existing regulations requiring persons convicted of certain criminal offenses to obtain prior written consent before participating in the conduct of the affairs of any depository institution to incorporate the FDIC’s existing Statement of Policy, and to amend the regulations setting forth the FDIC’s procedures and standards applicable to an application to obtain the FDIC’s prior written consent. Following the issuance of final regulations, the FDIC’s existing Statement of Policy would be rescinded. The proposed incorporation of the Statement of Policy into the FDIC’s regulations would provide for greater transparency as to its application, provide greater certainty as to the FDIC’s application process and help both insured depository institutions and affected individuals to understand its impact and to potentially seek relief from its provisions. Comments are due 02/14/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-26351.pdf. Federal Register, Vol. 84, No. 241, 12/14/2019, 68353-68363.

FDIC Rescinds Outdated Statements of Policy.

FDIC initiated a comprehensive review of its Statements of Policy to identify those that were outdated. Additionally, FDIC, in the 2017 report required by the Economic Growth and Regulatory Paperwork Reduction Act, committed to reviewing published guidance to identify any guidance that should be revised or rescinded because it is out-of-date or otherwise no longer relevant. In furtherance of these initiatives, the FDIC Board of Directors approved a proposal to rescind four FDIC Statements of Policy, which was published in the Federal Register on 09/30/2019, with a 30-day comment period. FDIC did not receive any comments on the proposed rescission of these Statements of Policy and is rescinding them effective 12/31/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-23/pdf/2019-27225.pdf. Federal Register, Vol. 84, No. 246, 12/23/2019, 70413-70415.  

FDIC Requests Comment on Information Collections.

  • FDIC announced it seeks comment on the information collection titled Transfer Agent Registration and Amendment Form. FDIC also gave notice that it sent the collection to OMB for review. Comments are due 01/15/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-26981.pdf. Federal Register, Vol. 84, No. 241, 12/16/2019, 68446-68449.
  • FDIC announced it seeks comment on the information collection titled Notification of Performance of Bank Services. FDIC also gave notice that it sent the collection to OMB for review. Comments are due 02/07/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-08/pdf/2020-00058.pdf. Federal Register, Vol. 85, No. 5, 01/08/2020, 895-901.

FDIC Issues Notice of Designated Reserve Ratio for 2020.

FDIC designates that the Designated Reserve Ratio (DRR) for the Deposit Insurance Fund shall remain at 2 percent for 2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-18/pdf/2019-27235.pdf. Federal Register, Vol. 84, No. 243, 12/18/2019, 69373.

FDIC Issues Response to Exception Requests Pursuant to Recordkeeping for Timely Deposit Insurance Determination.

FDIC is providing notice to covered institutions that it has granted a time-limited exception concerning the requirement to maintain official custodian information in deposit account records for government deposit accounts, a time-limited exception concerning the requirement to maintain accurate beneficiary information in deposit account records for informal revocable trust accounts, and an indefinite exception concerning the requirement to maintain certain identifying information for beneficial owners of deposits in low balance, short-term prepaid card accounts. The grants of exception relief were effective 11/26/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-23/pdf/2019-27626.pdf. Federal Register, Vol. 84, No. 246, 12/23/2019, 70527-70528.

FDIC Issues Termination Receiverships.

FDIC as Receiver for former depository institutions, intends to terminate its receivership for the institutions listed in the notice. The liquidation of the assets for each receivership has been completed. To the extent permitted by available funds and in accordance with law, the Receiver will be making a final dividend payment to proven creditors. Based upon the foregoing, the Receiver has determined that the continued existence of the receiverships will serve no useful purpose. Consequently, notice is given that the receiverships shall be terminated, to be effective no sooner than thirty days after the date of this notice. If any person wishes to comment concerning the termination of any of the receiverships, such comment must be made in writing, identify the receivership to which the comment pertains, and be sent within thirty days of the date of this notice to: Federal Deposit Insurance Corporation, Division of Resolutions and Receiverships, Attention: Receivership Oversight Department 34.6, 1601 Bryan Street, Dallas, TX 75201. No comments concerning the termination of the above-mentioned receiverships will be considered which are not sent within this time frame. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-19/pdf/2019-27397.pdf. Federal Register, Vol. 84, No. 244, 12/19/2019, 69743-69744.

OCC Proposes Amendments to Employment Contract Rule. 

The Office of the Comptroller of the Currency (OCC) issued a proposed rule that would implement changes recommended in the March 2017 Economic Growth and Regulatory Paperwork Reduction Act report, including the repeal of the OCC’s employment contract rule for Federal savings associations, and amend the OCC’s fiduciary rules. The proposed rule also would amend the OCC’s rule for conversions from mutual to stock form of a savings association to reduce burden, increase flexibility, and update cross-references. Additionally, the proposed rule would update cross-references to repealed and integrated rules, remove unnecessary definitions, and make technical changes to other OCC rules. Comments are due 03/09/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-08/pdf/2019-28074.pdf. Federal Register, Vol. 85, No. 5, 01/08/2020, 1052-1081.

OCC Requests Comment on Information Collections.

  • OCC announced it seeks comment on the information collection titled Extensions of Credit to Insiders and Transactions with Affiliates. OCC also gave notice that it sent the collection to OMB for review. Comments are due 02/10/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26809.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 68010-68011.
  • OCC announced it seeks comment on the information collection titled Financial Management Policies— Interest Rate Risk. OCC also gave notice that it sent the collection to OMB for review. Comments are due 02/10/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26808.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 68011-68012.
  • OCC announced it seeks comment on the information collection titled Guidance on Sound Incentive Compensation Policies. OCC also gave notice that it sent the collection to OMB for review. Comments are due 02/10/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26807.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 68012-68013.
  • OCC announced it seeks comment on the information collection titled Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Diversity Self-Assessment Template for OCC-Regulated Entities. OCC also gave notice that it sent the collection to OMB for review. Comments are due 01/15/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-27051.pdf. Federal Register, Vol. 84, No. 241, 12/16/2019, 68544-68545.
  • OCC announced it seeks comment on the information collection titled Retail Foreign Exchange Transactions. OCC also gave notice that it sent the collection to OMB for review. Comments are due 03/10/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-10/pdf/2020-00232.pdf. Federal Register, Vol. 85, No. 7, 01/10/2020, 1373-1374.

OCC Issues Correction to Regulatory Capital Rule.

OCC is making technical corrections to the Capital Simplification for Qualifying Community Banking Organizations final rule that appeared in the Federal Register on 11/13/2019. The technical corrections align the rule text in the final rule with changes made by other final rules. The technical corrections also include a conforming edit. The correction is effective 01/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-18/pdf/2019-27168.pdf. Federal Register, Vol. 84, No. 243, 12/18/2019, 69296-69298.

OCC Issues Inflation Adjustments for Civil Money Penalties.

OCC is providing notice of its maximum civil money penalties as adjusted for inflation. The inflation adjustments are required to implement the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The adjusted maximum amount of civil money penalties in this notice are applicable to penalties assessed on or after 01/01/2020, for conduct occurring on or after 11/02/2015. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28053.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71735-71737.

OCC Issues Correction to Other Real Estate Owned Rule.

OCC is correcting a final rule originally published in the Federal Register on 10/22/2019 revising the other real estate owned rule and making related technical amendments. The final rule had an effective date of 12/01/2019. On 11/21/2019, the OCC published a correction to that final rule in the Federal Register amending the final rule’s effective date to 01/01/2020. This document corrects and supplements the 11/21/2019, final rule. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28054.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71735.

HUD Requests Comment on Information Collections.

  • The Department of Housing and Urban Development (HUD) announced it seeks comment on the information collection titled FHA-Insured Mortgage Loan Servicing Involving the Loss Mitigation Program. HUD also gave notice that it sent the collection to OMB for review. Comments are due 01/13/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26697.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 67951-67952.
  • HUD announced it seeks comment on the information collection titled National Standards for the Physical Inspection of Real Estate (NSPIRE) Demonstration. HUD also gave notice that it sent the collection to OMB for review. Comments are due 01/13/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26695.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 67952-67953.
  • HUD announced it seeks comment on the information collection titled Nonprofit Application and Recertification for FHA Mortgage Insurance Programs. HUD also gave notice that it sent the collection to OMB for review. Comments are due 01/13/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26696.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 67951.
  • HUD announced it seeks comment on the information collection titled Housing Counseling Federal Advisory Committee (HCFAC). HUD also gave notice that it sent the collection to OMB for review. Comments are due 03/06/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-06/pdf/2019-28522.pdf. Federal Register, Vol. 85, No. 249, 01/06/2020, 522-523.

FEMA Issues Final Rule on Suspensions of NFIP Community Eligibility.

The Federal Emergency Management Agency (FEMA) issued a final rule which identifies communities in the states of Iowa, and Minnesota, where the sale of flood insurance has been authorized under the National Flood Insurance Program (NFIP) that are scheduled for suspension on the effective dates listed within the final rule because of noncompliance with the floodplain management requirements of the program. If FEMA receives documentation that the community has adopted the required floodplain management measures prior to the effective suspension date given in the final rule, the suspension will not occur and a notice of this will be provided by publication in the Federal Register on a subsequent date. The effective date of each community’s scheduled suspension is the third date listed in the third column of the tables in the final rule. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-26956.pdf. Federal Register, Vol. 84, No. 241, 12/16/2019, 68346-68348.

FEMA Issues Final Flood Hazard Determinations.

FEMA has issued a final notice which identifies communities in the states of Missouri, and Nebraska, where flood hazard determinations, which may include additions or modifications of Base Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, or regulatory floodways on the Flood Insurance Rate Maps (FIRMs) and where applicable, in the supporting Flood Insurance Study (FIS) reports have been made final. The FIRM and FIS report are the basis of the floodplain management measures that a community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in FEMA’s National Flood Insurance Program (NFIP). The final notice is effective 05/01/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-13/pdf/2019-26888.pdf. Federal Register, Vol. 84, No. 240, 12/13/2019, 68182-68184.

FEMA Issues Final Notices of Changes in Flood Hazard Determinations.

  • FEMA issued new or modified Base (1% annual-chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) for communities in the states of Illinois, and Indiana. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. The flood hazard determinations modified by each LOMR will be used to calculate flood insurance premium rates for new buildings and their contents. The effective date for each LOMR is indicated in the table in the final notice. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-27/pdf/2019-27962.pdf. Federal Register, Vol 84, No. 248, 12/27/2019, 71446-71448.
  • FEMA issued new or modified Base (1% annual-chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) for communities in the states of Illinois, Indiana, Michigan, and Ohio. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities. The flood hazard determinations modified by each LOMR will be used to calculate flood insurance premium rates for new buildings and their contents. The effective date for each LOMR is indicated in the table in the final notice. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-09/pdf/2020-00183.pdf. Federal Register, Vol. 85, No. 6, 01/09/2020, 1173-1176.

FEMA Issues Proposed Flood Hazard Determinations.

  • FEMA has requested comments on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the state of Iowa. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 03/26/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-27/pdf/2019-27960.pdf. Federal Register, Vol. 84, No. 248, 12/27/2019, 71444-71446.
  • FEMA has requested comments on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for communities in the state of Michigan. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). Comments are due 04/08/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-09/pdf/2020-00184.pdf. Federal Register, Vol. 85, No. 6, 01/09/2020, 1172-1173.

FEMA Withdraws Proposed Flood Hazard Determinations.

FEMA is withdrawing its proposed notice concerning proposed flood hazard determinations, which may include the addition or modification of any Base Flood Elevation, base flood depth, Special Flood Hazard Area boundary or zone designation, or regulatory floodway (herein after referred to as proposed flood hazard determinations) on the Flood Insurance Rate Maps and, where applicable, in the supporting Flood Insurance Study reports for Winneshiek County, Iowa and Incorporated Areas. The withdrawal is effective 12/13/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-13/pdf/2019-26889.pdf. Federal Register, Vol. 84, No. 240, 12/13/2019, 68186.

FinCEN Requests Comment on Information Collections.

  • The Financial Crimes Enforcement Network (FinCEN) announced it seeks comment on the information collection titled Renewal of Information Collection Requirements in connection with the Imposition of a Special Measure concerning Commercial Bank of Syria, including its subsidiary Syrian Lebanese Commercial Bank, as a financial institution of primary money laundering concern. FinCEN also gave notice that it sent the collection to OMB for review. Comments are due 02/18/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-19/pdf/2019-27359.pdf. Federal Register, Vol. 84, No. 244, 12/19/2019, 69822-69824.
  • FinCEN announced it seeks comment on the information collection titled Beneficial Ownership Requirements for Legal Entity Customers. FinCEN also gave notice that it sent the collection to OMB for review. Comments are due 02/28/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28037.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 72137-72138.

FinCEN Solicits Applications for Bank Secrecy Act Advisory Group.

FinCEN is inviting the public to nominate financial institutions, trade groups, and non-federal regulators or law enforcement agencies for membership on the Bank Secrecy Act Advisory Group. New members will be selected for three-year membership terms. Nominations are due 01/21/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-19/pdf/2019-27358.pdf. Federal Register, Vol. 84, No. 244, 12/19/2019, 69822.

Treasury Finalizes Regulations Relating to Withholding and Reporting Tax on Certain U.S. Source Income Paid to Foreign Persons. 

The Department of the Treasury (Treasury) issued final regulations that provide guidance on certain due diligence and reporting rules applicable to persons making certain U.S. source payments to foreign persons, and guidance on certain aspects of reporting by foreign financial institutions on U.S. accounts. The final regulations affect persons making certain U.S.-related payments to certain foreign persons and foreign financial institutions reporting certain U.S. accounts. The final regulations are effective 01/02/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-02/pdf/2019-27979.pdf. Federal Register, Vol. 85, No. 1, 01/02/2020, 192-206.

Treasury Proposes Regulations on Misdirected Direct Deposit Refunds.

Treasury issued proposed regulations to provide guidance on section 6402(n) of the Internal Revenue Code (Code), concerning the procedures for identification and recovery of a misdirected direct deposit refund. The regulations reflect changes to the law made by the Taxpayer First Act. The proposed regulations affect taxpayers who have made a claim for refund, requested the refund be issued as a direct deposit, but did not receive a refund in the account designated on the claim for refund. Comments are due 02/21/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-23/pdf/2019-27653.pdf. Federal Register, Vol. 84, No. 246, 12/23/2019, 70462-70466.

Treasury Proposes Amendments to Source of Income from Certain Sales of Personal Property.

Treasury issued proposed regulations modifying the rules for determining the source of income from sales of inventory produced within the United States and sold without the United States or vice versa. These proposed regulations also contain new rules for determining the source of income from sales of personal property (including inventory) by nonresidents that are attributable to an office or other fixed place of business that the nonresident maintains in the United States. Finally, these proposed regulations modify certain rules for determining whether foreign source income is effectively connected with the conduct of a trade or business within the United States. Comments are due 02/28/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-27813.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71836-71851.

Treasury Proposes Amendments to Federal Government Participation in the Automated Clearing House. 

Treasury is proposing to amend its regulation governing the use of the Automated Clearing House (ACH) Network by Federal agencies. Our regulation adopts, with some exceptions, the Nacha Operating Rules developed by Nacha, formerly known as NACHA—The Electronic Payments Association (Nacha), as the rules governing the use of the ACH Network by Federal agencies. Treasury is issuing this proposed rule to address changes that Nacha has made to the Nacha Operating Rules since the publication of the 2016 Nacha Operating Rules & Guidelines book. These changes include amendments set forth in the 2017, 2018, and 2019 Nacha Operating Rules & Guidelines books, including supplements thereto, with an effective date on or before 06/30/2021. Comments are due 02/03/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-03/pdf/2019-27261.pdf. Federal Register, Vol. 85, No. 2, 01/03/2020, 265-271.

Treasury Issues QFC Recordkeeping Requirement Exemption.

Treasury is issuing a determination regarding a request for an exemption from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The exemption is granted 01/02/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-02/pdf/2019-27801.pdf. Federal Register, Vol. 85, No. 1, 01/02/2020, 1-3.

Treasury Requests Comment on Information Collections.

  • Treasury announced it seeks comment on the information collection titled U.S. Business Income Tax Return. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 01/21/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-19/pdf/2019-27297.pdf. Federal Register, Vol. 84, No. 244, 12/19/2019, 69825-69830.
  • Treasury announced it seeks comment on the information collection titled Allocation and Qualified Equity Investment Tracking System. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 02/24/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27786.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 71078.
  • Treasury announced it seeks comment on the information collection titled New Markets Tax Credit Program Community Development Entity (CDE) Certification Application. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 02/24/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27788.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 71077.
  • Treasury announced it seeks comment on the information collection titled Relief for Certain Spouses of Military Personnel. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 02/24/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27751.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 71081-71082.
  • Treasury announced it seeks comment on the information collection titled Form 8233—Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 01/27/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-27/pdf/2019-27888.pdf. Federal Register, Vol. 84, No. 248, 12/27/2019, 71531-71534.
  • Treasury announced it seeks comment on the information collection titled Troubled Asset Relief Program—Making Home Affordable Participants. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 01/29/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28143.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 72140.
  • Treasury announced it seeks comment on the information collection titled Tax Exempt Forms and Schedules. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 01/30/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-31/pdf/2019-28274.pdf. Federal Register, Vol. 84, No. 250, 12/31/2019, 72435.
  • Treasury announced it seeks comment on the information collection titled Application By Survivors for Payment of Bond or Check Issued Under the Armed Forces Leave Act of 1946, as amended. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 03/03/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-03/pdf/2019-28422.pdf. Federal Register, Vol. 85, No. 2, 01/03/2020, 416-417.
  • Treasury announced it seeks comment on the information collection titled Request to Reissue U.S. Savings Bonds to a Personal Trust. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 03/03/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-03/pdf/2019-28423.pdf. Federal Register, Vol. 85, No. 2, 01/03/2020, 417.
  • Treasury announced it seeks comment on the information collection titled Minority Bank Deposit Program (MBDP) Certification Form for Admission. Treasury also gave notice that it sent the collection to OMB for review. Comments are due 03/03/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-03/pdf/2019-28423.pdf. Federal Register, Vol. 85, No. 2, 01/03/2020, 417.

Treasury Establish Prices for 2019 and 2020 United States Mint Numismatic Products.

Treasury is announcing pricing for United States Mint numismatic products. The pricing for the products may be viewed in the table in the notice. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-03/pdf/2019-28401.pdf. Federal Register, Vol. 85, No. 2, 01/03/2020, 418.

FHFA Proposes Amendments to Stress Test Rule.

The Federal Housing Finance Agency (FHFA) issued a proposed rule that would amend its stress testing rule, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). Specifically, the proposed rule would revise the minimum threshold for the regulated entities to conduct stress tests from $10 billion to $250 billion, remove the requirements for Federal Home Loan Banks (Banks) subject to stress testing, and remove the adverse scenario from the list of required scenarios. These amendments align FHFA’s rule with rules adopted by other financial institution regulators that implement the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) stress testing requirements, as amended by EGRRCPA. The proposed rule also makes certain conforming and technical changes. Comments are due 01/15/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-26950.pdf. Federal Register, Vol. 84, No. 241, 12/16/2019, 68350-68353.

SBA Issues Peg Rate.

The Small Business Administration (SBA) publishes an interest rate called the optional “peg” rate (13 CFR 120.214) on a quarterly basis. This rate is a weighted average cost of money to the government for maturities similar to the average SBA direct loan. This rate may be used as a base rate for guaranteed fluctuating interest rate SBA loans. This rate will be 1.88 percent for the January–March quarter of FY 2020. Pursuant to 13 CFR 120.921(b), the maximum legal interest rate for any third party lender’s commercial loan which funds any portion of the cost of a 504 project (see 13 CFR 120.801) shall be 6% over the New York Prime rate or, if that exceeds the maximum interest rate permitted by the constitution or laws of a given State, the maximum interest rate will be the rate permitted by the constitution or laws of the given State. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28188.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 72101.

SBA Requests Comment on Information Collections.

  • SBA announced it seeks comment on the information collection titled Statement of Personal History. SBA also gave notice that it sent the collection to OMB for review. Comments are due 03/03/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-09/pdf/2020-00175.pdf. Federal Register, Vol. 85, No. 6, 01/09/2020, 1189.
  • SBA announced it seeks comment on the information collection titled Generic Clearance for SBA Customer Experience Data Collections. SBA also gave notice that it sent the collection to OMB for review. Comments are due 02/10/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-10/pdf/2020-00209.pdf. Federal Register, Vol. 85, No. 7, 01/10/2020, 1368-1369.

FCA Proposes District Financial Reporting.

The Farm Credit Agency (FCA) proposes amending the regulation governing how a Farm Credit bank presents information on its related associations when preparing annual bank financial statements on a standalone basis. FCA proposes to provide an additional presentation option that would allow the related association financial information to be in a supplement. Comments are due 03/09/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-07/pdf/2019-27573.pdf. Federal Register, Vol. 85, No. 4, 01/07/2020, 647-649.

RHS Finalizes Amendments to Single Family Housing Guaranteed Loan Program.

The Rural Housing Service (RHS) has finalized changes to the single family housing guaranteed loan program (SFHGLP) regulation to streamline the loss claim process for lenders who have acquired title to property through voluntary liquidation or foreclosure; clarify that lenders must comply with applicable laws, including those within the purview of the Bureau of Consumer Financial Protection (CFPB); and better align loss mitigation policies with the mortgage industry. The final rule is effective 04/24/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27504.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 70881-70887.

RBC Finalizes Advanced Biofuel Payment Program.

The Rural Business-Cooperative Service (RBC) published an interim rule in the Federal Register on 02/11/2011. Through this action, RBS finalizes the rule based on public comments and new program requirements established in the Agricultural Improvement Act of 2018 (2018 Farm Bill). The final rule is effective 12/27/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-27/pdf/2019-27396.pdf. Federal Register, Vol. 84, No. 248, 12/27/2019, 71297-71303.

CCC Finalizes Amendments to Technical Assistance for Specialty Crops Program.

The Commodity Credit Corporation (CCC) issued a rule revising the Technical Assistance for Specialty Crops (TASC) program regulations to incorporate legislative changes introduced in the Agriculture Improvement Act of 2018 and to incorporate changes that conform the operation of the program to the requirements in the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Guidance) and Federal grant-making best practices. The rule is effective 12/23/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-23/pdf/2019-27248.pdf. Federal Register, Vol. 84, No. 246, 12/23/2019, 70393-70399.

CCC Finalizes Amendments to Foreign Market Development Program. 

CCC issued a rule revising the Foreign Market Development (FMD) program regulations to incorporate changes that conform the operation of the program to the requirements in the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Guidance) and Federal grant-making best practices. The rule is effective 01/09/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-09/pdf/2019-27964.pdf. Federal Register, Vol. 85, No. 6, 01/09/2020, 1083-1096.

CCC Issues Interim Final Rule on Environmental Quality Incentives Program.

CCC issued an interim final rule making changes to the Environmental Quality Incentives Program (EQIP) to conform to the Agriculture Improvement Act of 2018 (the 2018 Farm Bill). EQIP helps agricultural producers conserve and enhance soil, water, air, plants, animals (including wildlife), energy, and related natural resources on their land. Eligible lands include cropland, grassland, rangeland, pasture, wetlands, nonindustrial private forest land, and other agricultural land on which agricultural or forest-related products or livestock are produced and natural resource concerns may be addressed. Participation in the program is voluntary. The interim rule is effective 12/17/2019, comments are due 01/17/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-17/pdf/2019-26872.pdf. Federal Register, Vol. 84, No. 242, 12/17/2019, 69272-69293.

CCC Issues Interim Rule on Agricultural Conservation Easement Program.

CCC issued an interim rule that makes changes to the Agricultural Conservation Easement Program policies and procedures in the regulations to conform with the Agriculture Improvement Act of 2018 (the 2018 Farm Bill). The interim rule is effective 12/30/2019. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-01-06/pdf/2019-27883.pdf. Federal Register, Vol. 85, No. 3, 01/06/2020, 558-590.

CFTC Finalizes Amendments to Public Rulemaking Procedures.

The Commodity Futures Trading Commission (CFTC) is issuing a final rule that amends CFTC’s regulations to eliminate the provisions that set forth the procedures for the formulation, amendment, or repeal of rules or regulations. Because the Administrative Procedure Act (APA) governs CFTC’s rulemaking process, CFTC believes that it is unnecessary to codify the rulemaking process in a Commission regulation. The amended regulation is comprised solely of the procedure for filing petitions for rulemakings, as the APA does not address this process. The rule is effective 01/16/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-17/pdf/2019-27103.pdf. Federal Register, Vol. 84, No. 242, 12/17/2019, 68787-68790.

FASB Proposes Statement of Federal Financial Accounting Standards.

The Federal Accounting Standards Advisory Board (FASB) has issued an exposure draft of a proposed Statement of Federal Financial Accounting Standards titled Deferral of the Effective Date of SFFAS 54, Leases. The exposure draft is available on the FASB website at https://www.fasab.gov/documents-forcomment/. Copies can be obtained by contacting FASB at (202)512–7350. Respondents are encouraged to comment on any part of the exposure draft. Comments are due 01/31/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27679.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 70968-70969.

FTC Requests Comment on Information Collection.

The Federal Trade Commission (FTC) announced it seeks comment on the information collection titled Rule Governing Pre-sale Availability of Written Warranty Terms. FTC also gave notice that it sent the collection to OMB for review. Comments are due 03/02/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-31/pdf/2019-28194.pdf. Federal Register, Vol. 84, No. 250, 12/31/2019, 72362-72364.

FCC Requests Comment on Advanced Methods to Target and Eliminate Unlawful Robocalls.

The Federal Communications Commission (FCC) solicits input for the first staff report on call blocking. FCC seeks data and other information on the availability and effectiveness of call-blocking tools offered to consumers, the impact of FCC actions on illegal calls, the impact of call blocking on 911 services and public safety, and any other information that may inform FCC’s analysis of the state of deployment of advanced methods and tools to eliminate illegal and unwanted calls. Comments are due 01/29/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-30/pdf/2019-28136.pdf. Federal Register, Vol. 84, No. 249, 12/30/2019, 71888-71889.

NCUA Requests Comment on Information Collections.

  • The National Credit Union Administration (NCUA) announced it seeks comment on the information collection titled Monitoring Bank Secrecy, 12 CFR part 748.2. NCUA also gave notice that it sent the collection to OMB for review. Comments are due 01/13/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26767.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 67963.
  • NCUA announced it seeks comment on the information collection titled Written Reimbursement Policy, 12 CFR 701.33. NCUA also gave notice that it sent the collection to OMB for review. Comments are due 01/21/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-20/pdf/2019-27530.pdf. Federal Register, Vol. 84, No. 245, 12/20/2019, 70213-70214.
  • NCUA announced it seeks comment on the information collection titled Advertising of Excess Insurance. NCUA also gave notice that it sent the collection to OMB for review. Comments are due 01/30/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-31/pdf/2019-28240.pdf. Federal Register, Vol. 84, No. 250, 12/31/2019, 72383.

NCUA Delays Effective Date of Prompt Corrective Action Regulations.

NCUA issued a final rule to delay the effective date of both NCUA’s 10/29/2015 final rule regarding risk-based capital (2015 Final Rule) and NCUA’s 11/06/2018 supplemental final rule regarding risk-based capital (2018 Supplemental Rule), moving the effective date from 01/01/2020 to 01/01/2022. During the extended delay period, NCUA’s current PCA requirements will remain in effect. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-17/pdf/2019-27141.pdf. Federal Register, Vol. 84, No. 242, 12/17/2019, 68781-68787.

NCUA Issues CFR Correction.

NCUA issued a correction to the Code of Federal Regulations (CFR). In Title 12 of CFR, Parts 600 to 899, revised as of 01/01/2019, on page 700, in § 703.114, remove paragraph (3) that appears below paragraph (d). The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-18/pdf/2019-27403.pdf. Federal Register, Vol. 84, No. 243, 12/18/2019, 69298.

SSA Issues Rate for Assessment on Direct Payment of Fees to Representatives.

The Social Security Administration (SSA) announced that the assessment percentage rate under the Social Security Act (Act) is 6.3 percent for 2020. A claimant may appoint a qualified individual as a representative to act on his or her behalf in matters before SSA. If the claimant is entitled to past-due benefits and was represented either by an attorney or by a non-attorney representative who has met certain prerequisites, SSA withholds up to 25 percent of the past-due benefits and use that money to pay the representative’s approved fee directly to the representative. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-12/pdf/2019-26752.pdf. Federal Register, Vol. 84, No. 239, 12/12/2019, 67987-67988.

DOL Finalizes Regular Rate Under the Fair Labor Standards Act.

The Department of Labor (DOL) issued the regular rate under the Fair Labor Standards Act (FLSA). FLSA generally requires that covered, nonexempt employees receive overtime pay of at least one and one-half times their regular rate of pay for time worked in excess of 40 hours per workweek. The regular rate includes all remuneration for employment, subject to the exclusions outlined in section 7(e) of the FLSA. In this final rule, DOL updates a number of regulations on the calculation of overtime compensation both to provide clarity and to better reflect the 21st-century workplace. These changes will promote compliance with the FLSA, provide appropriate and updated guidance in an area of evolving law and practice, and encourage employers to provide additional and innovative benefits to workers without fear of costly litigation. The final rule is effective 01/15/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-26447.pdf. Federal Register, Vol. 84, No. 241, 12/16/2019, 68736-68776.

VA Proposes Specialty Education Loan Repayment Program. 

The Department of Veterans Affairs (VA) proposes to amend its regulations that govern scholarship programs to certain health care professionals. This rulemaking would implement the mandates of the VA MISSION Act of 2018 by establishing a Specialty Education Loan Repayment Program, which would assist VA in meeting the staffing needs of VA physicians in medical specialties for which VA has determined that recruitment or retention of qualified personnel is difficult. Comments are due 02/24/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-26/pdf/2019-27511.pdf. Federal Register, Vol. 84, No. 247, 12/26/2019, 70908-70913.

HHS Finalizes Amendments to Exchange Program Integrity.

The Department of Health and Human Services (HHS) issued a final rule revising standards relating to oversight of Exchanges established by states and periodic data matching frequency. This final rule also includes new requirements for certain issuers related to the collection of a separate payment for the portion of a plan’s premium attributable to coverage for certain abortion services. The final rule is effective 02/25/2020. The notice may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-12-27/pdf/2019-27713.pdf. Federal Register, Vol. 84, No. 248, 12/27/2019, 71674–71711.

By, Ally Bates

/by
,

Changes to Community Reinvestment Act Proposed by Regulators

The below article is the Special Focus section of the January 2020 Compliance Journal. The full issue may be viewed by clicking here.

On January 9, 2020 the OCC, Treasury, and FDIC (agencies) issued a joint notice of proposed rulemaking (proposed rule) to modernize Community Reinvestment Act (CRA) regulations. The proposed rule contains four main elements designed to encourage banks to serve their communities by making the regulatory framework more objective, transparent, consistent, and easy to understand. Specifically, the agencies have proposed to (1) clarify which activities qualify for CRA credit, (2) update where activities count for CRA credit, (3) create a more transparent and objective method for measuring CRA performance, and (4) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and reporting. Comments on the proposed rule are due March 9, 2020. 

Background 

Congress enacted the CRA in 1977 with the purpose of encouraging sound lending to all areas of a bank’s community. The OCC, FDIC, and Board of Governors of the Federal Reserve have since issued regulations to implement the statute. The proposed rule presents the first major revisions to CRA regulation since 1995.  

The agencies have acknowledged that over the past 25 years, technology and the expansion of interstate banking have transformed the financial services industry, how banks deliver their services, and how customers choose to bank. Recognizing the need for modernization, the agencies issued an Advance Notice of Proposed Rulemaking (ANPR) in 2018. WBA, along with bankers, trade groups, and other industries, offered feedback on the CRA framework through comments on the ANPR. Comments discussed how current CRA framework has not kept pace with changes in banking or technology and that the CRA regulations and guidance has become cumbersome, outdated, and complex. WBA’s comment letter highlighted points received by member banks, specifically challenges presented when:  

  • An activity qualifies for CRA credit during one exam, but not the next, 
  • A bank believes that an activity will receive CRA credit, but does not, and 
  • A bank is unable to obtain confirmation in advance that an activity will receive credit.   

The proposed rule would address these comments by clarifying and expanding what qualifies for CRA credit. That aspect of the rule is discussed below, along with select provisions. Note that this article is intended to summarize key provisions of the proposed rule rather than provide a comprehensive overview. For the complete rule please see the link at the end of the article. This article covers the four main elements of the rule: what counts for CRA credit, where activities count for CRA credit, measuring CRA performance, and CRA-related data collection. 

Clarifying and Expanding What Qualifies for CRA Credit 

Under the current CRA framework, qualifying activities generally fall into the category of retail banking or community development (CD) activities, depending on various considerations. Most banks face uncertainty as to what types of activities meet those considerations and thus, qualify for CRA credit. The proposed rule aims to remedy this in a few ways. Two are presented below: an expansion upon the definition of “qualifying activities” and the creation of a qualifying activities confirmation process alongside an illustrative list of qualifying activities. 

Qualifying Activities Criteria 

The proposed rule would define a “qualifying activity” as an activity that helps meet the credit needs of a bank’s community, particularly those individuals, areas, and populations with needs. Those criteria generally include activities that currently qualify for CRA credit while establishing the following new categories: 

  • A retail loan provided to: 
    • A low or moderate-income (LMI) individual or family,
    • A small business, or 
    • A small farm. 
  • A retail loan provided in Indian country. 
  • A retail loan that is a small loan to a business or a small loan to a farm located in a low- or moderate-income census tract. 
  • A CD activity that provides financing for or supports certain criteria. Examples include: 
    • Essential community facilities that partially or primarily benefit or serve LMI individuals or areas of identified need, 
    • Family farms, 
    • Financial literacy programs or education or homebuyer counseling, 
    • See the proposed rule at the end of this article for the complete list. 

Qualifying Activities Confirmation and Illustrative List 

Under the proposed rule, the agencies would establish an online process for a bank to seek confirmation as to whether an activity qualifies for credit.1 The agencies would inform the bank whether the activity qualifies, or the activity does not qualify, and then place the activity on a publicly available list. Through this process, the list would contain examples of activities, submitted by banks, that the agencies have determined qualify or do not qualify for credit. 

The list would also be revised at least every three years, through a public notice and comment process, to add activities that meet the criteria and to remove activities that no longer meet the criteria (e.g., if broadband were universally available and no longer considered to be essential infrastructure). An initial proposed list is available on the agencies’ websites and in section IV of the proposed rule. 
 
Expanding Where CRA Activity Counts 

Assessment areas under current CRA rules depend on brick-and-mortar bank locations, creating difficulties for reaching outside that area. The agencies have proposed to address this by creating two categories of assessment areas: “facility-based” and “deposit-based.”  

Facility-Based Assessment Area 
 
The proposed rule requires banks to delineate an assessment area encompassing each location where the bank maintains a main office, a branch, or a non-branch deposit-taking facility as well as the surrounding locations in which the bank has originated or purchased a substantial portion of its qualifying retail loans. The area must consist of:  

  • One whole metropolitan statistical area (using the metropolitan statistical area boundaries that were in effect as of January 1 of the calendar year in which the delineation is made),  
  • The whole nonmetropolitan area of a state, 
  • One or more whole, contiguous metropolitan divisions in a single metropolitan statistical area (using the metropolitan division boundaries that were in effect as of January 1 of the calendar year in which the delineation is made), or  
  • One or more whole, contiguous counties or county equivalents in a single metropolitan statistical area or nonmetropolitan area.  

Deposit-Based Assessment Area 
 
The proposed rule would require banks that receive more than 50 percent of their retail domestic deposits from outside of their facility-based assessment areas to delineate separate, non-overlapping “deposit-based” assessment areas in the smallest geography where they receive five percent or more of their retail domestic deposits. These deposit-based assessment areas must be delineated to consist of: 

  • One whole state,  
  • One whole metropolitan statistical area (using the metropolitan statistical area boundaries that were in effect as of January 1 of the calendar year in which the delineation is made),  
  • The whole nonmetropolitan area of a state, 
  • One or more whole, contiguous metropolitan divisions in a single metropolitan statistical area (using the metropolitan division boundaries that were in effect as of January 1 of the calendar year in which the delineation is made),  
  • The remaining geographic area of a state, metropolitan statistical area, nonmetropolitan area, or metropolitan division other than where it has a facility-based assessment area, or  
  • One or more whole, contiguous counties or county equivalents in a single metropolitan statistical area or nonmetropolitan area. 

Activity Outside of Assessment Area 

The proposed rule would permit banks to receive CRA credit for qualifying activities conducted outside of their assessment areas at the bank level. Under this approach, banks would still be encouraged to meet local community needs where they have branches and depositors but would be given flexibility to serve other communities with distinct needs as these activities would be considered when calculating the overall dollar value of their qualifying activities under the proposed rule. The goal of this framework would be to reduce the number of areas where there are more banks that want to engage in CD activities than there is need for those activities (known as CD hot spots) and areas where there is a great need for CD activities but few banks that engage in those activities (known as CD deserts). 

Providing an Objective Method to Measure CRA Activity

Current CRA regulations evaluate a bank’s CRA performance on generally undefined terms through a relatively unspecified process. The proposed rule would attempt to provide a more objective, clear, and consistent assessment by establishing new, general performance standards for institutions that are not small banks. Small banks could opt into the general performance standards, while those that do not would be evaluated under the small bank performance standards consistent with current regulation. 

Under the general performance standards, banks would receive a presumptive rating based on what performance standards are met within a given category. Banks would be evaluated on CRA performance at a bank-level and in each assessment area. The bank-level performance standards are based upon: 

  • CRA evaluation measures, 
  • Assessment area ratings (see below), and 
  • Community development minimums.

The assessment area performance standards are based upon:  

  • Retail lending distribution tests, 
  • CRA evaluation measures, and 
  • Community development minimums. 

CRA Evaluation Measure 
 
A bank’s bank-level CRA evaluation measure is the sum of:  

  • The bank’s annual bank-level qualifying activities values2 divided by the average quarterly value of the bank’s retail domestic deposits as of the close of business on the last day of each quarter for the same period used to calculate the annual qualifying activities value, and  
  • The number of the bank’s branches located in low- or moderate-income census tracts, distressed areas, underserved areas, and Indian country divided by its total number of branches as of the close of business on the last day of the same period used to calculate the annual qualifying activities value multiplied by .01. 

A bank’s assessment area CRA evaluation measure is determined in each assessment area and is the sum of:  

  • The bank’s annual assessment area qualifying activities value divided by the average quarterly value of the bank’s assessment area retail domestic deposits as of the close of business on the last day of each quarter for the same period used to calculate the annual assessment area qualifying activities value,  
  • The number of the bank’s branches located in low- or moderate-income census tracts in the assessment area divided by its total number of branches in the assessment area as of the close of business on the last day of the same period used to calculate the annual assessment area qualifying activities value multiplied by .01, and 
  • Annual assessment area CRA evaluation measures for each year in the evaluation period, separately for each assessment area. 

Retail Lending Distribution Tests 

The retail lending distribution tests would evaluate a bank’s originations in each assessment area using both a geographic distribution test and a borrower distribution test. Both the geographic distribution test and the borrower distribution test would apply for small loans to businesses and farms. The borrower distribution test would apply, in addition, for home mortgage and consumer lending. 

To pass the geographic distribution test for both the small loan to a business product line and the small loan to a farm product line, a bank’s percentage of such loans in low- or moderate income census tracts originated during the evaluation period in the assessment area must meet or exceed the threshold established for either the associated geographic demographic comparator or the associated geographic peer comparator.  

  • The geographic demographic comparator threshold is 55 percent of the percentage of businesses or farms in low- and moderate-income census tracts in the assessment area.  
  • The geographic peer comparator threshold is 65 percent of the percentage of small loans to businesses or farms in low- and moderate income census tracts originated by all banks evaluated under the general performance standards. 

To pass the borrower distribution test for the home mortgage lending product line, a bank’s percentage of home mortgage loans to low- and moderate income individuals and families originated during the evaluation period in the assessment area must meet or exceed the threshold established for either the associated borrower demographic comparator or the associated borrower peer comparator.  

  • The borrower demographic comparator threshold is 55 percent of the percentage of low- and moderate income families in the assessment area.  
  • The demographic peer comparator threshold is 65 percent of the percentage of home mortgage loans to low- or moderate-income individuals and families originated by all banks evaluated under the general performance standards. 

Community Development Minimum 

The community development minimum would be determined by taking the quantified value of community development loans and community development investments in the assessment area during the evaluation period, divided by the average quarterly value of the bank’s assessment area retail domestic deposits as of the close of business on the last day of each quarter of the evaluation period. To achieve a rating of outstanding or satisfactory, this value must meet or exceed 2 percent. 

Data Collection, Recordkeeping, and Reporting 

Reporting The current CRA framework requires banks to collect and report a variety of data on loans. However, small banks, as defined under the current rule, generally are exempt from these requirements. The current framework also does not collect data on all CRA activity. Under the proposed rule, there would be separate data collection and reporting requirements for banks subject to the general performance standards and for banks subject to the small bank performance standards. Banks evaluated under the general performance standards would be required to collect and maintain extensive information such as retail lending distribution tests results, CRA evaluation measures calculations, and presumptive ratings determinations. Banks would also be required to collect and maintain records of all qualifying and non-qualifying retail loans, assessment area lists, qualifying activities data, and the location of retail loans, and retail domestic deposit data.  

Conclusion 

The proposed rule is the industry’s opportunity to comment on its experiences under current CRA, and what it would like to see in a new rule. The Federal Reserve did not join on the proposed rule, but has indicated its own plans to update its CRA regulations. As the process continues, with House Financial Services hearings being conducted in January of 2020, WBA will continue to monitor all activity on CRA reform to keep its membership informed. WBA plans to submit comments on the proposed rule. To craft a meaningful comment letter, WBA encourages banks to provide us with their thoughts and concerns. In addition, WBA encourages all members to consider writing comments on the proposed rule their own.  

The proposed rule can be found by clicking here.
 
To assist WBA in crafting a meaningful comment letter, reach out to WBA’s Scott Birrenkott at: sbirrenkott@wisbank.com

  1. This process would be optional, and banks would not be required to use this process.
  2. To better understand “bank-level qualifying activities” the proposed rule provides an example: [qualifying loans on balance sheet for at least 90 days and CD investments] + [twenty five percent of the origination value of qualifying loans sold within 90 days of origination] = [CD services and monetary and in-kind donations].

By, Ally Bates

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Events

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2022 Supervisory Priorities Explained

Are you prepared for your next examination? Do you understand the 2022 supervisory priorities? Unfortunately, it seems that 2022 is not starting out any better than 2021. Thus, the regulators continue to “covidize” examination expectations to recognize the pandemic’s increasing impact on banking operations and a rapidly changing economic landscape.

AFTER THIS WEBINAR YOU’LL BE ABLE TO:

  • Understand the focus of FDIC 2022 examinations
  • Appreciate the impact of the recent supervisory priorities
  • Use improved examination preparation strategies
  • Access insightful examination resources

WEBINAR DETAILS
Big or small, well run or not, every bank will undergo regular and rhythmical examinations. Fortunately, it’s an open-book test! The Risk Management Manual of Examination Policies and Consumer Compliance Examination Manual offer a bird’s-eye view of the entire process. Imagine being able to maximize the examination cycle rather than dread it or being in a position to tell your story effectively rather than defending every operational decision and accounting entry.

This program will go through the new technology and examination strategies that will help your institution thrive during the next exam. From available resources to a review of recent examination changes, this is a must-attend webinar. Join us to learn the best way to navigate the nature and scope of the exam as well as the best available strategies to effectively present your business plan and mission to examiners.

WHO SHOULD ATTEND?
This informative session is designed for senior executives, directors, Audit Committee members, managers, compliance personnel, audit staff, and anyone involved with the examination process.

TAKE-AWAY TOOLKIT

  • Recent FDIC supervisory highlights
  • Regulatory guidance on examinations
  • Checklist of FDIC resources
  • PDF of slides and speaker’s contact info for follow-up questions
  • Attendance certificate provided to self-report CE credits
  • Employee training log
  • Interactive quiz

NOTE: All materials are subject to copyright. Transmission, retransmission, or republishing of any webinar to other institutions or those not employed by your agency is prohibited. Print materials may be copied for eligible participants only.

MEET THE PRESENTER – David A. Reed, JD, Reed & Jolly, PLLC
Attorney, author, consultant, and nationally recognized speaker, David Reed is a partner in the law firm of Reed & Jolly, PLLC. He provides guidance to financial institutions on establishment and revision of policies and procedures, organizational compliance, collections, security, contractual agreements, regulatory matters, and corporate governance. His engaging speaking style has made him a nationwide lecturer on regulatory compliance, consumer lending, bankruptcy, and collections.

A former trial attorney and vice president and general counsel of a large regional financial institution, Reed is also a Certified Fraud Examiner. He is particularly known as an expert in the areas of operations, bankruptcy, and collections. He has trained state and federal examination staff on numerous issues, including BSA, ID theft red flags, SAFE Act, third-party contract management, and bankruptcy.

REGISTRATION OPTIONS

  • $245 – Live Webinar Access
  • $245 – OnDemand Access + Digital Download
  • $320 – Both Live & On-Demand Access + Digital Download
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