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FDIC rescinding proposed rules

ICBA commended the FDIC board of directors for withdrawing three proposed rules that would harm community banks and the communities they serve.

The FDIC announced it is withdrawing proposals to:

• Revise its brokered deposits framework so more deposits would be considered brokered and fewer would be considered core deposits.
• Impose new diversity and independence requirements to bank boards, as well as other large bank corporate governance standards, on community banks.
• Apply new incentive-based compensation standards to community banks despite a lack of support from all of the regulatory agencies that must participate in the rulemaking according to statute.

In a national news release, ICBA President and CEO Rebeca Romero Rainey said the proposals, if finalized, would have restricted bank liquidity, conflicted with state laws, imposed sweeping new requirements on bank boards, and significantly departed from current practice.

The FDIC also announced the withdrawal of a proposed rule that would apply the agency’s regulations under the Change in Bank Control Act to large asset managers that acquire controlling shares in FDIC-supervised institutions.

The FDIC said if it pursues regulatory action on these matters in the future, it will do so by publishing new proposals or other issuances consistent with the Administrative Procedure Act.

Source: ICBA; FDIC

CFPB….to be or not to be?

The CFPB leadership plans to lay off nearly all of its 1,700 employees while initiating the agency's shutdown, CNBC reported, citing employees' testimonies. In statements released Feb. 27, federal employees reported that discussions about the mass layoffs occurred during meetings with CFPB leaders and members of Elon Musk's Department of Government Efficiency (DOGE), the report said.

A federal judge for the District of Maryland, extended a temporary restraining order preventing the CFPB from transferring funds back to the Federal Reserve or the Treasury Department, amid concerns raised by plaintiffs about the agency's intentions, Bloomberg Law reported, citing a court order.

However, the Trump administration denied claims that it intends to dismantle the Consumer Financial Protection Bureau, Politico reported, citing a court filing.

In recent filings, US Justice Department lawyers contested allegations from a union representing CFPB workers, who sought to halt actions they characterized as efforts to undermine the agency, the report said.

"The predicate to running a 'more streamlined and efficient bureau' is that there will continue to be a CFPB," acting Director Russell Vought said in a motion filed Feb. 24 in federal court.

Vought said prior administrations have routinely paused policy decisions to reassess ongoing initiatives and attributed the agency's temporary shutdown to disruptive protests rather than an intent to eliminate the bureau.

The court has since issued a preliminary injunction to pause any firings at the CFPB pending further hearings.

In the court filing, the administration noted that it has nominated Jonathan McKernan, a former board member of the Federal Deposit Insurance Corp., to lead the CFPB.

During a Feb. 27 confirmation hearing, McKernan emphasized his commitment to uphold the law and the bureau's mandates while facing intense scrutiny from lawmakers regarding the agency's future under the Trump administration.

"Under my watch, the CFPB will take all steps necessary to implement and enforce the federal consumer financial laws and perform each of its other statutorily assigned functions. But the CFPB will do this by centering its regulation on real risks to consumers and by focusing its enforcement on bad actors," McKernan said in his written testimony.

Source: S&P Global Market Intelligence; CNBC; Bloomberg Law; Politico

To add to the confusion…..

Federal regulators asked employees to return to the office amid calls for staff cuts by the US administration.

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The FDIC has laid off between 600 and 700 employees, accounting for over 10% of its workforce, as of Feb 28, American Banker reported, citing a person familiar with the matter. The job cuts resulted from both the termination of probationary employees and voluntary departures following deferred resignation offers, the report said.

And then, the FDIC mandated that all employees return to the office by March-end as part of a broader initiative to reduce its workforce, Bloomberg Law reported, citing an email by FDIC Deputy Chairman Daniel Bendler.

Bendler reportedly asked all employees to report to the agency's Washington headquarters or a nearby regional office full-time starting March 31. Employees currently working remotely will need to relocate to an office within a 50-mile radius of their homes.

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The National Treasury Employees Union advised federal workers to ignore a mass email from the OPM demanding they report five accomplishments from the previous week, asserting that "Elon Musk is not your boss," according to the American Banker.

In response to the OPM's email, the union said the request constitutes an unfair labor practice and violates collective bargaining rights under federal law, according to the report.

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Back at the CFPB, acting Chief Human Capital Officer Adam Martinez reportedly urged employees to respond to the OPM email, despite many being on administrative leave, which led to confusion.

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Meanwhile, the Trump administration has instructed government agencies to submit plans for staff reductions by March 13, American Banker reported, citing a memo issued by the Office of Management and Budget and the Office of Personnel Management (OPM).

Source: S&P Global Market Intelligence; American Banker; Bloomberg Law

ICBA opposes consolidation of the banking regulators

ICBA President and CEO Rebeca Romero Rainey issued the following statement opposing the consolidation of the nation’s banking regulators:

“While Wall Street bank executives and others have called for consolidating the nation’s banking regulators, ICBA and community bankers have long supported the independence of the federal banking agencies and our nation’s dual banking system.

“Federal banking regulators should be objective, nonpartisan, and protected from political influence, which is essential to promoting a safe and sound banking system, consumer confidence, and a strong national economy. Wall Street calls for consolidating the agencies undermine consumer confidence in the financial system.

“Any changes to our nation’s trusted system of banking regulation must involve careful study and input from all stakeholders, including the community banks that stand to be most impacted by these proposals. While community banks are strong advocates for streamlining federal banking regulations and building efficiencies, structural reforms are better focused on protecting agency accountability by enacting board oversight at the federal banking agencies with meaningful community bank representation and ensuring regulatory oversight is tiered and risk weighted."

Source: ICBA

Speaking out against one-size-fits-all regulations

Over the years, our industry has experienced an increase in regulatory burden that threatens community banks’ ability to focus on what matters: their local community and beloved patrons. That’s why ICBA continually advocates for regulators and lawmakers to tailor regulations based on risk, size or activity in order to counteract one-size-fits-all regulations. If regulations are not tailored, many community banks might have to comply with rules, laws or regulations not designed for them and that have no basis in terms of what their activity truly is. 

Congress and regulators will often tailor regulations using various thresholds, such as a bank’s asset size or activity. For example, a well-known asset-based threshold is the Community Reinvestment Act, where banks’ obligations and requirements differ, depending on their asset sizes. In contrast, Bank Secrecy Act regulations are tied to the dollar amount of the underlying activity. Even coverage under the Home Mortgage Disclosure Act is based on the number of home loans that the bank originates. 

Many regulations include built-in thresholds, explicitly through statute, while others are subject to agency discretion. However, some of the threshold exemptions were put in place over 40 years ago and haven’t been updated since, and some have floating thresholds that automatically adjust over certain periods of time, such as threshold changes based on inflation. Yet, even those floating thresholds generally have not kept pace with changes to the industry or are no longer appropriate to community banks’ risk profile.

Source: ICBA

An article from ACB Associate Member, SouthState Bank

Here is the Largest Reason for Community Bank Consolidation

In this article by Chris Nichols, Director of Capital Markets at SouthState Bank, an ACB Associate Member, he explores reasons why "in the last 13 years, community banks represent virtually all the decline in the number of charters".

"To survive and thrive, we believe that community banks must embrace risk-adjusted return-on-capital loan pricing models and apply pricing discipline to individual products, relationships, branches, employees, lines of business and geographies."

Click here to learn more.

Source: SouthState Bank

$31B in farm aid coming soon

Agriculture Secretary Brooke Rollins said the USDA expects to meet the congressional deadline of March 21 to send out the $31 billion in farm aid that Congress passed in December, according to reports.

As reported by the Hagstrom Report, Rollins indicated to the USDA’s annual Ag Forum that the USDA expects to meet the congressional deadline of March 21 to send out the $31 billion in farm aid that Congress passed in December as part of an end-of-year funding package. The aid includes $10 billion in economic loss assistance for producers whose revenue was below the cost of production and $21 billion for disaster losses impacting agriculture.

Source: S&P Global Market Intelligence; Hagstrom Report

FDIC problem bank list

The FDIC will stop publishing the aggregate assets of banks on its "problem bank list" in a move it said is intended to prevent potential negative consequences.

It has become easy to identify whether a large bank is added to the list, which could lead to a run, acting FDIC Chairman Travis Hill said in a statement.

The FDIC is still disclosing the number of problem banks, which fell to 66 in the fourth quarter of 2024 from 68 in the prior quarter.

Source: S&P Global Market Intelligence; FDIC