AFSPA
ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
November 15, 2018
2018 edition: 91 / 104
MICROBILT

Maxine Waters says easing banking regulations 'will come to an end' when she takes committee chair
  • Rep. Maxine Waters pledged Wednesday that Trump administration efforts to roll back banking reforms won't stand when the new Congress convenes.
  • The California Democrat is expected to take over as chair of the House Financial Services Committee.
  • "Make no mistake, come January, in this committee the days of this committee weakening regulations and putting our economy once again at risk of another financial crisis will come to an end," Waters said during a hearing with Randal Quarles, the Fed's vice chair of banking supervision.
Rep. Maxine Waters, poised to take over the powerful House Financial Services Committee when the new Congress convenes in January, laid down the law Wednesday about the future of banking regulation.

Speaking ahead of remarks by Randal Quarles, the Federal Reserve's vice chair of oversight for the banking industry, the California Democrat said efforts to loosen the reins on Wall Street financial institutions won't be tolerated should she be committee chair, as expected.

"Make no mistake, come January, in this committee the days of this committee weakening regulations and putting our economy once again at risk of another financial crisis will come to an end," Waters said.

Bank shares moved lower following a CNBC report on the remarks, with the SPDR S&P Bank ETF down 0.6 percent in morning trade.

Waters is likely to take over as chair of the committee following the midterm elections that gave back House control to the Democrats. Rep. Jeb Hensarling, a Texas Republican, currently presides over the committee. Read more at CNBC

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The Fed wants to loosen regulations even more for community banks
  • Randal Quarles, the Federal Reserve's vice chair of supervision, said more changes are coming that will allow community banks relief from the post-financial crisis capital requirements.
  • The Fed said two weeks ago that it will place banks into four categories for leverage requirements but stressed that size was only one factor it would use in determining how much of a buffer banks would need.
The Federal Reserve isn't finished easing up rules for the nation's smallest financial institutions, according to remarks Wednesday from the central bank's top regulator.

Just two weeks after the Fed announced changes to the way banks are classified and the types of capital cushions they'll need, Randal Quarles, vice chair of supervision, said more changes are coming that will allow community banks relief from the post-financial crisis capital requirements

"Our work to improve regulatory efficiency is not done, and we expect to make additional progress in the months ahead on a number of issues," Quarles said in remarks to be delivered to the House Financial Services Committee. He said the next proposal would be aimed at a leverage ratio proposal for community banks.

"We expect that this proposal would meaningfully reduce the compliance burden for community banking organizations, while preserving overall levels of capital at small banks and our ability to take prompt action when problems arise," he added. Read more at CNBC


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Unbanked Population Trends Keep Improving in America

The number of unbanked and underbanked people in America has continued to shrink in America. A fresh report covering 2017 banking trends (and hopefully things have continued to improve considering the recent strength of 2018) from the Federal Deposit Insurance Corporation (FDIC) has assessed the inclusiveness of the U.S. banking system.

The 2017 survey indicated that 6.5% of U.S. households were considered to be "unbanked" in 2017, representing about 8.4 million households.
  • 7.6 million households unbanked in 2009;
  • 8.2 million households unbanked in 2011;
  • 7.7 million households unbanked in 2013;
  • 7.0 million households unbanked in 2015;
  • and 6.5 million households unbanked in 2017.
Approximately 8.4 million U.S. households, made up of 14.1 million adults and 6.4 million children, were unbanked in 2017. ... The decline in the unbanked rate from 2015 to 2017 can be explained almost entirely by changes in household characteristics across survey years, particularly improvements in the socioeconomic circumstances of U.S. households.

Almost 70 percent (68.4 percent) of U.S. households were "fully banked" in 2017, meaning that the household had a bank account and did not use AFS in the past 12 months. The fully banked rate in 2017 was slightly higher than the 2015 estimate (68.0 percent). Read more at 247WALLST

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State of lending in communities of color

Over 53M consumers unbanked or underbanked

One of the most reliable measures of a community's economic vitality is convenient access to full-service banking. Regardless of whether a community is urban, suburban or rural, both consumers and local businesses rely on brick and mortar bank branches for a wide array of products and services

New research that measures how well banks serve communities found that America's access to banking expanded from 2015 to 2017, except when it comes to more than 53 million Black and Latinix consumers or others with low incomes or less education.

In summarizing its new survey findings on banking activity during the past 12 months, the Federal Deposit Insurance Corporation (FDIC) noted that one in five U.S.

households (22.7 million) did not use mainstream credit and that "Black and Hispanic households at every income level evaluated in the survey were more likely to be in this condition than white households."

"The good news is that our nation's banking system is serving more Americans than ever before," said FDIC Chairman Jelena McWilliams. "The bad news is that even as the overall number of people who are unbanked has declined, 8.4 million households continue to lack a banking relationship." Read more at NASHVILLE PRIDE Inc.

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Artificial Intelligence + Alternative Data = More GOOD CUSTOMERS

Artificial Intelligence (AI) is getting a lot of attention in the financial services market - and rightfully so. AI promises to deliver more accurate predictions of creditworthiness for lenders. It also promises to be useful in detecting fraud. In this blog, learn how lenders need more than AI platforms and new analytical models, to realize its full potential.

New Sources of AI Data
AI techniques such as machine learning learn to recognize patterns from studying vast amounts of data. But these techniques, impressive as they are, are of limited use when they are applied to the same old data that lenders have been relying on for years. They might be able to discover a few new patterns, but they'll also recycle a lot of previous analysis based on the same limited data sets.

Along with AI, lenders need new and unique data. Specifically, they need alternative data.

What's Alternative Data?
It's data beyond the traditional credit reports and FICO scores that have so long served as the basis for lending decisions. Alternative data is alternative along two different axes:

It includes data that is more comprehensive and provides a more complete picture of individual consumers.
It includes data about far more people, including the roughly 30% of U.S. adults about whom traditional screening services provide little or no data. This 30% includes Generation Z
(the post-Millennial generation), immigrants, students, and military households.
Read more at ACCELITAS

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Are Credit Unions missing an important segment of their communities?

Sometimes compliance and public policy collide.

For example, financial institutions restricted accounts to certain types of business because they drew heightened BSA/AML oversight-even though those account would best serve consumers.

During a session at the 2018 CUNA BSA Certification Conference in Louisville, Ky., Jim Vilker, vice president of professional services, CU*Answers, outlined recent U.S. Government Accountability Office report that found many U.S. Southwest border residents were losing access to banking services because of "derisking" and branch closures.

Derisking is the practice of financial institutions limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering.

GAO surveyed a nationally representative sample of 406 financial institutions, which included 115 financial institutions that operate in the Southwest border region. Read more at CUNA

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Understanding credit risk management and why it matters. by Walt Wojciechowski

Credit stands out as one of the most vital resources for any business, regardless of size or the specific nature of industries to which companies belong. On a macroeconomic scale, a company's credit - specifically its business credit rating, as issued by Dun & Bradstreet and similar agencies - can serve as a primary benchmark of its high standing within an industry, as valuable as evidence of its annual revenue, stock price and overall valuation. Business credit's importance on a more immediate, micro scale is not particularly different, representing factors ranging from a company's record of fiscal responsibility to its ability to offer financing to its loyal customers.

The undeniably big and multifaceted role credit plays for a business is also what makes it so important to protect from the various risks the company can encounter in the course of its operations, whether from vendors who abuse your trust by not paying back invoices or individual customers who become seriously delinquent.

Here, we'll take a closer look at the numerous hazards risks an organization may run into, and how to deal with them - as well as credit risk management strategies for mitigating the likelihood of their occurrence in the first place.

Credit risks posed by individuals
While not nearly as potentially troublesome as credit risks posed by other businesses, it is still worth examining the hazards that delinquent individual loan recipients can pose. For small businesses, in particular, even just a few past-due customers can be devastating if such specific issues aren't dealt with promptly. Read more at MICROBILT

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WHAT DEVELOPING COUNTRIES CAN TEACH AMERICA ABOUT BANKING

For decades, the US has led the way in helping other countries develop. Whether it's been through USAID programs like Farmer-to-Farmer, educational programs like Fulbright scholarships, or volunteer activities like the Peace Corps.

But the tables have turned - at least, when it comes to advances in financial inclusion. Countries like Kenya and Vietnam have been leapfrogging the US. While tens of millions of Americans remain unbanked or underbanked, these countries are rapidly developing modern financial systems, introducing millions to services previously unavailable to them.

Of course, emerging market environments differ dramatically from mature markets like the United States, and solutions cannot be simply copy-pasted from one market to another. But given the rate of progress in each of these countries, it is worthwhile to look at how they did it and where the US may be falling short.

The catchphrase "it is expensive to be poor," continues to be true in the US. While wealthy customers are lured by financial institutions with juicy sign up offers, fee waivers and complimentary golf tee times, those at the bottom of the pyramid pay for every basic service, including human tellers, paper statements and monthly account maintenance fees. Read more at WTVA.COM

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MINNESOTA: Payday loan alternatives rise

MINNEAPOLIS (AP) - Sky-high interest payday loans are getting some more affordable competition in the Twin Cities area from community-based organizations.

Exodus Lending is one nonprofit offering residents interest-free loans to help pay off debts, Minnesota Public Radio reported . The organization has helped about 200 borrowers since April 2015, according to Exodus Executive Director Sara Nelson-Pallmeyer.

Exodus gets its capital in interest-free loans from supporters. The group then gives people struggling with payday loans up to $1,000 in no-cost loans.

"We started because a payday lender opened on the same block as Holy Trinity Lutheran Church in South Minneapolis," Nelson-Pallmeyer said. "People within the congregation were alarmed and disturbed by another outfit like this taking people's money out of the community."
Read more at FAIRMONT SENTINEL

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Democrats took the House. Now they want to take on corporate America

Democrats are promising new scrutiny of corporate America's biggest names as they expand their power on Capitol Hill.
In the week since the midterm election, Democratic lawmakers have vowed to launch inquiries into publicly traded companies with ties to President Trump and his top lieutenants.
With Republicans in control of the White House and Senate, Democrats have little chance of passing meaningful legislation. Instead, they're doubling down on accountability for the Trump administration - and business provides a back door.

Democrats are promising new scrutiny of corporate America's biggest names as they expand their power on Capitol Hill.

In the week since the midterm election, Democratic lawmakers have vowed to launch inquiries into publicly traded companies with ties to President Donald Trump and his top lieutenants, including Deutsche Bank, Boeing, and AT&T. They plan to seek answers directly from pharmaceutical CEOs on the cost of prescription drugs. And they want to turn up the pressure on consumer-facing companies like Wells Fargo, Equifax and payday lenders.

"To appeal to the Democratic base right now requires them to at least posture as though they're going to meaningfully contest corporate power," said David Segal, executive director of Demand Progress, a liberal advocacy group. Read more at CNBC

Dreher Tomkies LLP Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.


Hey, I'm here. So, I must be working. Right? by David Kilby

Well, maybe not. We're all familiar with absenteeism. "Bob is out sick today." He's not here, so don't expect any production from him. Management understands that unless the other workers pick up Bob's production, output will be down today by one Bob.

But what about presenteeism? Bob's here at work - see, that's him over there - but, is he actually being productive right now, or is he really trying to figure out how to pay for a new transmission for his car?

Absenteeism is usually regarded as a problem; presenteeism usually is not.
However, as David Kilby points out in his book, The New Productivity Engine, presenteeism costs Americans more business productivity loss than employees who are absent. He cites Daniel Sitter, author of Learning for Profit: "Presenteeism accounts for 61 percent of an employee's total lost productivity and medical costs."

According to a 2004 article in the Harvard Business Review, more time is lost from people showing up but not performing at full capacity, than from people staying home. Sitter also states that forty-nine percent of employees lose productivity at a rate of one hour or more per day due to stress, and that one-fifth of employees come to work more than six days a year when they're too stressed to be effective.

A major cause of stress at work is sudden personal financial problems, David Kilby says in his book. He calls it "a financial heart attack!" A 2014 survey by American Express found that half of all Americans had experienced an unforeseen expense in the past year - some of which could be considered an emergency. Read more at DKILBY

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Dem House can put Main Street's needs over Wall Street's wants

Having won control of the House, Democrats need to push a robust policy agenda that concretely connects with Main Street Americans who care about their jobs, wages, benefits, savings, investments, homes, retirements and so much more. Their quality of life and standard of living must be the guideposts.

The powerful House Financial Services Committee should be at the forefront of those efforts. That committee has jurisdiction over all aspects of finance, from Wall Street's biggest financial conglomerates and global hedge funds to the smallest community banks and storefront payday lenders.

What the committee does impacts every American with a credit card, a checking or saving account, a personal loan, a mortgage, a student loan or any other financial product or service. Thus, the committee's agenda will affect everyone's wallet or pocketbook.

A Main Street jobs agenda would support those financial institutions and activities that support the productive economy, jobs, growth, home ownership and, ultimately, the American Dream of broad-based prosperity. Read more at THE HILL

 
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