October 10, 2018

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The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, FinCEN, the National Credit Union Administrat ion, the  Office of the Comptroller of the Currency and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued a statement to address instances in which certain banks and credit unions may decide to enter into collaborative arrangements to share resources to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively.  
Collaborative arrangements described are generally most suitable for financial institutions with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing. The statement explains how these institutions can share BSA/AML resources in order to better protect against illicit finance risks, which can in turn also reduce costs.  
Among other things, the joint statement aims to:
  • Highlight the potential benefits of collaborative arrangements that pool resources, such as staff, technology, or other resources, to increase operational efficiencies, reduce costs, and leverage specialized expertise; and
  • Outline risk considerations and mitigation measures associated with the use of collaborative arrangements.
Financial institutions should approach the establishment of collaborative arrangements like other business decisions, with due diligence and thorough consideration of the risks and benefits. Banks and credit unions are encouraged to contact their primary federal regulator with questions regarding sharing BSA resources, and should refer to other relevant guidance.
Community bank compliance costs declined in 2017 after several years of gains, according to a new survey from the Federal Reserve and Conference of State Bank Supervisors. Costs declined to an estimated $4.7 billion last year (21 percent of community bank income) from $5.4 billion in 2016 (24 percent), according to the survey.
The decline was largely attributed to lower personnel expenses, which dropped to $3.562 billion in 2017 from $4.236 billion in 2016. Over the previous two years, compliance costs rose by nearly $1 billion.
The survey of more than 500 community banks in 37 states uses call report data to develop the cost estimates. This year's survey also addresses trends in lending, banking services, mergers and acquisitions, management succession, and financial technology.
The Survey  >> 
State financial regulators will renew their litigation efforts against the Comptroller of the Currency (OCC). The issue: the OCC's recent decision to create a special purpose charter for financial technology firms.
The CSBS Board of Directors approved moving forward with litigation against the OCC. The case will be filed at a time deemed appropriate.  A federal court had ruled prior litigation as not yet ripe for consideration. With the OCC's July 31 announcement creating a federal fintech charter, the CSBS Board decided to reaffirm its commitment to challenge the OCC's action. 
Led by Senate Banking Committee Chairman Mike Crapo (R-Idaho), seven Republican senators endorsed efforts to revisit the Volcker Rule and urged the bank regulatory agencies to go beyond their proposed policy changes in making fixes to the complex rule. Specifically, the senators noted that the agencies' July proposal suggested "few changes" to the rule's provisions on "covered funds."
"We encourage the agencies to use the discretion granted them by Congress in Section 609 to revise the definition of 'covered fund' or include additional exclusions to address the current definition's overly broad application to venture capital, other long-term investments and loan creation," the senators said.
The agencies' proposal would streamline and tailor the rule by focusing its restrictions on proprietary trading and investments in covered funds on banks with "significant" and "moderate" trading activities; banks with limited trading assets and liabilities of less than $1 billion would have a rebuttable presumption of compliance with the Volcker Rule. The proposal followed a provision in the S. 2155 regulatory reform law that generally exempts banks with less than $10 billion in assets from Volcker Rule requirements to significantly reduce the rule's burden on community banks.
CECL will fundamentally change how banks account for expected credit losses.  
A successful CECL implementation begins with the basics. Developing appropriate models isn't enough. Banks must meet the expectations of regulators and auditors in an efficient, sustainable manner. By using CECL as a catalyst to centralize and enhance processes, banks can improve long-term productivity, increase analytical reuse, and deliver long-term value.
At ACB's Management & Directors Conference on November 8, Amy Pierce, president of Bank Strategic Solutions will discuss ALLL and Preparing for CECL. 
This session will focus on:
  • The different models
  • The impact CECL will all have on a bank's balance sheet and capital
  • Current Reserve levels compared to CECL expectations
  • Which CECL model is best for your bank
  • How to document CECL with an Excel spreadsheet
  • Regulator and Auditor expectations
  • Learning the Qualitative factors and economic forecasts under CECL
There is no registration fee for ACB bank members. Plus, earn 6 CPE credits.   
Be there and be informed!
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October 16, 2018
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