April 12, 2019

 To: IBANYS Member CEOs

From:  Steve Rice, IBANYS Director of Government Relations & Communications

SUMMARY Of IBANYS' April 12, 2019 Government Relations Call

IBANYS' Government Relations Committee held a conference call Friday, April 12 to hear updates on the latest activities in Albany and Washington, D.C. 

Opening Remarks:

John Witkowski noted the need for banker participation in the Government Relations process, including reaching out to their state and federal legislators to build relationships and make their voices heard in Albany and Washington. He described the current legislative environment in Albany as similar to "pushing a rock uphill," noting i t is a   very different environment with Democrats in control of the full Legislature, including the State Senate. 

There has been a significant change in legislative direction. Banking bills that were not moved when there was a Republican Senate now are being passed. The State Senate Banks Committee is now comprised of seven Democrats and four Republicans. Significantly, Senate Democrats have been strongly supported by the credit union industry for many years, and many represent downstate districts with a strong credit union presence, but not a strong community bank presence.)

In this changed environment, the reality is that IBANYS needs to adopt a different approach in some instances, (e.g. by attempting to limit or mitigate potential harm in some legislation, where in past we could just oppose in the Republican Senate.) Credit unions are coming hard, including on gaining entry into the business of municipal deposits. Chairman Sanders is, for the most part, supportive of their agenda, and like many in his conference, has long history and familiarity with them. 
Federal Issues:   
  • Alan Keller from ICBA, provided updates on safe harbor for banks regarding legal cannabis banking, BSA and AML reform, Community Bank Leverage Ratio (CBLR) grassroots efforts, the ECORA Act (primarily related to Ag bankers) and the upcoming ICBA Capital Summit April 28-May 1 in Washington. Congress is now out for its April recess, and will return the week of April 29. ICBA Capital Summit includes Senate Banks Comittee Chairman Crapo (R-ID) and FDIC Chair Jelena McWilliams. Regulatory relief and ICBA's "Community Focus 2020" lead the agenda. Position and Issue pages and lobby cards will be sent in advance of Summit. 
  • Mr. Keller also reported that Safe Banking Act creates safe harbor for cannabis banking where it is legal to some degree. It has been marked up by the House Financial Services Committee with strong bi partisan support, and a floor vote is likely before August recess. There is a Senate bill (sponsored by Merkley, D-OR and Gardner, R, CO)) introduced but it likely faces much more resistance as Chairman Crapo does not support.
  • Money laundering: A markup possible on a bill in late April drafted by House Financial Services Committee Chair Waters that would promote info sharing between law enforcement and banks. Rep. Maloney (D-NY) also has a bill that includes issues related to beneficial ownership/customer info, and would relieve banks from the onus of collecting information from customers.
  • Flood insurance expires in May, and the most likely action will apparently be to pass a 5-to-6 month extension.
State Issues:

Mr. Crowell noted the continuing efforts by credit unions to gain access to municipal deposits business -- through programs such as the State Business Development District Program, the State Community Bank Deposit Program and by entering the business itself. To counter the potential loss in deposits that could result to community banks, Mr. Crowell and Mr. Witkowski discussed  the possibility of developing  a proactive bill to improve and enhance the current Community Bank Deposit Program. There are not a large number of community banks currently taking advantage of the program. The model could be a similar program in California, which has more than $5 billion and has proven very successful, including as a way to advance small business lending.  

Mr. Witkowski and Crowell indicated this could be a way to counter potential loss of deposits in the event that credit unions do gain entry into municipal deposits.  IBANYS plans to compare the New York and California programs and try to determine if we might emulate their program to make it more attractive to banks as a source of funding.  IBANYS will plan tonsend out information on this to the banks, get a better idea as to who presently participates, what the program's impact is, and if there is interest in improving it.
  • State Senate Legislation. Sen. Sanders' bill to require banks to disclose negative consequemces on credit score related to alternative payment schedules has passed the Senate. IBANYS submitted an amendment noting that banks would be remiss and perhaps liable if they so informed borrowers as the legislaation stated. Our amendment would have provided borrowers notice of potential impact where loan modification occurs, and expanded universe of who would be covered. However, the amendment was rejected, as Senate Democrats wanted notice given three separate times: when the application is made, when the loan is granted and again as a follow-up. An Assembly companion bill exists, but the language in the Senate bill  likely means there could be an opportunity to either  defeat it in the Assembly or obtain a gubernatorial veto.
  • Mr. Crowell discussed two credit union bills: One would allow credit unions to enter Banking Development District program. (sponsored by Sen. Montgomery). No Assembly companion yet, but the legislation is indicative of Chairman Sanders' viewpoint. Also, legislation on the Excelsior Linked Deposuit Program (where the State provides reduced interest rate on state deposits, and participating banks reduce their rates on borrowers loan by equal amount) would allow credit unions into the program.

There is also a basic banking account bill in the system. Currentluy, eight transactions are allowed at no charge, but this bill would allow seniors up to 12 at no charge.

  • On other issues, Mr. Crowell noted IBANYS was able to stop an effort in the State Senate mandating all banks to have notary public at every facility. Also, there is a bill to prohibit banks from asking for proof of citizenship from account holders, and to reject efforts to freeze if no proof given. 
  • In the Assembly, much of the focus on student loan issues, and seeking to regulate them, but banks are exempted from the legislation.
  • There was a brief discussion of cannabis banking issues, including a possible move toward establishing a "state bank" that would, among other things, address the financing of legal cannabis-related businesses. However, this is currently limited to a study. 
Like Congress, the State Legislature is now out on its April recess until it returns to Albany on Monday, April 29. At that time, there will be 25 scheduled session days until the Legislature adjourns on June 19.

Closing Comments:

Mr. Witkowski noted IBANYS this week held its first NYC based compliance meeting, following two regional compliance programs in upstate areas. Federal and state regulators participated in each, and a common theme was the value of community banks as a key component of the state and local economy and social fabric. They stressed the need for community banks to continue to be in front of state and federal lawmakers, make their voices heard and remain a strong and viable presence in Albany and Washington. He again urged bankers to participate in the upcoming ICBA Capital Summit and IBANYS scheduled congressional meetings beginning with a dinner Monday evening, April 29 and the hill visits Tuesday, April 30. 

Stephen W. Rice
Director of Government Relations & Communications