May 17, 2023
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Exempting most community banks from special assessment

The FDIC board of directors voted 3-2 to issue a proposed rule that would exempt the vast majority of community banks from its special assessment following the failures of Silicon Valley Bank and Signature Bank of New York.
  • Fully exempt thousands of community banks with less than $5 billion in assets from paying any special assessment.
  • Base the special assessment on covered banks’ uninsured deposits reported as of Dec. 31, excluding the first $5 billion, which will reduce or eliminate the impact for some  institutions over that asset threshold.
  • Collect the special assessment at an annual rate of approximately 12.5 basis points over an expected total of eight quarterly assessment periods, beginning with the first quarterly assessment period of 2024.
Source: ICBA
Preserve tiered regulations following recent failures

Banking regulators should not impose additional regulatory requirements following recent bank failures without understanding their potential costs and unintended consequences, particularly for smaller institutions, Federal Reserve Governor Michelle Bowman said.
Speaking in Germany, Bowman expressed concern with calls for regulatory reforms that would cast aside tiering expectations for less complex institutions, given that federal statute directs regulators to appropriately calibrate requirements for these banks. “The unique nature and business models of the banks that recently failed, in my view, do not justify imposing new, overly complex regulatory and supervisory expectations on a broad range of banks,” Bowman said.
Bowman also said:
  • New requirements could encourage bank consolidation, constrain credit availability, and affect broader financial stability.
  • Policymakers should be careful and intentional about new requirements that would increase funding costs, such as higher capital requirements.
  • The Fed should review its services that support banking system resiliency, such as Fedwire and the discount window, to determine whether they are keeping up with the banking industry.
  • The Fed should engage an independent third party to prepare a report to supplement its internal review of the failure of Silicon Valley Bank.
Bowman is the first person to fill the Fed’s community banking seat, which was instituted by Congress in 2015.
Source: ICBA
Fees rescinded on Fannie and Freddie loans

The Federal Housing Finance Agency (FHFA) rescinded the upfront fees based on borrowers' debt-to-income ratios for loans acquired by Fannie Mae and Freddie Mac.
In March, the agency announced that it would delay implementation in order to engage with industry stakeholders and better understand their concerns.

"To continue this valuable dialogue, FHFA will provide additional transparency on the process for setting the enterprises' single-family guarantee fees and will request public input on this issue," FHFA Director Sandra Thompson said.
Source: S&P Global Market Intelligence
Regulators lose patience for slow remediation as they step up supervision

Banks should prepare for harsher exams and demands for quicker remediation as regulators step up supervision following recent bank failures.

Regulatory agencies have started intensifying their supervision of banks following the collapses of Silicon Valley Bank, Signature Bank and First Republic Bank, which rank as the third-, fourth-, and second-largest bank failures in US history, respectively. Deposits, liquidity and capital levels will be closely scrutinized, and regulators will have less tolerance for companies that are slow to fix their issues.

"Regulators will be more skeptical of how banks are complying with legal requirements [rather] than good-faith efforts," said Matthew Bisanz, a partner with Mayer Brown's financial services regulatory and enforcement practice. Promises of improvement or even some progress will be greeted with a reply of "you need to get it done," he said.

Banks will soon have much less time to address problem areas, according to Bisanz.

"We're going to see 90 days become 30 days," Bisanz said. "We're going to see 180 days become 60 days."

Regulators are revisiting previously issued Matters Requiring Attention (MRAs) and Matters Requiring Immediate Attention (MRIAs) and scrutinizing the responses to make sure banks are doing what needs to be done to mitigate risks to the banking system, said Peter Dugas, who heads the Center for Regulatory Intelligence at financial consulting firm Capco.
Source: S&P Global Market Intelligence
Guidance on reopening closed deposit accounts

The Consumer Financial Protection Bureau issued a circular affirming that banks might violate federal law if they unilaterally reopen a deposit account to process transactions after a consumer has already closed it.
The CFPB said consumers have complained about banks reopening closed accounts to assess overdraft, nonsufficient-funds, and maintenance fees, citing a previous order against USAA Federal Savings Bank.
Such practices may violate the Consumer Financial Protection Act’s prohibition on unfair acts or practices, the bureau said.
Source: ICBA; CFPB
Groups back Senate online notarization bill

ICBA and other groups expressed strong support for the Senate version of House-passed legislation to expand consumer access to online notarization.
Introduced in the Senate by Sens. Kevin Cramer (R-N.D.) and Mark Warner (D-Va.), the bipartisan SECURE Notarization Act (S. 1212) would:
  • Authorize the nationwide use of remote online notarization for real estate transactions, financial services, and other legal documents.
  • Create a minimum national security standard for the use of remote online notarization.

The bipartisan bill passed the House earlier this year via unanimous consent after passing the House during the previous Congress.

Source: ICBA
Bill offering tax relief for rural lending introduced

ICBA expressed its strong support for the House introduction of legislation to exempt from taxation interest income on farm real estate and rural mortgage loans.
ACRE Act: Authored by Reps. Randy Feenstra (R-Iowa) and Wiley Nickel (D-N.C.), the Access to Credit for our Rural Economy (ACRE) Act (H.R. 3139) would provide relief for loans secured by agricultural and aquaculture real estate or by rural single-family homes that are the borrower's principal residence.
In a national news release and a letter to the lead sponsors, ICBA said the ACRE Act would:
  • Give lenders a strong incentive to remain in the rural farming and housing markets, thereby boosting local economic activity.
  • Offer community banks greater flexibility to work with farmers who may have trouble servicing their debt.
  • Assist those seeking to remain on the farm or acquire a home loan in rural communities by providing borrowers with more competitive rates and loan terms.
Source: ICBA
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With the exception of official announcements, the Arkansas Community Bankers Association Board of Directors, Officers and staff disclaim any responsibility for opinions expressed and statements made in articles published in Arkansas Community Bankers NewsWatch 2023.
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