October 14, 2020-...------------------------------------------------------------------------------------------------No copyright infringement intended
Vendor * Spotlight
SBA Streamlines Some PPP Forgiveness

The SBA and Treasury Department released a simpler loan forgiveness application for Paycheck Protection Program loans of $50,000 or less to provide needed relief to lenders and borrowers.
 
The agencies released a two-page Form 3508S application, a three-page instruction sheet, and an interim final rule on the streamlined forgiveness process, which they said will allow lenders to process forgiveness applications more swiftly.  
 
Under the simplified process, borrowers with loans of less than $50,000 are exempt from reductions in the forgiveness amount based on reductions in full-time equivalent employees, salary, or wages.
 
While these borrowers need not make those calculations or show they qualify for a safe harbor, they still must submit documentation to lenders supporting the amounts they paid for payroll costs or other forgivable expenses.
 
Source: Small Business Administration; US Treasury
Push on PPP Asset-Threshold Impact Continues
 
Senate Banking Committee Chairman Mike Crapo (R-Idaho) urged regulators to use their discretion to minimize the regulatory impact of Paycheck Protection Program lending.
 
In a letter to the agencies, Crapo noted that PPP lending has led to significant balance sheet growth, sending some institutions over certain asset-based regulatory thresholds.
 
The FDIC recently told a group of 14 House Republicans that it is exploring options to address the impact of PPP loans after the lawmakers urged regulators to exclude PPP balances from regulatory thresholds.

Source: Senate Banking Committee; Federal Deposit Insurance Corporation 
Capital Rule Updates Finalized
 
Federal banking regulators issued a final rule revising the definition of eligible retained income for institutions subject to the agencies' regulatory capital rule.
 
The rule, which finalizes an interim final rule issued in March and takes effect in January 2021, is intended to strengthen the incentives for banking organizations to use their capital buffers as intended in adverse conditions.
 
The rule revises the definition to the greater of (1) a banking organization's net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (2) the average of a banking organization's net income over the preceding four quarters.

Source: OCC; FDIC; Federal Reserve
Central Banks Report Digital Currency Principles
 
The Federal Reserve and other central banks issued a report setting out common foundational principles and core features of a potential all-purpose central bank digital currency. Issued alongside the Bank for International Settlements, the report establishes that a CBDC should complement monetary and financial stability, coexist with cash and commercial bank money, support wider policy objectives and do no harm to monetary and financial systems, and promote innovation and efficiency.
 
Central banks across the world are looking to issue digital currencies to the public. But the move would lead to banks being left without retail depositors, the most stable source of their funding, according to a report in The Wall Street Journal.

Source: Federal Reserve; Wall Street Journal 
CFPB Relaxes Stance on Marketing Services

The Consumer Financial Protection Bureau released frequently asked questions on the legality of RESPA marketing services agreements. The bureau also rescinded Compliance Bulletin 2015-05, RESPA Compliance and Marketing Services Agreements.
 
The CFPB said the actions do not mean MSAs are presumptively legal. Rather, whether an MSA violates RESPA Section 8 will depend on specific facts and circumstances, including how the MSA is structured and implemented.
 
As laid out in the 2015 compliance bulletin, MSAs are usually framed as payments for advertising or promotional services but can be used to disguise compensation for referrals, which can increase the cost of real estate settlement services.

 Source:Consumer Financial Protection Bureau 
How the Pandemic is Changing Lending

COVID-19 changes offer challenges and opportunities to lenders and will influence the preferences of customers.

A new white paper from ICBA Preferred Service Provider Jack Henry & Associates/ProfitStars identifies five ways the events of 2020 are likely to shape the path forward as the industry enters a new phase that could redefine borrower relationships.

Source: Independent Community Bankers of America 
More Fintechs Could Follow Lead of Buying 'vanilla' Community Bank

Fintech Jiko Group Inc. recently purchased a small community bank in the Midwest. Observers said the tie-up makes sense and could be a harbinger of deals to come.

While some fintechs have opted to partner with banks or establish bank startups, Jiko chose to purchase an existing lender outright, in the process cutting some of the time and expense related to setting up a de novo. As Jiko CEO and co-founder Stephane Lintner told S&P Global Market Intelligence: "A bank comes with processes and supervision already in place. It was a very smooth and incremental path."

The target of Jiko's deal was Mid-Central National Bank, a Minnesota-based bank with about $124 million in assets, the right size for the fintech's ambitions.

Mid-Central came to Jiko's attention in part because one of the fintech's investors and co-founders had owned a stake in the bank for more than 25 years. "So what started as a friendly exploration turned into a mutual decision to merge and lead us to where we are now," Lintner explained.

There can be strategic benefits to buying a bank like Mid-Central, which has a national charter and received an 'Outstanding' rating in its most recent Community Reinvestment Act examination.
The acquisition received approval from the OCC and the Federal Reserve Bank of San Francisco. Jiko's CEO described the regulatory process as "friendly and thorough, therefore, lengthy."

Some observers say the pandemic could make small lenders increasingly amendable to selling. With an acting comptroller at the helm of the OCC who has been vocally encouraging fintech innovation, more firms may follow Jiko's lead in seeking to acquire existing banks and all the infrastructure and regulatory relationships that come with an established company.

Source: S&P Global Market Intelligence