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Regulation
ICBA Urges Regulators To Issue Volcker Rule Guidance on CDO TruPS
ICBA urged the federal banking regulators to issue guidance clarifying that the Volcker Rule does not require banks to permanently write down prior to yearend their holdings of collateralized debt obligations backed by trust-preferred securities.

In a letter to the agencies, ICBA also called on regulators to reconsider these investments as ownership of “covered funds” under the Volcker Rule, particularly in cases where the community bank is only receiving interest and principal from the investment.

In the community bank summary of the Volcker Rule, the agencies indicated that a “small number of community banks” owning CDOs backed by TruPS meet the definition of “covered funds” and would have to divest in conformance with the rule. However, several brokers and investment bankers have been advising banks that not only do they have to divest their CDO TruPS by July 2015, but that there is an immediate impact to the carrying value of the CDOs under OTTI accounting rules.

At ICBA’s urging, the banking agencies are meeting this week to discuss the implications of the CDO TruPS issue.

Read ICBA’s Letter.

Read the Final Rule.

Read the Community Bank Guide.



Regulation
ICBA Posts Reference Charts on QM Rule
ICBA posted new reference charts on the ability-to-repay and qualified mortgage rules that take effect Jan. 10. The reference charts outline lender underwriting requirements, mortgage loan requirements and legal protections for various QM and non-QM loans.

The reference charts and more information on the mortgage rules is available on ICBA’s Mortgage Rules Resource Page. Additional information and compliance resources on the QM and ability-to-repay mortgage rule can be found on the Consumer Financial Protection Bureau’s Regulatory Implementation webpage.

Additionally, community bankers can submit questions to the CFPB at CFPB_reginquiries@cfpb.gov or 202-435-7700.


Patents
ICBA, Coalition Promote Transparency in Demand Letters
ICBA and a coalition of other trade groups urged Congress to direct the Federal Trade Commission to go after patent-assertion entities’ unfair and deceptive demand letters. In a joint letter to Senate Commerce Committee leaders, the coalition also expressed support for legislative language that would require these entities to provide minimum disclosures to better identify themselves, the patent in question and the specific nature of the infringement being alleged.

The coalition letter notes that demand letters often allege that the mere use of everyday technology violates the patent holders’ rights. They also use the threat of litigation to extract a “licensing fee” from recipient business that often settle the claims rather than run the risk of litigation.

The House of Representatives recently passed legislation to address the increasing problem of abusive patent-infringement demands. The Innovation Act of 2013 (H.R. 3309) includes provisions that would make it easier for community banks and other small businesses to challenge the validity of frivolous patent claims.

ICBA is submitting a statement for the record for today’s Senate Judiciary Committee on protecting small businesses from patent abuse. Read the Coalition Letter.


Accounting
ICBA, State Banking Groups Express Opposition to Accounting Proposal
ICBA and 41 state banking associations expressed strong concerns with the Financial Accounting Standards Board’s proposed change to accounting standards that would require all community banks to revise how they account for their loan-loss reserves, loans and securities.

In a joint letter to the FASB, the coalition wrote that the proposed expected-credit-loss model would harm community banks, their customers and local economies by front-loading credit losses at inception without considering the evolution of realized losses throughout the credit cycle. The proposal would increase loan-loss reserves by an average of 30 to 50 percent, according to the Office of the Comptroller of the Currency.

The proposed model also relies on complex modeling techniques that are difficult and expensive for community banks to adopt, while producing an outcome that may not reflect the true expected losses for financial instruments held by community banks, the coalition wrote.

The coalition encouraged the FASB to consider an alternative approach that relies on historical losses as the primary driver for building and maintaining the loan-loss reserve. As loans and securities become individually impaired, the reserve would be increased based on a specific measurement of impairment. This alternative proposal properly builds the necessary allowance in a ratable fashion that matches the credit risks inherent in the financial instrument with its earning potential, the coalition wrote. Read the Coalition Letter.



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GSEs
FHFA Proposes Gradual Decrease of Fannie, Freddie Loan Purchase Limits
The Federal Housing Finance Agency is seeking public input on a plan to gradually reduce the maximum size of loans that Fannie Mae and Freddie Mac may purchase.

The proposal would set the loan-purchase limit at $400,000 in areas where the statutory maximum loan limit for one-unit properties is currently $417,000 and at $600,000 in areas where the current limit is $625,500.

The FHFA said reducing the loan-purchase limits would reduce the government-sponsored enterprises’ business at the high end of the market, invite private capital to re-enter the market and limit taxpayer exposure to losses.

The FHFA is seeking input on whether six months’ advance notice is adequate, whether the FHFA should announce a multi-year schedule of decreases and to what date any future loan purchase limit reductions should be tied.

Comments are due by March 20, 2014.


Go Local
Top Five Photos for Main Street Holidays Contest Announced
ICBA’s first Main Street Holidays photo contest has officially announced its top 5 contenders for the title of Best Decorated Main Street in America. This week, go to ICBA’s Facebook page and vote for your favorite Main Street by liking the photo. The winner with the most likes will be the winner of a $300 donation to a local charity. Voting closes at 9 a.m. (Eastern time) this Friday. Submit Your Vote Today.


ICBA News
ICBA Promotes Aleis Stokes and Joe Schneider to Senior Vice President
ICBA announced that Aleis Stokes, vice president of media and public relations, and Joe Schneider, vice president of state relations, have been promoted to the senior vice president level, making them part of ICBA’s senior management team. 

As senior vice president of media and public relations, Stokes will continue to be responsible for communicating ICBA’s key policy positions and the positive story of the nation's community banks. As senior vice president of state relations, Schneider will continue to serve as the primary liaison between ICBA and its network of 46 affiliated state and regional partner associations. Read ICBA Release.


Regulation
Agency Teleconference Thursday Covers Social Media
Financial regulators are hosting a teleconference this week on social media and consumer compliance. The teleconference, scheduled for 1 p.m. (Eastern time) this Thursday, is free, but registration is required. Register Online.


Regulation
Fed Designates Reserve Bank Chairs, Deputy Chairs
The Federal Reserve Board announced the designation of the chairs and deputy chairs of the 12 Federal Reserve Banks for 2014. Each reserve bank has a nine-member board of directors. The board of governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair.


Economy
Industrial Production Surpasses Pre-Recession Peak
Industrial production increased 1.1 percent in November and was up 3.2 percent from a year ago, the Federal Reserve reported. It was the largest increase since November 2012 and the first time industrial production surpassed its pre-recession peak of December 2007. Capacity utilization for the industrial sector increased 0.8 percentage point to 79.0 percent, a rate 1.2 percentage points below its long-run average.


Poll
Take This Week’s Quick Poll
Take this week’s Quick Poll on arbitration clauses, and view results from the previous poll on new bank charters. View the Archive.


Education
ICBA Hosting Compliance Institute in Dallas
Seasoned compliance professionals and newer compliance officers are invited to attend ICBA’s Compliance Institute to get the latest regulatory education. The seminar, scheduled for Feb. 9-14 in Dallas, will feature a fast-paced learning environment that will address the key concepts of each regulation and offer strategies that spell success in the examination context. Register Online.









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