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Volcker Rule
ICBA Urges Congress to Advocate Volcker Rule Repair for Community Banks
ICBA called on Congress to help ensure the federal banking regulators issue critically needed guidance clarifying that the Volcker Rule does not require banks to permanently write down their holdings of collateralized debt obligations (CDOs) backed by trust-preferred securities (TruPS). The message to Congress followed Monday’s ICBA letter to regulators urging guidance on the issue.

In its message to Capitol Hill, ICBA called on lawmakers to seek the proper fix to the harmful TruPS provision in the Volcker Rule and, if necessary, hold committee hearings on the issue and community bank concerns. Senate Banking Committee Ranking Member Mike Crapo (R-Idaho) yesterday responded with a letter urging regulators to issue appropriate guidance to address community bank concerns with the Volcker Rule. Sens. Joe Manchin (D-W.Va.), Roger Wicker (R-Miss.) and Mark Kirk (R-Ill.) sent a similar letter seeking swift action. ICBA thanks the senators for their outreach.

The Wall Street Journal separately reported on ICBA’s efforts in support of the Volcker Rule guidance.

Banking regulators recently issued final regulations implementing the Volcker Rule, which bars depository institutions and their affiliates from engaging in short-term proprietary trading for their own account. It also prohibits these institutions from owning, sponsoring or having certain relationships with hedge funds or private equity funds.

While the Volcker Rule includes some key community bank exemptions, it does require all banks, including community banks, to divest their holdings of CDOs backed by TruPS by July 2015. If community banks are forced to write these investments down, they may have to do so at “fire sale” prices that would result in a permanent loss of capital, rather than holding these investments to maturity.

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

Read ICBA Release.

Read ICBA Letter to Regulators.

Read Wall Street Journal Article.

Read Final Volcker Rule.

Read Agencies’ Community Bank Summary.

ICBA Delivers Petition Opposing Costly Accounting Proposal
ICBA delivered to the Financial Accounting Standards Board its petition opposing proposed accounting standards that would require all community banks to revise how they account for their loan-loss reserves (ALLL), loans and securities. The petition includes signatures from 4,650 community bankers and allies urging the Financial Accounting Foundation and FASB to withdraw their plan.

The proposal would implement a single approach for recognizing credit losses on loans, securities and trade receivables. It would replace the current “incurred loss” model with an “expected loss” model that would require banks to estimate expected credit losses and recognize the net present value of those losses at origination.

The FAF-FASB proposal would require complex modeling and compel banks to recognize losses much earlier than necessary in the credit-loss cycle, penalizing community banks for investing in loans and securities. The Office of the Comptroller of the Currency estimates that loan-loss reserves on average will increase by 30-50 percent with adoption of the proposal.

ICBA’s petition urges the regulators to re-propose a simpler and more straightforward proposal that would not harm the nation’s community banks. The alternative credit-loss model should require community banks to recognize credit losses ratably over the life of the loan using historical credit losses experienced by the institution or by a peer group, the petition notes. Upon the occurrence of an incurred-loss event where the occurrence of a credit loss is probable, the historical credit-loss model would be replaced by the incurred-loss model for the impaired asset only. Read the Petition. Read ICBA Release.

Report: Target Investigating Massive Data Breach
Nationwide retailer Target is investigating a data breach potentially involving millions of customer credit and debit card records, according to news reports. Various reports said the breach began on or around Black Friday and extends to nearly all Target locations nationwide.

The breach reportedly extended from Nov. 29 to as recently as Dec. 15 and has affected an unknown number of Target customers. There is no indication that the breach affected customers who shopped at Target’s online stores, according to the reports.

The “track data” that were reportedly stolen allow thieves to create counterfeit cards by encoding the information onto any card with a magnetic stripe. If they were able to intercept PIN data for debit transactions, they would theoretically be able to reproduce stolen debit cards and use them to withdraw cash from ATMs, according to the reports.

ICBA Bancard and Visa offer communications best practices on data breaches in their “Understanding a Data Compromise and How to Respond” guide.
ICBA will continue monitoring this case and report additional information as it is available.

CFPB Launches Education Campaign on Mortgage Rules
The Consumer Financial Protection Bureau launched a campaign to educate the public about the bureau’s mortgage rules. The CFPB released educational materials ahead of the rules’ Jan. 10 effective date, including mortgage tips and tools for consumers, a guide for housing counselors, answers to consumer questions and fact sheets on the rules.

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 CFPB’s Regulatory Implementation webpage.

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

Monetary Policy
Fed Begins Tapering Asset Purchases by $10B Each Month
The Federal Open Market Committee agreed to reduce the size of its asset purchases, beginning in January. The FOMC announced that it will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month, down from $40 billion, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month, down from $45 billion.

The FOMC said that economic activity is expanding at a moderate pace and that labor market conditions have shown further improvement. The panel also reaffirmed its plans to keep the target range for the federal funds rate at historic lows.

In its updated economic projections, the Federal Reserve estimated faster economic growth in 2014. The latest estimate projects growth of 2.8 percent to 3.2 percent compared with its September forecast of 2.9 percent to 3.1 percent. It also lowered its unemployment rate forecast to a range of 6.3 percent to 6.6 percent from 6.4 percent to 6.8 percent. Read FOMC Statement. Read Economic Projections.

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USDA Announces Fiscal 2014 Fee Rates for Guaranteed B&I Loans
The USDA’s Rural Business Cooperative Service announced the fees for lenders and borrowers participating in the Business and Industry (B&I) guaranteed loan program for fiscal 2014. The renewal fee rate will be 0.5 percent and will apply to all loans obligated in fiscal 2014.

The USDA also noted that it expects the 2014 appropriations bill will authorize it to charge a maximum of 3 percent for its fiscal 2014 guarantee fee, which the agency plans to do unless Congress lowers the maximum fee. If Congress were to lower the maximum fee, USDA will publish a notice in the Federal Register.

OCC Reports Q3 Trading Revenue of $4.5 Billion
Insured U.S. commercial banks and savings institutions reported trading revenue of $4.5 billion in the third quarter, down 38 percent from the previous quarter and 15 percent from a year ago, according to the Office of the Comptroller of the Currency. The OCC said client demand tends to fall toward the end of the year, so there was a seasonal component to the revenue decline. However, the uncertainty associated with the potential federal government shutdown in October exacerbated the seasonal effect, the agency said.

Housing Starts Rise 22.7 Percent in November
Housing starts rose a seasonally adjusted 22.7 percent in November and were up 29.6 percent from a year ago, the Commerce Department reported. Single-family starts were up 20.8 percent from the previous month.

Building permits were down 3.1 percent from October but up 7.9 percent from the previous year. Single-family permits were up 2.1 percent.

Go Local
Vote for Your Favorite Holiday-Decorated Main Street
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) tomorrow. Submit Your Vote Today.

CEO Compliance Review Seminar Slated for 2014 Convention
ICBA will feature a new CEO compliance seminar at the upcoming ICBA Community Banking Live 2014 convention in Hawaii. CEO Compliance Review is a lively new workshop addressing what CEOs need to know to manage their compliance officer function, to navigate examinations, and to make compliance product and service selections and refinements. 

Attendees must be registered for ICBA Community Banking Live 2014, which is scheduled for March 2-6 at the Hilton Hawaiian Village in Honolulu. Register today for the convention to qualify for a $300 early-bird discount. Learn More About the Seminar. Learn More About the Convention.

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.

Stop Developing Policies from Scratch
Alleviate the tedious task of developing bank policies from scratch. ICBA’s policies and procedures reference guide offers thorough, easy-to-read instructions to guide you through the process of developing or revising policies. There are more than 95 policies to choose from covering compliance, lending and management. Learn More.

Products and Services
Read the December Issue of BankInsurance.com News
In the December issue of BankInsurance.com News from Michael White Associates: Wealth management income at banks keeps climbing. And while banks with less than $500 million in assets saw a 3.9 percent rise in bank insurance earnings, some supersized bank holding companies’ performance drove overall industry results lower. Plus, insurer Ameritas Life exits banking. Read the Issue.

Products and Services
Participants Make $500M in New Loans and Commitments via Bank Assetpoint
Promontory Interfinancial Services announced that participants have entered into new loan originations and commitments valued at more than $500 million after viewing or posting asset listings on the Bank Assetpoint website. Since launch of the platform’s beta version 10 months ago, Bank Assetpoint has gained more than 4,000 participants. Eligible participants are able to post or search listings for a wide range of bank assets. Read More.

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