ICBA News, sponsored by Insured Cash Sweep—ICBA Calls for Tiered Regulation

Advocacy
ICBA Calls for Tiered Regulation to Minimize Financial, Economic Costs
Citing the growing regulatory burden on the nation’s community banks, ICBA called on policymakers to carve out community banks from new regulations and to expand on the tiered approach to financial regulation. In a national news release, ICBA said that 900 new rules and proposed rules affecting the banking industry have been entered into the Federal Register since 2007 alone.

“Community banks face an alphabet soup of regulations, each of which contains hundreds of pages of burdensome rules,” said Jeffrey L. Gerhart, ICBA chairman and chairman, president and CEO of Bank of Newman Grove, Neb. “From A to Z and beyond, these regulations impose direct costs on community banks, inhibiting them from serving their customers and communities.”

The costs of regulations are significant for community banks, their customers and the economy as a whole, ICBA said. A Federal Reserve study predating the massive influx of banking regulations in recent years cited data estimating that a sampling of the most burdensome regulations amounted to more than 14 percent of community bank operating expenses.

Since then, regulatory burdens have only increased, the association noted. Reforms implemented since the Wall Street financial crisis of 2008-09 are estimated to create up to 20,000 pages of new rules. Further, increasing regulations are expected to drive up lending rates, cost 7.5 million jobs and cut gross domestic product by 0.7 per year over the next five years, the Institute of International Finance estimates. Read ICBA Release.

In the News
ICBA’s Fine: GAO Study a Good Starting Point on Too-Big-To-Fail
The Government Accountability Office’s study on the funding advantage enjoyed by too-big-to-fail financial institutions is a positive step toward understanding the extent of the too-big-to-fail problem, ICBA President and CEO Cam Fine wrote in a Charlotte Business Journal op-ed.

Fine wrote that there is reason to believe the megabank funding advantage relates directly to the too-big-to-fail problem, as evidenced by the Moody’s Investors Services downgrade of megabank credit ratings that would have been worse without these institutions’ government guarantee against failure.

He also wrote that too-big-to-fail firms continue to benefit from the Federal Reserve’s policy of maintaining ultra-low interest rates, which also penalizes the community banks that stay in business based on how they price their deposits and loans.

“Breaking up the largest and riskiest financial institutions will help ensure they never again put the nation’s financial system, taxpayers and economy in jeopardy,” Fine wrote. “The GAO’s study is a good place to start. The U.S. economy became powerful not because of its large banks, but because of its robust free markets.”

Regulation
ICBA Recommends Revisions to Updated Remittance Rule
ICBA said it appreciates the willingness of the CFPB to reconsider areas of the rule of concern to community banks. However, the association wrote that the proposed rule does not provide sufficient relief to prevent community banks from scaling back or eliminating their remittance transfer services.

ICBA also expressed concerned that the proposed disclosure of recipient institution fees and foreign tax requirements will cause consumer confusion and will impair consumers’ ability to effectively comparison shop between providers.

ICBA recommended three modifications to the Consumer Financial Protection Bureau’s proposed revisions to its rule on remittance transfers. In a comment letter, ICBA encouraged the CFPB to:

replace the recipient bank fee disclosure with a statement that recipient institution fees “may apply,”
replace the disclosure of national taxes with a statement that foreign taxes “may apply,” and
revise the error-resolution and liability provisions to ensure that the senders should be responsible for the accuracy of all routing and account crediting information they provide, not just account numbers.

The association wrote that it agrees with the CFPB’s 90-day effective date if the bureau accepts ICBA’s recommendations. If it does not, ICBA advocated making the rules effective no less than 240 days after the rule is finalized. Read ICBA Comment Letter. Read Industry Letter.

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Congress
Senators Vow To Continue Opposing CFPB Nominee
Senate Republicans said they will continue to oppose the confirmation of any nominee for director of the Consumer Financial Protection Bureau until structural changes are made at the bureau. The lawmakers said they continue to support reforms that would:

replace the CFPB’s single director with a board,

subject the bureau to the congressional appropriations process, and
establish a safety-and-soundness check for the prudential financial regulators.

Sen. Jerry Moran (R-Kan.) filed legislation (S. 205) that would enact these reforms.

President Obama has renominated Richard Cordray for director of the CFPB, though a recent court ruling could affect the nomination. A federal appeals court ruled that last year’s appointments to the National Labor Relations Board, which Obama made without Senate approval, are unconstitutional. Cordray was similarly appointed.

From the beginning of the CFPB debate, ICBA has called for a commission structure and has supported legislation to achieve this goal. The association also supports prudential banking regulator participation in CFPB rule-writing by empowering the Financial Stability Oversight Council to veto CFPB rules under a more practical and realistic standard than currently exists.

Security
Distributed Denial of Service Incidents Affecting Community Banks
Since mid-September, there have been a series of sophisticated Distributed Denial of Service (DDoS) incidents targeted against large financial services organizations in apparent retaliation for activities not directly associated with the financial sector. DDoS attacks take down websites or network servers and typically adopt one of two tactics: flooding the site with a deluge of data or overwhelming an application server with seemingly valid requests. Financial institutions and their service providers have generally been able to handle these attacks with minimal disruption to customers.

In the past, public announcements of pending attacks against one or more financial institutions have been made, and the attacks were generally directed at the large financial institution networks and public websites. However, there has been a recent shift, and the hacktivists have taken aim at smaller institutions.

There has been no unauthorized access to information or funds during these attacks. There has been no significant impairment of core business functions, and customers have continued to be able to carry out transactions through phone bill payment services, branch banking and other means.

ICBA recently distributed information to its member community banks to provide information to help mitigate risk from DDoS attacks and recommends that community banks closely monitor and be on alert for any increase in DDoS cyber-attack activity.

Economy
Survey: Some Banks Report Easing Lending Standards
Modest fractions of domestic banks reported easing their standards across major loan categories over the past three months, according to the Federal Reserve’s January survey of senior loan officers. Domestic respondents indicated that demand for business loans, prime residential mortgages and auto loans had strengthened, while demand for other types of loans was largely unchanged. U.S. branches and agencies of foreign banks, which mainly lend to businesses, reported little change in their lending standards, while demand for their loans was reportedly stronger.

Poll
This Week’s Quick Poll
Take this week’s Quick Poll on new Federal Housing Administration rules, and view results from the previous poll on the impact of new mortgage regulations. View the Archive.

Education
ICBA Webinar on Challenges in Estimating ALLL
Can your community bank's Allowable Loan and Lease Losses hold up to the examination of outside auditors and regulators? In today’s banking environment, you need to have a careful understanding of the challenges associated with ALLL estimation. An upcoming ICBA webinar, scheduled for 11 a.m. (Eastern time) Tuesday, Feb. 12, will examine challenges in estimating ALLL and new solutions for ALLL management. Register Online.

Products and Services
2012 Year-in-Review Disaster Checklist Helps Preparations
From winter ice storms to the June Derecho to Superstorm Sandy, 2012 was a historic year for disasters. In a 12-month period, Agility responded to more than 4,200 businesses in 44 states and provinces. So what can we learn from these events? What did banks do to prepare? Perhaps more important—what steps can community banks take today? Agility has compiled the following 2012 Year-in-Review Checklist to help your community bank gain insight and prepare for the future. Download the Checklist.