ICBA News, sponsored by Bank Assetpoint—FDIC Director Backs Stricter Leverage Rules Under Basel III

Regulation
FDIC Director Backs Stricter Leverage Rules Under Basel III
Financial regulators should consider stricter leverage ratios than those outlined in Basel III proposed capital guidelines, an FDIC board member said. FDIC Director Jeremiah Norton said regulators should establish higher minimum leverage ratios based on high-quality tangible capital relative to a bank's total assets.

“It is hard to dispute that the financial system and the real economy would be much better off today had banks been financed by higher levels of real equity back in 2008,” Norton said. “Regulators should evaluate the shortcomings of a risk-weighted assets regime and consider a more balanced approach to capital regulation.”

Norton said there is growing empirical evidence that a leverage ratio based on total assets is a better predictor of bank distress than a risk-based capital ratio. He said a leverage ratio forces banks to account for all assets, even those assets assigned low risk weights in the Basel system.

“In my view, the regulatory community would be achieving incomplete reform of capital regulation absent a new and enhanced leverage ratio requirement,” he said.

Norton’s criticism of the Basel Committee’s focus on risk-weighted capital ratios are similar to what others have said about Basel III, including FDIC Vice Chairman Tom Hoenig.

Congress
House Committee Examines FHA’s Role, Finances
The House Financial Services Committee held the first in a series of hearings on the role and viability of the Federal Housing Administration. Lawmakers on the panel discussed the role of the FHA in the housing market, the projected $16.3 billion shortfall in its insurance fund and how the agency can shore up its finances.

The FHA, which did not testify, last week increased mortgage insurance premiums as part of a series of changes to strengthen its Mutual Mortgage Insurance Fund. The FHA will increase premiums for most new mortgages by 10 basis points and increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points to the maximum authorized amount. Further, the FHA said it will require most borrowers to continue paying annual premiums for the life of their mortgage loan.

Additionally, the FHA said it will:

consolidate its Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM pricing options for FHA case numbers assigned on or after April 1,
require lenders to manually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income ratio greater than 43 percent,
propose increased down payment requirements for mortgages with original principal balances above $625,500, and
step up its enforcement efforts on aggressive marketing to borrowers with previous foreclosures.

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Treasury
Treasury Introduces New Search Tool for Specially Designated Nationals
Treasury’s Office of Foreign Assets Control is testing a new online application that allows users to search its list of Specially Designated Nationals have close or approximate matches returned. Treasury said the SDN Fuzzy Logic Search is considered fully functional, but users are welcome to provide feedback on its usability and performance by emailing O_F_A_C@do.treas.gov.

The “fuzzy logic” tool will run parallel with the older, exact-match SDN Search tool for approximately 30 days. It will then replace the older search tool.

Regional News
ICBA’s Thomas Offers Advocacy Updates at Tour de Texas
ICBA Senior Executive Vice President of Government Relations Karen Thomas last week joined the Independent Bankers Association of Texas for IBAT’s 2013 Tour de Texas regional meetings. Thomas and IBAT President and CEO Christopher Williston provided advocacy updates to community bankers in eight Texas cities over four days.

In panel discussions before a total of 900 participants, Thomas and Williston discussed some of the top issues facing the community banking industry. Among the top issues discussed were the 113th Congress, regulatory relief initiatives, proposed Basel III capital guidelines, new mortgage rules and prospects for credit union advocacy in the coming year.

Magazine
February ICBA Independent Banker Available

ICBA legislative staff highlight key legislative issues for community banking for the new 113th Congress in this month’s ICBA Independent Banker. The issue includes a Washington Watch column summarizing the Consumer Financial Protection Bureau’s new ability-to-pay mortgage lending standards, including concessions the bureau made for community banks. Other articles cover rising debit card fraud, strategic IT planning, microlending programs, mobile data security principles as well as profiles of five industry emerging leaders.

The issue is online at IBmag.org. Print subscriptions are in the mail, and free digital subscriptions are available by email to any employee of an ICBA member bank. To receive a digital subscription, send an email to magazine@icba.org with your name(s), your bank’s name and address, your email address.

Blog
JPMorgan Fudges Lending Numbers
A new report from one of the megabanks that contributed to the recent Wall Street financial crisis is using creative numbers to defend these institutions and take on community banks, ICBA President and CEO Cam Fine wrote in his latest blog post. A JPMorgan Chase paper says that megabanks lend more relative to their size than do smaller institutions—thanks to a formula that expands the definition of credit to include categories of funding that rarely apply to community banks. Read the Blog Post.

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 Audio Call Covering New Mortgage Rules
ICBA and BuckleySandler LLP are hosting a free audio conference on new Consumer Financial Protection Bureau regulations affecting the mortgage market. “The New Mortgage Environment: Details on the CFPB's New Mortgage Rules,” scheduled for 2 p.m. (Eastern time) Wednesday, Feb. 13, will cover new rules on qualified mortgages, high-cost loans, loan-originator compensation, mortgage servicing, appraisals and escrow accounts. Register Now.

Education
Community Bank IT Institute in May
Expanding technology is fueling a revolution in services available to community bank customers—make sure your bank is on the front lines. ICBA has partnered with McGladrey to provide a broad-based, comprehensive, strategic program for community bank information technology officers. The Community Bank IT Institute, scheduled for May 13-17 in Kansas City, Mo., will help community banks manage and maximize technology investments and achieve focused strategies to meet both increasing customer demand and rapidly changing security requirements. Register Online.