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05/20/2013

House Passes ICBA-Advocated SEC-Relief Bill

ICBA NewsWatch Today 05/20/2013

Advocacy
House Passes ICBA-Advocated SEC-Relief Bill
The House passed ICBA-advocated legislation that would put a reasonable check on new Securities and Exchange Commission regulations and ensure they do not jeopardize community banks’ viability.

The SEC Regulatory Accountability Act (H.R. 1062), which passed on a 235-161 vote, would require the SEC to propose or adopt new rules only after a reasoned determination by the agency’s chief economist that the benefits of a new rule justify the costs. Further, it expresses the sense of Congress that rules adopted by the Public Company Accounting Oversight Board comply with the same standards required of the SEC.

The bill also requires the SEC to:

In a letter of support to members of Congress, ICBA noted that rigorous and quantitative justification of all new rules issued by the financial regulatory agencies is a component of its Plan for Prosperity, which is designed to advance targeted regulatory relief measures for the nation’s community banks.

Several provisions in the ICBA Plan for Prosperity are making progress in the 113th Congress. Details of the plan, including a document tracking the legislative progress of the package, are available on ICBA’s “Be Heard” website.


Advocacy
ICBA: Credit Union Push Makes No Financial or Fiscal Sense
ICBA expressed its strong opposition to controversial legislation that would allow tax-subsidized credit unions to expand into prohibited member business lending. The Small Business Lending Enhancement Act (S. 968), introduced by Sen. Mark Udall (D-Colo.) and 14 original cosponsors, would more than double credit unions’ business-lending cap from 12.25 percent to 27.5 percent of a credit union’s assets.

In a national news release, ICBA said that Congress put a limit on credit unions’ member business loans to preserve their mission of meeting the financial needs of consumers of modest means. In a letter to lawmakers, the association noted that additional commercial lending by tax-subsidized credit unions would decrease tax revenues, increase credit union failures and put the financial system at greater risk.

ICBA and the nation’s community bankers successfully opposed the tax-subsidized credit union industry’s efforts to raise the business-lending cap last year. Community bankers can tell their members of Congress to oppose the credit union power grab with customizable messages to lawmakers on ICBA’s “Be Heard” grassroots website. Contact Congress Today!


Advocacy
ICBA’s Buhrmaster: Boosting Megabank Capital Would Protect Against Future Crises
While too-big-to-fail financial firms now face tighter regulatory resolution authorities and “living will” mandates, these regimes only provide guidance on what to do after the next disaster strikes, ICBA Chairman-Elect John Buhrmaster wrote in a new American Banker op-ed. The Terminating Bailouts for Taxpayer Fairness Act (S. 798) would actively protect against future calamities, he wrote.

By setting capital standards that vary depending on the size and complexity of the financial institution, S. 798 would reduce the likelihood that megabanks would reach the brink of failing and that the financial system would go bust, Buhrmaster wrote. The other half of the bill—which would provide targeted regulatory relief to community banks—would take an important step toward truly tiered financial regulations, he wrote.

ICBA strongly supports the legislation to help address the too-big-to-fail problem. Community bankers can use ICBA’s “Be Heard” grassroots website to send customizable emails and tweets to their senators in support of the Terminating Bailouts for Taxpayer Fairness Act (S. 798).

Read Buhrmaster’s Op-Ed. Learn More About Too-Big-To-Fail.


Too-Big-To-Fail
Bank of England’s Haldane Praises TBTF Act
In related news, Bank of England Executive Director of Financial Stability Andrew Haldane praised the Terminating Bailouts for Taxpayer Fairness Act (S. 798). Speaking at the Federal Reserve Bank of Atlanta, Haldane said the proposal to raise capital requirements of the largest financial firms is attractive, simple and robust.

Haldane said that policymakers should assess whether the financial system has adequate capital insurance to deal with the too-big-to-fail problem. He said the emerging consensus, within academia, officialdom and among market participants, is that it has not.

“Despite enormous progress in developing policy proposals, too big to fail is an itch that remains unscratched,” Haldane said.


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Regulation
CFPB Finalizes “Rural” and “Underserved” Definitions in Escrow Rule
The Consumer Financial Protection Bureau issued a final rule clarifying and making technical amendments to its January rule imposing new requirements on the mandatory use of escrow accounts for higher-priced mortgage loans.

The final rule clarifies how to determine whether a county is considered rural or underserved and provides illustrations of how to facilitate compliance. The CFPB’s final rule established an exemption from mandatory escrow requirements for certain creditors that operate predominantly in rural or underserved areas.

The determinations are now based on currently applicable Urban Influence Codes, which are established by the USDA’s Economic Research Service (for “rural”) or based on HMDA data (for “underserved”). The CFPB published the final list of rural and underserved counties for 2013, which goes into effect with the escrows rule on June 1. It is identical to the preliminary list posted on March 12.

This final rule also establishes a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until the expanded provisions take effect in January 2014.

The CFPB noted that it received many comments suggesting changes to the “rural” and “underserved” definitions, which were outside the scope of the narrow technical changes the rule was proposing. The bureau said it plans to finalize the proposed rule it issued concurrently with the QM rule, and that rule will address questions of further flexibility for small institutions.

ICBA recently urged the CFPB to amend its definition of “rural” in its final rule, noting that the bureau should include all non-metropolitan counties and any town or community with a population of 50,000 or less. In a comment letter to the bureau, ICBA wrote that its definition of “rural” is too narrow and excludes many counties and communities that are rural in nature.


Regulation
FASB Proposes Changes to Lease Accounting
The Financial Accounting Standards Board, in a joint project with the International Accounting Standards Board, re-proposed its exposure draft on lease accounting. As expected, the proposal calls for the recognition of lease assets and lease liabilities for both the lessee and lessor.

Under the proposal, the amortization of balance sheet items would depend on the type of asset being leased. For leases that do not exceed a term of 12 months (including options to extend), current operating lease accounting could be applied.

Lessees would recognize a right-of-use asset and an offsetting lease liability measured at the present value of future lease payments. Amortization of the asset and liability would follow different methodologies depending on the underlying leased asset.

Lessor accounting would result in the “derecognition” of the leased asset (such as equipment or vehicles) or continued recognition (real estate and property) depending on the underlying asset. If the leased asset is derecognized, a receivable for the right to receive lease payments and a residual asset would be recorded.


Too-Big-To-Fail
MIT’s Johnson: Perfect Orderly Liquidation Authority for Megabanks a Myth
Financial regulators’ orderly liquidation authority for large financial firms has not ended the too-big-to-fail problem, MIT economics professor Simon Johnson wrote on The New York Times Economix blog. Johnson wrote that a report from the Bipartisan Policy Center that concludes that no significant structural changes are needed at megabanks is overly optimistic.

“The Bipartisan Policy Center report depicts a pair of mythical beasts—the perfect orderly liquidation authority and its partner, the bail-in creditor,” Johnson wrote. “More broadly, this appears to be part of a concerted effort by megabanks and their allies to convince you, and the Board of Governors of the Federal Reserve, that the existence of these beasts will hold all other evils at bay. Such mythical beasts do not exist in the real world.”


Economy
Rural Economic Index Expands in May
The rural economy grew at a faster pace in May, according to Creighton University’s index. The Rural Mainstreet Index climbed from 58.3 in April to 58.8 in May, its highest level since December 2012.

Approximately 60 percent of respondents reported that low agriculture commodity prices are the greatest threat to the farm-based economy for 2013. Another 16.7 percent said drought is the top threat, while 15.2 percent cited the bursting of the farmland price bubble.


Agriculture
Reports Find Farmland Values Slow in Q1
Federal Reserve bank reports indicated a slowdown in farmland prices. The Kansas City Federal Reserve Bank said prices for nonirrigated farmland in its region rose 3.4 percent in the first quarter, slower than the 7.7 percent quarterly increase a year ago. The St. Louis Fed separately reported that land values in parts of the Midwest and Southeast regions fell by an average of 2.3 percent in the first quarter.


ICBA News
ICBA Announces Management Promotions
ICBA announced 16 staff promotions, which go into effect immediately. The promotions include:


On Tap
Senate Expected To Take Up Farm Bill this Week
The Senate is expected to take up its version of a five-year farm bill (S. 954) as soon as today and could pass it before lawmakers break for the Memorial Day recess. Senate Agriculture Committee Chairman Debbie Stabenow (D-Mich.) said last week that she expects the Senate to vote on the measure by the end of this month. The Senate and House agriculture committees voted last week to advance their respective farm bills.


Poll
This Week’s Quick Poll
Take this week’s Quick Poll on deposit advance products, and view results from the previous poll on using Twitter for grassroots advocacy. View the Archive.


Education
ICBA Webinar Covers Health Reform Impact on Employers
An ICBA webinar later this month will cover compliance with the Patient Protection and Affordable Care Act of 2010. Health Reform: The Impact on Employers, slated for 11 a.m. (Eastern time) Thursday, May 30, incorporates the latest IRS guidance, rules and regulations for implementing the myriad provisions affecting individuals and employers. Register Online.


Products and Services
Webinar: Secure Your Site
Cybercriminals are only getting smarter and banking regulations only more complex. While staying ahead of threats can be a tough job, you don't want to wait until after an attack to get up to date! ProfitStars, an ICBA Preferred Service Provider, understands what you need to keep your website safe and compliant and invites you to participate in this informative webinar: “Regulators, Malware and Hijacking—Oh My! The Latest Tips to Secure Your Site,” scheduled for 1 p.m. (Eastern time) this Wednesday. Register Now.


Products and Services
Free Webinar: Fee Income from Installment Lending
ICBA and Preferred Service Provider Bank Intelligence Solutions from Fiserv team up to offer a webinar at 2 p.m. (Eastern time) this Wednesday on how community banks can increase the effective yield on every installment loan and develop comprehensive fee income strategies that work in the current environment. The webinar will also take a close look at lessons learned from top performers in installment lending. Register Online.




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