01/08/2014

Congress Planning Bills Protecting Community Banks from Volcker Rule

ICBA NewsWatch Today 1/8/2014

Volcker RuleCongress Planning Bills Protecting Community Banks from Volcker RuleMembers of both chambers of Congress are preparing legislation to enact ICBA-advocated changes to Volcker Rule provisions affecting collateralized debt obligations backed by trust-preferred securities. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Subcommittee on Financial Institutions and Consumer Credit Chairman Shelley Moore Capito (R-W.Va.) are planning legislation that would prohibit the Volcker Rule from requiring banks to divest their holdings of certain pools of securities issued before Dec. 10, 2013. Additionally, Senate Banking Committee members Joe Manchin (D-W.Va.) and Mark Kirk (R-Ill.), as well as House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) and potentially other lawmakers, are developing similar legislation to exempt CDO TruPS from the Volcker Rule. Separately, the banking regulators are reportedly considering issuing an interim final rule as soon as this week that would exempt all existing CDO TruPS from compliance with the Volcker Rule. The developments follow repeated calls by ICBA for regulators to address the problem and for Congress to seek a proper fix and, if necessary, to hold committee hearings on community bank concerns. In a Dec. 21 letter to regulators, ICBA called for regulators to completely exempt community bank CDO TruPS. Following receipt of ICBA’s letter and other direct discussions between ICBA and the agencies, regulators recently released a joint statement that said they are reconsidering treatment of CDO TruPS under the Volcker Rule and would seek a resolution of the matter by Jan. 15. The statement noted that Dec. 31 call reports should account for any changes to the final rule issued by regulators and is designed to defer any accounting decisions until after the agencies act on the rule this month. The Volcker Rule bars depository institutions and their affiliates from engaging in short-term proprietary trading for their own account or owning, sponsoring or having certain relationships with hedge funds or private equity funds. While final rule issued last month includes some key community bank exemptions, it also indicates that CDOs backed by TruPS could be considered prohibited by the rule. This would require all banks, including community banks, to divest their holdings of CDO TruPS by July 2015 and to immediately recognize the impairment, before year-end 2013, under “other than temporary impairment” accounting standards. 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. The regulators responded to community banker concerns with frequently asked questions community banks should consider in determining whether they will be forced to divest their CDO TruPS under the Volcker Rule. The document discusses whether TruPS CDOs are “covered funds” prohibited by the Volcker Rule or can be restructured to not be considered covered funds. It also discusses whether investment in a TruPS CDO constitutes an ownership interest in a covered fund. However, ICBA said in a national news release that the FAQs do not offer a permanent solution for community banks potentially affected by the Volcker Rule. In a message to the regulatory agencies, ICBA President and CEO Cam Fine wrote that regulators’ misguided interpretation of this section of the rule would hurt community banks, their owners and investors, and their families and communities. ICBA continues to press members of Congress to advance legislation and to keep the pressure on banking regulators to properly fix the Volcker Rule impact on CDO TruPS. Grassroots AlertAct Now on Flood Insurance Ahead of Today’s Senate VoteICBA continues urging the nation’s community bankers to tell their senators to support legislation to delay sharp increases in National Flood Insurance Program premiums. Community bankers can use ICBA’s customizable message to Congress to tell their senators to advance S. 1846. The Homeowner Flood Insurance Affordability Act (S. 1846), introduced by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.), would delay rate increases for up to four years by giving the Federal Emergency Management Agency time to develop a plan to help property owners who cannot afford higher premiums. If Congress does not approve S. 1846, dramatic rate increases included in the 2012 Biggert-Waters flood insurance reforms would continue to be implemented. These increases would destabilize the still-recovering housing market in affected areas and negatively affect home values. Contact Your Senators Today! RegulationCFPB Issues Resources on Mortgage Rules Taking Effect FridayThe Consumer Financial Protection Bureau released resources for consumers on new mortgage rules slated to take effect on Friday. The CFPB released sample letters that consumers can use to contact their mortgage servicers, mortgage tips for homebuyers and homeowners, answers to consumer questions, and consumer tools and fact sheets. ICBA recently posted new reference charts on the ability-to-repay and qualified mortgage rules and offers additional resources on its Mortgage Rules Resource Page. Additional information and compliance resources on the new mortgage rules 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.ICBA NewsWatch Today is sponsored by CNA:ICBA Member Milestones, brought to you by CNA, recognizes community bank anniversaries and milestones in the January issue of ICBA Independent Banker magazine. CNA understands it takes more than a strong balance sheet to run a successful bank. It takes commitment to the community, dedication to service and flexibility to meet the needs of clients. For more than 100 years, CNA's professionals have worked to build strong relationships and solid business insurance solutions that meet the needs of their clients. For more information on CNA’s programs, visit www.cna.com/communitybanks.Too-Big-To-FailJPMorgan Agrees to $1.7B Penalty for Madoff SchemeJPMorgan Chase agreed to pay $1.7 billion to the victims of Bernard Madoff’s investment scheme, Justice Department officials announced. Officials announced criminal charges consisting of two felony violations of the Bank Secrecy Act. The charges will be deferred for two years under an agreement requiring JPMorgan to admit to its conduct and reform its anti-money-laundering policies. The Treasury Department, Office of the Comptroller of the Currency and Financial Crimes Enforcement Network separately announced that they had also reached agreements with JPMorgan. PollTake This Week’s Quick PollTake this week’s Quick Poll on the Target payment-card breach, and view results from the previous poll on arbitration clauses. View the Archive.EducationCall Report Workshop Slated for AprilAs regulatory and economic changes occur, so does the complexity and importance of preparing an accurate quarterly call report. Preparers must understand and remain current on all revisions to the report, preparation instructions, recently released accounting standards and procedures as these are all critical to a successful product. Call Report Preparation, scheduled for April 14-15 in Minneapolis, features an in-depth, line-by-line discussion of all schedules in Form 041 and the steps to eliminate common errors. Register Today.