Richard's Rapid Fire - December 2, 2016

Breaking: OCC Moving to Create Charters for FinTech Firms

The OCC today issued a White Paper detailing plans to create special purpose charters for fintech firms and is seeking comments on the various issues raised by this initiative.  We applaud the OCC for their efforts to further explore chartering, and we will provide the agency with our reactions – particularly in regard to ensuring a level playing field on regulation and supervision to ensure safety and soundness, competitive fairness and comparable expectations for community inclusion.

For more background, you may read CBA’s analysis, OCC Comptroller Thomas Curry’s remarks and the OCC’s whitepaper.

 

U.S. Bank Named a Best Brand

Congratulations to CBA Board Chairman Ross Carey and the entire U.S. Bank team for being named a Best Brand for Small Business and Middle Market Banking by Greenwich Associates. This is a well-deserved distinction.

 

CFPB Outlines Risks Incentive Programs May Pose

On Monday, the CFPB issued a bulletin warning banks of the risks incentive programs may pose to consumers. While acknowledging the potential benefits of sales incentive programs, the Bureau claims such programs may create an “unrealistic, high-pressured sales culture.” To head off any regulatory action, the Bureau argues in favor of the implementation of robust compliance management systems (CMS), which would include more oversight from bank boards, stronger policies and procedures, increased employee training, monitoring and corrective action, a consumer complaint management program and independent compliance audits.

 

CBA Calls for “Know Before You Owe” Initiative in Federal Student Lending

With student debt at $1.3 trillion and rising, it is time for the U.S. Department of Education to change what it has been getting wrong all these years: it is time they help student borrowers “Know Before You Owe” (KBYO). One of CBA’s priorities in 2017 will be to show the risks of having more than 90 percent of our nation’s outstanding student debt under the Education Department and why banks believe the private sector ought to be able to play a larger role in helping families finance higher education. CBA’s op-ed in Morning Consult addresses this and argues why the current model of uncapped lending of federal capital with minimal to no underwriting is not sustainable.

 

President-Elect Trump Announces Key Nominations

The entire banking industry has been focused this week on President-elect Donald Trump’s latest appointments to his cabinet. Not only did he nominate Steven Mnuchin, a former partner at Goldman Sachs, as Secretary of Treasury, but he also nominated Wilbur Ross, a former banker, to serve as his Secretary of Commerce. Once confirmed, these two positions will bring a perspective to the financial industry that has been lacking for almost a decade. 

Here’s what leadership under Mnuchin and Ross could mean:

  • Dodd-Frank reform to ensure banks are able to lend;
  • Tax cuts and trade reform;
  • The administration will “take a look” at CFPB reform;
  • An interest rate increase is expected in December, but Mnuchin believes rates will remain “relatively low” for the next couple years; and
  • Ross will focus on increasing American exports.

With these two nominations, President-elect Trump took an important step forward by ensuring individuals with banking experience, who have spent years serving consumers, are nominated to serve in his administration. When asked if he wears the title of “banker” as a badge of honor, Mnuchin put it bluntly by stating he understands what it takes to provide consumers with a loan.

On the regulatory front, Mary Jo White is stepping down as SEC Chair; Federal Reserve Chair Janet Yellen will stay with the central bank until her term expires in 2018; and FDIC Chairman Martin Gruenberg will stay until his term expires in 2018.

You may view a list of President-elect Donald Trump’s rumored and named cabinet picks here.

 

House Democrats Re-elect Nancy Pelosi as Minority Leader

Beating back a challenge from Congressman Tim Ryan (D-OH), Congresswoman Nancy Pelosi (D-CA) won a majority of support among House Democrats to continue on in her role as House Minority Leader. While it appears there may be appetite for new leadership, Nancy Pelosi still secured 68 percent of Democrat support. My guess is Pelosi, who is already 76 years old, will only lead House Democrats for the next two years before she relinquishes the post.

 

CBA Identifies Top Risk Areas for Banks in 2017

As we head into the New Year, CBA’s Internal Audit Governance Working Group, which is comprised of heads of audit from CBA members, identified the top risks banks should pay attention to in 2017.

Here are the top five:

  1. Cybersecurity, Events & Response Plan
  2. Culture & Conduct
  3. Regulatory Compliance
  4. Third Party Relationships
  5. Strategic Growth, Risk & Product Innovation

You may view a comprehensive list and analysis of these risks here.

 

CBA Continues its Committment to Robust Underwriting Standards for Autos

In the third quarter, the subprime auto loan delinquency rate increased to 2%, up from 1.6% in Q3 of 2014, according to the Federal Reserve Bank of New York. In its report, the New York Fed made their concerns clear; however its blog post also stated “the majority of auto loans are still performing well.” At CBA, our Auto Finance Committee is committed to robust underwriting standards. As the New York Fed notes, delinquencies on auto loans originated by banks remained low, with most of the troubled loans originating at finance companies, which is not a large enough market to harm the overall financial system.

 

Court Rules, CFPB Appeals

Recently, the CFPB took steps to appeal the U.S. Court of Appeals for the District of Columbia’s long-anticipated ruling in PHH Corp v. CFPB. The decision, which declared the CFPB’s governing structure unconstitutional, allows for the president to remove the Bureau’s director at will. Regardless of the eventual outcome, it is essential the CFPB operate as an independent agency, just as the other agencies in Washington do. A five person, bipartisan commission at the CFPB would allow the Bureau to remain a strong, stable and effective regulator capable of withstanding constant shifts in political power.

For background details on this case, see the CBA-prepared statement and analysis released following the court's decision. You may also view CBA's amicus brief in the PHH RESPA Case and op-ed in support of a CFPB commission.

For those interested in furthering their understanding of the issues and procedures involved in the appeals process, the American Banker’s John Heltman provides a good summary.

 

House Passes Bill Altering Criteria for SIFI Designation

In a 253-161 vote, the House of Representatives passed a bill yesterday altering the criteria for regulators to label banks as systemically important financial institutions (SIFI). The bill removes the application of a strict $50 billion-asset threshold for SIFI designation, which allows regulators more flexibility in selecting which institutions are considered systemically important.

 

Calling All Applicants for CBA’s Joe Belew Award

CBA members have long supported the needs of their local communities. Each year, CBA highlights our member banks’ commitment to community development by awarding one of our members with our annual Joe Belew Award. This year, the award will be presented to our member bank applicant with the most innovative and impactful program supporting digital access to financial services. And remember, be sure to highlight how your bank is meeting the needs of low- and moderate-income consumers, the underserved/underbanked, minorities, seniors, or rural communities. We look forward to receiving all of you applications, and may the best bank win!

Please be sure to submit your completed application by Thursday, February 8, 2017 to CBA’s Maren Colon. You may email her here: mcolon@consumerbankers.com. She anxiously awaits all of our member banks’ applications!

 

Sparks Fly at Promontory, I Moderate

For a political junkie like myself, elections are always fun to watch, especially one as exciting as the 2016 presidential race. Recently, I had the opportunity to join in on the post-election conversation at Promontory’s Post-Election Executive Summit where I moderated a debate between two well-known political consultants from opposite sides of the aisle, Mary Matalin and James Carville.  Matalin, who has served on the campaigns of Presidents Ronald Reagan and George H.W. Bush, and Carville, who served on the campaign of President Bill Clinton, clashed in a post-election debate for the ages. From our conversations, I can tell you there never has been a more exciting time to be in Washington.

Thank you to everyone at Promontory for being such gracious hosts. We are glad to have you as a member of the CBA family.

CBA's Richard Hunt moderated a debate this week between political consultants Mary Matalin and fellow-Cajun James Carville at Promontory’s Post-Election Executive Summit

 

Welcoming our Newest Associate Members

We’re glad to welcome our newest associate members Mayer Brown, our neighbor in the Nation’s Capital, and Arch Insurance Company, located in New York City!

 

Three Things to Know to Be In the Know

Number of ‘problem’ banks at seven-year low

U.S. to Forgive at Least $108 Billion in Student Debt in Coming Years

CIO Voices: Capital One’s Rob Alexander on How to Win in Banking

 

Lagniappe

Shout out to USAA for being named Bank of the Year by American Banker.

CBA Small Business Banking Committee Member Richard Bynum was named regional president for the Greater Washington area by PNC Bank.

Debby Hopkins, Chief Innovation Officer at Citi and Chief Executive of Citi Ventures, will retire at the end of 2017. Vanessa Colella will succeed Debby in both positions.

Pam Fansler was named chairman of First Tennessee Bank’s East Tennessee region from March until she retires in July.

Leo Rinaldi, a former executive at J.P. Morgan Chase, joined Novantas as a director.

 

Frost Bank's Cliff McCauley dropped by CBA Headquarters this week.

 

'Tis the Season for holiday cheer! On Friday, Team CBA came together to prepare our 2016 holiday cards.