Banking News

Kansas City Fed: FCS Tax Advantages Distort Competition July 28, 2016

A recent article published by researchers at the Federal Reserve Bank of Kansas City demonstrated how the Farm Credit System’s tax advantages have distorted competition in the marketplace between commercial banks and FCS lenders. Bert Ely pointed to the article in yesterday’s edition of AmBA’s Farm Credit Watch e-bulletin. While both classes of lenders currently hold roughly a 40 percent market share, the article’s comparison of real estate and production loans showed the competitive edge FCS enjoys as a result of its tax-advantaged status.

When it came to real estate loans -- from which all FCS profits are tax-exempt -- FCS lenders had 10 percent greater market share than commercial banks. That trend was reversed, however, for production loans, where FCS profits are only exempt from state income taxes. Commercial lenders held roughly 61 percent of those loans, compared to 39 percent held by their FCS competitors.

These data “illustrate the distorting effect of the differential tax treatment of banks and the FCS,” Ely wrote. “They provide powerful evidence as to why the taxation of banks and the FCS should be comparable.”
Click here to read Farm Credit Watch. Click here to read the Kansas City Fed article.



Fed Sees 'Moderate' Economic Expansion, Maintains Rates July 28, 2016

Fed officials agreed to maintain a 0.25 to 0.5 percent target range for the federal funds rate, according to a statement from the Federal Open Market Committee following their July meeting. The committee noted “moderate” economic expansion and strong job gains in June, but based their decision to keep rates as is on the previously sluggish labor market and “global economic and financial developments.” All but one member voted in favor of holding intrest rates steady.

Committee members said they would continue to monitor incoming economic data, and that rates are “likely to remain, for some time, below levels that are expected to prevail in the longer run.” Click here to read the FOMC statement.



Survey: Two-Thirds of Bankers Have Begun CECL Prep July 28, 2016

Approximately two-thirds of financial institutions have in some way begun tackling the Financial Accounting Standards Board’s Current Expected Credit Loss model for loan loss accounting, according to a survey released yesterday by financial information firm Sageworks. About 54 percent of respondents have read through the standard, 64 percent have discussed it within their institutions and 27 percent have shared CECL details with their boards.

However, 23 percent of respondents at banks and credit unions said they had not taken any action yet, and 11 percent said they were unsure about where to start. While CECL takes effect in 2020 for Securities and Exchange Commission registrants and 2021 for all other banks, ABA is encouraging bankers to begin planning now for the transition and educating their investors, management and board about CECL.

Click here to read more. Learn More at ABA.com/CECL.



New Article Highlights Innovative Card-Linked Rewards Programs July 28, 2016

The latest free article from the AmBA Banking Journal examines how three community banks are using debit card-linked rewards programs to deepen customer engagement, promote a “shop local” message and connect with their customers at crucial financial moments in their lives. With research suggesting that being rewarded for their business is a top desire of consumers, offering a card-linked rewards program can help banks as they compete more aggressively for market share and depth of wallet, particularly among millennial customers.

“In a 2015 Accenture study, millennials identified high fees and poor loyalty programs as the top reasons they are dissatisfied with their banks. Combine that with the fact that millennials switch their bank at nearly double the average of other generations, and it makes a compelling case for offering a rewards program,” the author writes.

In addition to viewing and sharing articles at aba.com/BankingJournal, readers can use the news site to keep tabs on the latest AmBA Newsbytes. Click here to read the article.



FBI Issues Warning about Email Scams July 25, 2016

Last week, the FBI issued a notification to warn companies of the ongoing threat of business email compromise scams that caused losses of nearly $76 million between December 2015 and March 2016. The notice outlines common types of BEC scams, steps businesses can take to mitigate their risk and what to do if they fall victims to this type of cybercrime.

The FBI noted that in most BEC scams, fraudsters typically target businesses that work with foreign suppliers or regularly transmit payments through wire transfers. Once the victim company is selected and compromised -- often through social engineering or computer intrusion techniques -- the fraudster conducts surveillance to understand the company’s processes and protocols and identify those with the authorization to perform or authorize these transactions. The fraudsters then compromise and assume control of the victim’s legitimate email account and, posing as the employee, instruct others to transact on their behalf.

Click here to read the FBI notice. Click here to view AmBA's corporate account takeover issue page.



AmBA Calls for Changes to Midsize Banks Stress Test Requirements July 25, 2016

In a comment letter to federal regulators on Friday, AmBA provided recommendations for improving the stress testing process for midsize banks and maximizing the effectiveness of the annual tests.

AmBA pointed out that the stress tests for mid-sized banks are tailored significantly to each bank based on a number of factors including the institutions’ local economy and risk profile, and that because of this tailoring, comparing banks’ results side by side could lead to inaccurate conclusions about the health of the institution. Rather than publishing identifiable stress test information for each bank, regulators should instead consider publishing an aggregate summary of stress test information, which would satisfy the mid-sized stress test disclosure requirement under the Dodd-Frank Act, AmBA said.

The association also favored a floating submission date, which would allow banks to conduct their stress tests during their capital planning process, allowing them to make more efficient use of their resources. Additionally, AmBA recommended that midsize banks be permitted to use the same stress-test scenarios over a multi-year period, which would allow regulators to make more accurate comparisons of results from year-to-year, while reducing regulatory burden.

Click here to read the letter.



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FS-ISAC Security Update

FS-ISAC Security Information Available to ABA Members

ABA members can now access FSā€ISAC security threat information via the FS-ISAC Weekly Risk Summary Report, designed for community institutions to deliver timely and actionable information on significant security threats.

Click here to access the most recent Weekly Risk Summary Report.