House Passes Portfolio Lending Bill November 19, 2015
By a bipartisan 255-174 vote, the House has passed H.R. 1210, which would designate all mortgage loans that institutions originate and hold in portfolio as Qualified Mortgages and thus subject to the safe harbor provisions of the Ability-to-Repay Rule. The bill is a signature part of AmBA’s Agenda for America’s Hometown Banks, and was also strongly advocated by the state bankers associations.
“It’s clear that new regulatory requirements have restrained mortgage lending, and have made it particularly difficult for some creditworthy borrowers to obtain a home loan,” said AmBA EVP James Ballentine. “This legislation is a common-sense approach that will help borrowers gain access to some of the lowest-risk mortgage products offered by banks."
AmBA Warns NCUA on Field of Membership Overreach November 19, 2015
As the National Credit Union Administration prepared to vote on a proposal that would substantially loosen credit unions’ field of membership limitations, AmBA urged NCUA to stand up the credit union lobby and follow the law.
AmBA’s Rob Nichols called on NCUA to “demonstrate that it is not a cheerleader for the industry it is charged with supervising,” adding that “[c]hanges that exceed NCUA’s statutory authority or that alter the competitive dynamic between banks and credit unions will be vigorously opposed, using all available tools.”
Click here to read AmBA's letter.
CFTC Issues Report on ‘De Minimis’ Swap Dealer Threshold November 19, 2015
The Commodity Futures Trading Commission yesterday released a preliminary report on the “de minimis” exception for swap dealers to register with the CFTC. The current rule requires a bank to register with CFTC as a swap dealer if it deals in more than $8 billion in notional swaps per year. This level is set to drop to $3 billion in December 2017 unless the CFTC takes further action.
CFTC Commissioner Christopher Giancarlo released a statement taking issue with the “arbitrary” de minimis threshold. “There is no policy basis whatsoever for the current threshold of $8 billion and no policy basis for lowering it to $3 billion,” he said. “The report provides no reason to believe that the threshold has anything to do with optimizing the safety, soundness, liquidity or vibrancy of U.S. swaps markets.”
Comments on the report are due by Jan. 19.
Click here to read the report.
Fed Signals Rate Hike in December November 19, 2015
The Federal Open Market Committee anticipated that projected labor market improvements could warrant an interest rate increase at its December meeting, according to minutes from the committee’s Oct. 27-28 meeting released yesterday. FOMC members noted “moderate” economic expansion, but slow-to-improve job gains and general uncertainty about inflation and real GDP growth spurred them to leave rates unchanged in October.
Following a split on whether to raise rates “later this year” at their mid-September meeting, “[m]ost participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting.”
Click here to read the FOMC minutes.
FASB Finalizes 'Market to Market' Accounting November 13, 2015
After at least five years of serious debate about proposing to mark all financial assets and liabilities to market, the Financial Accounting Standards Board have given final approval to an accounting standard that is limited in its requirement for mark to market accounting. The final standard, “classification and measurement,” becomes effective in 2018 and does not require MTM for loans or debt securities. It does, however, require all equity investments to be treated as trading securities, with changes in fair value recorded through earnings -- an important concern for banks that hold significant levels of equity securities.
For banks that are not considered under FASB’s definition to be “public business entities,” there is good news regarding footnote disclosures of the fair value of all assets and liabilities: these disclosures will no longer be required. However, banks that are public business entities will be required to disclose the value of their loans at the so-called “exit price” -- a major change for most banks.
For banks that have elected to use the “fair value option” to account for their debt, any changes in fair value due to their own credit quality will now be recorded through equity rather than through income. This eliminates the notorious circumstance under which Lehman Brothers reported large income statement gains -- in accordance with GAAP -- when its own credit rating was lowered.
Outreach conducted by bankers and the ABA convinced FASB members that both the original MTM proposal and FASB’s subsequent proposal did not improve bank accounting. Compared to the initial proposal, the standard will cause much less confusion for bank investors and less damage to the credibility of bank financial statements. It also avoids costly disclosures related to the value and management of core deposits.
FASB Sets Effective Dates for New Impairment Accounting November 13, 2015
Also at its Wednesday meeting, FASB agreed that its proposed Current Expected Credit Loss standard for impairment of loans and debt securities will become effective during 2019 for SEC registrants and 2020 for all other companies. In the meantime, AmBA is working closely with FASB members and staff in addressing the costs and complexity of the CECL model for community banks.
FASB received more than 950 comments from bankers, regulators, auditors and AmBA, who together identified 147 “fatal flaws” in the draft standard. FASB hopes to address the comments, which identify both high-level conceptual issues as well as specific issues, such as accounting for troubled debt restructurings and purchased loans, through meetings over the next month and through editing the wording in the text. A final standard is expected in February.
Click here to read AmBA’s discussion paper on the CECL.
Bankers Urged to Submit Post-Exam Surveys November 13, 2015
One of the top concerns among bank CEOs is inconsistent supervisory expectations and treatment related to examination experience, regulatory interpretation and enforcement or supervisory guidance. To help address these concerns, AmBA and the state bankers associations developed the Regulatory Feedback Initiative.
Since 2011, bankers have submitted more than 3,000 post-exam surveys covering safety and soundness and compliance exams. The surveys provide an opportunity to submit anonymous feedback; the results are aggregated and shared with the regulatory agencies and with CEOs of participating banks on request.
ABA encourages bank CEOs or their designees to take a 20-minute survey for any exams completed this year, provided they have not already submitted surveys. Click here to take the post-exam survey.
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