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Richard's Rapid Fire - December 7, 2018
Cajun Thoughts: The Marriott breach has the potential to be one of the largest breaches in the U.S., and, yet, has not received the same volume of media coverage as others even though 500 million customers were affected. Just a reminder, retailers do not have the same GLBA standards banks have, and it is time Congress creates a level playing field on behalf of consumers…New BCFP Director…As you all know, CBA and its membership has been working with other trade associations to create a five-person bipartisan commission at the Bureau of Consumer Financial Protection,even going so far as supporting then Director Cordray to be the Chairman of a five-person bipartisan commission with a brand new term, and every step of the way, we were rejected by Senate Dems. Now, the Democrats, chiefly Sen. Elizabeth Warren, have to live the next five years having zero say on any policy measures at the Bureau … My mother taught me never to say “I told you so,” so I am going to say WE told you so. We believe a bipartisan commission is in the best long-term interest of the Bureau as it gives many stakeholders a voice at the table instead of one person as called for under today’s leadership structure to make all of the decisions for every consumer with a financial product … The New Sheriffs…Kathy Kraninger’s confirmation completes the Trump Administration’s appointments to the regulatory arena for financial institutions with Comptroller Joseph Otting of the OCC, Chairman McWilliams of the FDIC and Chairman Jerome Powell of the Federal Reserve. I believe this has been President Trump’s best work by providing good, confident, experienced people at the head of regulatory agencies…Mortgage Bubbles?…About a week ago, there was an article in the Wall Street Journal about how the economy is coming to a standstill in mortgage originations as they focused on Dallas, Texas, and how rising interest rates were curtailing the appetite for many possible homebuyers. On that same day, I was up in New York City visiting with our membership and media, I visited a neighborhood called Hudson Yards. It was there I counted no fewer than ten cranes in the area, which also included a new vertical park and concert venue. As I was driving to the airport, I noticed Long Island City also had multiple cranes which will be added when Amazon brings their 25,000+ jobs into the arena as well. So which one is the truth…Dallas, Texas or New York City?…A Great from the Greatest Generation…On Wednesday, CBA HQ closed in observance of former President George H.W. Bush’s National Day of Mourning, something we will most likely do for every former president. I had the opportunity to meet President Bush way back in 1991 as a young congressional aide (with hair at the time) and I was struck by how tall he was…standing a firm 6’2”. The fact that he volunteered to defend our country at age 18 is usually a once in a lifetime accomplishment, but not for this person. God bless Texas and America!
CBA LIVE 2019 Speakers Announced: CBA LIVE 2019: The Currency of Now is just four months away and we have some outstanding keynote speakers to announce. In addition to CBA Board Chair Todd Barnhart of PNC, we will hear from Bank of America Chairman and CEO Brian Moynihan, CEO of Chase Consumer Banking Thasunda Duckett, Comptroller of the Currency Joseph Otting and FDIC Chairman Jelena McWilliams…and more. Register here and save $300 through January 18.
Kraninger Confirmed to Lead Bureau: On Thursday afternoon the Senate confirmed Kathleen Kraninger to a five-year term as director of the Bureau of Consumer Financial Protection. CBA looks forward to working with Ms. Kraninger on common-sense regulations that protect consumers while also allowing our well-regulated banking system to serve families and small businesses. We continue to support the shared mission of depoliticizing the Bureau and making it a gold standard regulator. In order to achieve these goals, the Bureau needs a bipartisan commission to ensure a variety of voices and views are at the table during the rulemaking process.
OCC Reduces Assessment Rates: Late last Friday, the OCC announced it will reduce the marginal rates in its General Assessment Fee Schedule by 10 percent for national banks, federal savings associations, and federal branches and agencies of foreign banks. The change takes effect with the March 31, 2019, assessment. The agency anticipates the change will reduce total assessments collected by the agency by more than $90 million in 2019. It isn’t every day a federal agency announces they are cutting costs.
Regulators Announce BSA/AML Innovation: On Monday, FinCEN and the prudential regulators announced they would encourage financial institutions to explore more innovative approaches to combat money laundering and illicit terrorist financing. This was an important first step in improving current Bank Security Act and anti-money laundering rules, regulations and guidelines.
To more fully update the existing BSA/AML framework, CBA has recommended in a letter to Congress:
- Amending reporting thresholds: CBA supports raising the reporting threshold for financial institutions from $5,000 to $10,000 for suspicious activity reports (SARs) and from $10,000 to $30,000 for currency transaction reports (CTRs). The current thresholds, established decades ago, have not been adjusted for inflation or otherwise amended.
- Requiring beneficial ownership be verified at the time a legal entity is formed: Shell companies with anonymous ownership provide shelter for criminals and every effort should be made to prevent these entities from accessing the nation’s financial system. CBA strongly encourages the Committee to consider measures that would require beneficial ownership information to be collected and verified by a government agency at the time a legal entity is formed and before corporate owners attempt to access the financial system at account opening.
- Streamlining reporting requirements and encouraging technological innovation: It is CBA’s position that FinCEN, the banking agencies, and law enforcement should periodically conduct a formal review of the reporting requirements under the BSA and its implementing regulations to ensure the information reported by and collected from financial institutions has a high degree of usefulness to law enforcement.
Bureau Releases Annual Report on Fair Lending: On Thursday, the Bureau released its annual report to Congress on its fair lending activities. The report details the Office of Fair Lending & Equal Opportunity’s work through its sixth full year of operation. The Office focused on promoting fair, equitable and nondiscriminatory access to credit in mortgage lending, deepened its supervisory work in servicing and small business lending, and embarked on new efforts to encourage innovation in expanding credit access.
To this end, the Bureau reported on its ECOA enforcement actions through 2017, detailing the most frequently-cited violations, highlighted their risk-based prioritization technique, and informed Congress on overall observations in fair lending. The topics highlighted in its fair lending observations include updates to proxy methodologies and issues in mortgage servicing. Finally, the Bureau briefed Congress about the rulemaking that took place for HMDA, ECOA, small business data collection, amicus programs, and no-action letters.
FDIC Quarterly Banking Profile: On November 20, the FDIC released its Quarterly Banking Profile for Third Quarter 2018, and reported a strong quarter and record profits for the banking industry. Chairman McWilliams announced that the current economic expansion is the second-longest on record, but cautioned that the competition to attract loan customers is strong, therefore, it is important that banks maintain their underwriting discipline and credit standards to minimize exposure to interest-rate risk and credit risk.
Some key takeaways below:
- Net income for the industry was 62 billion dollars in the third quarter, up 29.3 percent from a year ago – about half of the dollar increase in net income was attributable to tax reform. Noninterest income rose to $66.7 billion in the third quarter, up $2.4 billion (3.8 percent) from the year before.
- The annual increase in noninterest income was led by servicing fees, which increased by $432.9 million (18.8 percent), investment banking fees, which rose by $287.8 million (10.4 percent); and other noninterest income which grew by $1.5 billion (5.1 percent). Net interest income rose by $9.6 billion (7.5 percent) from 12 months ago, reflecting a modest growth in interest-bearing assets and wider net interest margins.
- Banks with assets of $10 billion to $250 billion reported the largest year-over-year increases in average asset yields (up 51 basis points) and average funding costs (up 33 basis points).
- The return-on-assets ratio increased to 1.41 percent in the third quarter from 1.12 percent one year ago, and marks the highest quarterly level reported by the industry since the Quarterly Banking Profile began in 1986. Noncurrent loan balances (90 days or more past due or in nonaccrual status) fell by $3.6 billion (3.4 percent) during the quarter, while overall credit card balances rose $806.5 million (7.6 percent) and losses on credit cards rose by $813.9 million (2.1 percent).
- A final metric worth noting is the FDIC’s deposit insurance reserve ratio, which reached 1.36 percent on September 30, up from 1.33 percent at the end of the second quarter. Because the deposit insurance reserve ratio has achieved the minimum reserve ratio of 1.35 percent that is required by law, the third quarter of 2018 marks the last quarter that the FDIC will assess quarterly assessment surcharges on large banks.
BofA Shuffles Executive Leadership: Bank of America’s previous co-head of retail banking Thong Nguyen was named vice chairman, overseeing corporate strategy and payments. Nguyen’s co-head Dean Athanasia will now be the sole retail division leader, which includes consumer and small business banking. In addition to Nguyen and Athanasia’s new roles, president of BofA’s trust and private banking divisions Katy Knox and head of Merrill Lynch Wealth Management Andy Sieg will join the management team, reporting to CEO Brian Moynihan. Congratulations – team CBA looks forward to working with all of you, and hearing from Mr. Moynihan at CBA LIVE 2019: The Currency of Now! Full article here.
Flagstar Acquires Wells Fargo Branches: On Monday, Michigan-based Flagstar Bank finalized its acquisition of 52 Wells Fargo branches located across the Midwest in Michigan, Indiana, Ohio and Wisconsin. The acquisition is part of Wells Fargo’s plan to reduce retail bank branches by about 5,000 by the end of 2020, and the move also includes about 490 team members who received offers of employment from Flagstar. Learn more about the transaction here.
BMO Harris Partners with AutoGravity: BMO Harris Bank announced a partnership with auto-fintech platform AutoGravity to streamline the car-buying and financing process for current and future customers. The platform connects American consumers with lenders and dealerships, and is available on iOS, Android and the Web. Another great effort by a CBA member to meet consumer needs and demands in the digital age. It is critical banks continue adapting to the rapidly growing multichannel bank environment. Learn more about how customers will benefit from this partnershiphere.
Fifth Third Teams Up With CommonBond: Fifth Third Bank and CommonBond recently teamed up to ease the personal finance process by offering an alternative way for customers to finance and refinance student loans. This solution builds on previous success in the area as Fifth Third has “helped customers in accelerating the pay down of more than $1 million in student debt, just a year after launching Fifth Third Momentum,” a program established in 2017 to help college graduates pay off student loans faster. More about the partnership here.
Santander Expands Private Wealth Group: With a concentrated effort on the ultra-wealthy,Santander intends to put more resources into its private wealth arm, with the intention of adding tens of billions of dollars to assets under management over the next three years. Head of the wealth management division Victor Matarranz said Santander is “aiming for double-digit growth in private wealth each year for the next three years” and the intention is “to provide a comprehensive range of services to the ultra-wealthy from one central point. More here.
Remembering George H. W. Bush: As you know, the Congressional agenda was shifted around this week as we stopped to remember and pay respect to former President George H.W. Bush,who passed away over the weekend. On Tuesday, several team CBA members and I paid tribute to our 41st President at Capitol Rotunda.
MERGERS & ACQUISITIONS
STATE OF THE WEEK
CBA State of the Week: Our State of the Week is ALABAMA, where more than 1 out of every 3 residents banks with a CBA member! CBA members in Alabama hold $81 Billion in total assets, employ 18,000 people, provide $2.2 Billion in small business loans and serve 1.9 Million customers.Alabama is also home to CBA member-banks Regions Financial Corp. and BBVA Compass.Check out our state by state numbers
From left to right: CBA President & CEO Richard Hunt with former First Lady Mrs. Barbara Bush and former President George H.W. Bush, Former President George H.W. Bush with CBA Chief of Staff Jeannie Bunton.