Richard's Rapid Fire - October 18, 2019
FDIC Chairman Jelena McWilliams said this week during a Q&A session I moderated at Exchequer Club in Washington, D.C., she hopes all three prudential regulators will work together on Community Reinvestment Act (CRA) reform, but said there is no guarantee it will happen.
The Chairman hopes to move forward together on the proposal but the FDIC, like the OCC, is willing to go alone.
Learn more about CBA's recommendations to successfully modernize CRA here.
Cajun Thoughts: EARNINGS TOP EXPECTATIONS It's been a mostly good week for America's banks as Q3 bank earnings started rolling in and beating expectations. Citigroup and JPMorgan Chase reported increased profits. Wells Fargo and U.S. Bank reported increased revenue. Bank of America profits rose in consumer banking, among other units ... BANKING ON CANNABIS REFORM FinCEN reported the number of financial institutions willing to work with the cannabis industry increased from just 337 in January 2017 to 715 in June 2019. Banks remain hesitant to hold accounts because marijuana is illegal under federal law and are likely to stay out until that changes. Political momentum is gathering behind federal legislation and Senate Banking Chairman Crapo says the Committee is working to prepare a bill to make it easier for banks to hold accounts for cannabis-related business ... HOUSE DEMS INTRODUCE COLLEGE AFFORDABILITY ACT This bill takes a positive step on one of the most common-sense student loan reforms by recognizing the need for better federal loan disclosures. However, the overall bill falls short when it comes to dealing with the cost of college which has to begin with fundamental reforms to federal student loan programs ... CFPB STUDENT LOAN OMBUDSMAN REPORT The CFPB's Student Loan Ombudsman Report is out this week. . The report looks at the number of unverified complaints...(you know how I feel about the whole "complaints" portal system), which are down 25 percent. Less than 3,000 (or less than one-tenth of one percent of all private loans) were reported over the last year for private loans and just 23 in my state of Louisiana.The more important number, however, is 98. That’s the percent of borrowers successfully repaying their private student loans compared to a double-digit default rate as high as 22 percent for federal loans.If the CFPB really wants to protect consumers, they should start with the federal loan program, which has opaque disclosures masking the true cost of federal loans ... BB&T-SUNTRUST UPDATE While closing the deal in the second half of 2019 is the desired timeline, the merger could be delayed into 2020 depending on the speed of regulatory approval process. We could have to wait a bit longer for Truist Financial...Hang tight Charlotte, N.C.! ... 2020 DEM CANDIDATES CASH ON HAND As of September 30, 2019, Sen. Bernie Sanders ($33.7 million), Sen. Elizabeth Warren ($25.7 million) and Mayor Pete Buttigieg ($23.4 million) are the three top-funded Democratic candidates. For perspective, former Vice President Joe Biden is at $9 million and President Trump at $83.2 million. Numbers for all Democratic candidates are available here ... KEEPING UP WITH RICHARD DAVIS It was great to catch up with former U.S. Bank President & CEO Richard Davis, now Head of Make-A-Wish Foundation. He gave me great insights on today's banking environment and the charitable world. Richard was CBA's Board Chairman in 2003.
M&A ACTIVITY
- CBA’s Education Funding Committee held its quarterly Hill Day on Tuesday, visiting more than 20 Congressional offices to talk about the need to reform federal student loans. Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-Tenn.) introduced his proposed Higher Education Act Reauthorization last month and House Democrats introduced their version this week. Neither proposal makes necessary structural reforms to the virtually unlimited nature of federal student loans, which has fueled the skyrocketing cost of college. The Committee stressed the need for responsible caps on federal loans along with bringing federal loan disclosures in line with the clear disclosures offered by banks.
- Following the Hill Day, the Education Funding Committee held its in-person meeting and heard from several senior CFPB staff, including the new Private Student Loan Ombudsman Robert Cameron. The Bureau released the latest ombudsman report this week, which saw an approximately 25 percent decrease in private student loan complaints. For the year ending Aug. 31, 2019, the Bureau handled approximately 2,900 private student loan complaints and 6,600 federal student loan complaints. The Bureau also shared the Committee’s concern with the opaque nature of federal loan disclosures and said they were preparing to test designed to help student evaluate, on a level playing field, federal and private loans.
- CBA's Digital Channels committee was in town this week to discuss all things digital banking and how to redesign the customer journey to take advantage of innovation. After meetings on the Hill on Wednesday, members heard from Andrew Hovet and Olivia Lui of sponsor Novantas and Jeff Swartz, Paul Watkins, Ed Blatnik from the CFPB in addition to engaging in general business discussion surrounding the intention to shift industry perspective to include digitization as an inherent aspect as opposed to a channel.
- The Fair & Responsible Banking committee meeting kicked off this morning with a presentation from Jay Budzik, Robert Carlson and Keri Blanks of sponsor ZestFinance about deploying radically transparent machine learning models. After an engaging business discussion of items ranging from HMDA disparate impact to redlining, the committee heard from Stephen Hayes of Relman Law and Nick Schmidt of BLDS on AI. Following CBA LIVE 2020 forum planning, the committee chatted with U.S. Department of Justice's Lucy Carlson, Deputy Chief of Housing & Civil Enforcement Section, Civil Rights Division.
D.C. DOWNLOAD
- Does the proposed interagency policy statement clearly describe the measurement of expected credit losses under CECL in accordance with FASB ASC Topic 326? Why or why not? If not, what additional information is needed? What information should be omitted from the policy statement?
- Does the proposed interagency policy statement clearly describe the measurement of credit losses on impaired AFS debt securities in accordance with FASB ASC Topic 326? Why or why not? If not, what additional information is needed? What information should be omitted from the policy statement?
- Does the proposed interagency policy statement clearly communicate supervisory expectations for designing, documenting, and validating expected credit loss estimation processes, internal controls over ACLs, and maintaining appropriate ACLs?
- Has the proposed interagency policy statement appropriately included concepts and practices detailed in the existing ALLL policy statements that also are relevant under FASB ASC Topic 326? If not, what additional information should also be included?
- Americans save 6% of disposable personal income, down from 11% in 1979.
- Roughly a third of a bank’s market value depends on the robustness and health of the bank’s savings balance.
- Nearly two-thirds of those in the study reported thinking about opening a new savings account, with a better rate being a top factor and would need a rate increase of at least 1.1% to move savings out of their primary bank.
- About half of those surveyed reported being comfortable with an online-only institution but nearly 80% reported they would not consider keeping savings with a company like Facebook, Amazon or Google (the greater the savings, the greater the likelihood).
- Savings are roughly equally divided into three buckets: today, tomorrow and someday. The majority of today savings is held by a customers’ primary bank and slightly more than half of someday – or retirement – savings is held by a bank as opposed to a brokerage firm or advisor.
- A fifth of millennials have savings in certificates of deposits, a percentage nearly equal across age brackets.