Richard's Rapid Fire - October 18, 2019

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. 




For the first time since 2006, not a single bank failed in 2018, marking only the third failure-free calendar year since the FDIC's founding in 1933. Only one bank has failed so far in 2019.
Nothing provides clarity like the asterisk. It clears the air and cuts to the point. It’s a shortcut to answers and understanding. 
*CBA LIVE is the place for clear, honest conversations. It’s where to go for answers to even the most challenging questions and find clarity amid the clutter. 
Sign up today to be a part of CBA LIVE 2020 at the Hilton San Diego Bayfront in San Diego, CA. Early bird registration rates are valid through Friday, January 10, 2020!
Education Funding Committee: Chair Christine Roberts, Citizens & Vice Chair Kelly ChristianoSallie Mae
  • 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. 



Digital Channels Committee: Chair Josh WinsteadTIAA Bank & Vice Chair Kristy BrandonComerica
  • 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 SwartzPaul WatkinsEd 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.
Fair & Responsible Banking Committee: Chair Mark SchultzCapital One & Vice Chair Julie Jehrio, M&T Bank
  • The Fair & Responsible Banking committee meeting kicked off this morning with a presentation from Jay BudzikRobert 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'Lucy Carlson, Deputy Chief of Housing & Civil Enforcement Section, Civil Rights Division.



CBA Recommends Legislative, Regulatory Changes to Improve CFPB, Consumer Protections: CFPB Director Kathy Kraninger this week gave her semi-annual report to the House Financial Services Committee and Senate Banking Committee.
A summary of the Senate Banking hearing is available here and a summary of the House Financial Services hearing is available here.
CBA wrote the chairs and ranking members of both committees in advance of these hearings to highlight needed legislative and regulatory changes to improve the CFPB and strengthen its consumer protection mission. Those letters are available here.
The letters highlight how the current dispute over the CFPB's leadership structure has added increased instability, noting pending legal challenges which could decide the constitutionality of the Bureau's leadership structure. A change in director affects consumer finance laws and the entire CFPB. The potential of a court ruling that could install a removeable at-will director would bring increased confusion.
Regulatory stability and transparency will not be realized until the Bureau's governance structure allows for the debate and deliberation of multiple stakeholders with diverse experiences and expertise. A bipartisan commission of five, Senate-confirmed commissioners would provide a balanced and deliberative approach to supervision, regulation and enforcement of rules and regulations that oversee the financial services sector and provide consumers needed safeguards.
Improving the financial lives of consumers is a goal that unites lawmakers, regulators and industry. Achievement of this shared goal occurs when there is a stable and even-handed regulatory framework that produces clear and reasonable rules of the road to protect consumers and allow for a robust financial services market.
House Committee Introduces College Affordability Act: More than ten years after the last reauthorization of the Higher Education Act (HEA), the House Committee on Education and Labor Democrats introduced the 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. Borrowers deserve to know the true cost of federal student loans and the Department of Education should bring federal loan disclosures, which currently mask the cost, in line with the pro-consumer standards required of private lenders.
The bipartisan Student Loan Disclosure Modernization Act introduced by Congressmen Emanuel Cleaver, II and Jim Banks is a perfect template for this effort.
The overall bill, however, falls short when it comes to dealing with the cost of college which has to begin with fundamental reforms to federal student loan programs. These virtually unlimited programs have fueled both skyrocketing tuitions and student debt burdens - and the bill remains silent on this fact.
Refinancing existing direct and well-performing private loans only moves borrowers into a broken system already experiencing double-digit default rates, limits future access to credit, and puts taxpayers on the hook for even more debt.
More information on CBA’s student lending reform proposals is available here.
Regulators Seek Comment on Proposed Allowances for Credit Losses, Proposed Guidance on Credit Risk ReviewThe FDICOCC, Federal Reserve and NCUA yesterday released a proposed interagency policy statement describing the measurement of expected credit losses under the current expected credit losses (CECL) methodology and the accounting for impairment on available-for-sale (AFS) debt securities in accordance with FASB ASC Topic 326; supervisory expectations for designing, documenting, and validating expected credit loss estimation processes, including the internal controls over these processes; maintaining appropriate ACLs; the responsibilities of boards of directors and management; and examiner reviews of ACLs.
Comments are due December 16, 2020, and CBA will continue to monitor developments.
The agencies are requesting comment on the following specific topics:
  1. 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?
  2. 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?
  3. 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?
  4. 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?
CBA, Novantas Release Report on Consumer Savings: CBA and Novantas this week announced the release of new consumer deposit research, The Savings Dilemma. The study delves into an area of increased attention – consumer savings behavior – with a focus on actions U.S. banks can do to encourage savings and grow valuable deposits.
The research examined more than 3,000 people who make financial decisions for their households with at least $2,000 in savings balances and found consumers think about savings in three buckets: “today,” “tomorrow” and “someday” money. While retail banks have traditionally thought of customers in a very binary fashion with respect to rate sensitivity, the study revealed customers have different rate priorities for different portions of their savings.
CBA's statement is available here and the full report is available here.
Key findings from the joint CBA-Novantas research include:
  • 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 FacebookAmazon 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. 
American Banker ran this article in advance of the joint study's release this week.
“Understanding why and how American families save – and which products they prefer for certain types of savings – is the first step in helping banks better serve their customers.
“Knowing this information helps build a stronger, more beneficial relationship for consumers with their banks.” 
-CBA Senior Vice President & Associate General Counsel David Pommerehn

Synchrony, PayPal to Launch First-Ever Venmo Credit Card: This week, CBA member Synchrony announced plans to launch the first-ever Venmo consumer credit card in the U.S. The co-branded card, expected to debut in the second half of 2020, will leverage Synchrony's digital technology expertise with Venmo's mobile app and social user experience to create personalized credit experiences and a user-friendly mobile app for cardholders.
Facebook's Libra Project Suffers SetbackFacebook's global cryptocurrency-based payments project Libra has suffered a serious setback as MastercardVisaeBay and Stripe have followed PayPal in abandoning the Libra Association. Mastercard thinks "there are potential benefits in such initiatives and will continue to monitor the Libra effort," a company spokesperson says, while a spokesperson for Visa states, "Our ultimate decision will be determined by a number of factors, including the Association's ability to fully satisfy all requisite regulatory expectations."
Crypto Firms Fall Under U.S. Banking Laws: According to a joint statement issued by the CFTC, FinCEN and SEC, the cryptocurrency industry must comply with U.S. banking laws under the Bank Secrecy Act. The agencies said regardless of the terminology used or technology employed, the agencies said "it is the facts and circumstances underlying an asset... that determines the general categorization of an asset, the specific regulatory treatment of the activity involving the asset, and whether the persons involved are 'financial institutions' for purposes of the BSA."
Of note, CBA members believe the current BSA/AML framework must be modernized to produce more useful information for law enforcement, alleviate compliance burdens on limited resources, and ensure BSA/AML serves as an effective tool in preventing criminals from accessing the financial system.
More information on CBA's recommendations for improving the BSA/AML framework is available here.