Richard's Rapid Fire - October 25, 2019

October 25, 2019

CBA's Fair & Responsible Banking Committee, led by Chair Mark Schultz of Capital One and Vice Chair Julie Jehrio of M&T Bank, at CBA HQ last week for their annual in-person meeting


Cajun Thoughts: DO THE CITIGROUP SHUFFLE CEO Michael Corbat of Citi has tapped the bank's Latin America CEO Jane Fraser to fill the role of President, a position that has been open since Jamie Forese retired earlier this year. Fraser will also serve as CEO of Global Consumer Banking, succeeding Stephen Bird who is leaving Citi soon. CEO of Citibanamex Ernesto Torres Cantu will take over for Fraser as CEO of Latin America ... STRAIGHT TALK FROM A BUREAUCRAT (WHO KNEW?) Dr. Wayne Johnson, a senior student loan official at the Education Department, announced he is leaving and on his way out the door declared the current federal student loan system is “fundamentally broken … The time has come for us to end and stop the insanity.” I could not agree any more with Dr. Johnson on this point. Congress should cap federal loans to stop the virtually unlimited, predatory lending practices which currently exist for grad students and parents. When default rates on federal loans are at 20%, serious reforms are long overdue. Of course, Dr. Johnson is leaving to run for the Senate seat in Georgia and has picked up the debt forgiveness flag so popular with political candidates. Here’s the catch: forgiving existing debt does nothing to help reduce the cost of college, which has been fueled by the federal overlending I mentioned earlier ... HOUSE PASSES BENEFICIAL OWNERSHIP BILL A bill requiring companies to reveal beneficial owners passed the House floor Tuesday with the addition of amendments adding stronger privacy protections. The Corporate Transparency Act, supported by CBA, relieves banks of the obligation to report ownership information. We encourage swift passage of the bill in the Senate ... MY TOP CONCERN THIS WEEK Over the last week, three banks announced staff overhauls for reasons including cost reductions and increased digital investments. Interest rate cuts and decreased use of brick-and-mortar banks are not helping! ... A CLOSER LOOK: MCKINSEY REPORT Much media coverage of the nearly 60 page McKinsey Global Banking Annual Review overlooked some key points and the advantage large banks have. A closer look is available below highlighting the strength of the U.S./North American banking system ... WELCOME BACK TO THE CBA FAMILY Monday marked the first day on the job for banking veteran Charlie Scharf as Wells Fargo's CEO. His background in technology and retail banking makes him a great choice and we are very excited to continue our relationship with him ... FINTECHS REJECTED A federal court judge on Monday ruled only "depository institutions" can receive a national bank charter from the OCC, a case brought to light by the New York Department of Financial Services when they sued the OCC for lacking the legal authority to issue charters. Fintech firms should be regulated on a level playing field as banks. The OCC will be challenging this ruling ...SUPREME COURT TO SETTLE CFPB The Supreme Court will finally put the constitutionality of the CFPB's leadership structure to rest, but regardless of the outcome, a sole-director calling all the shots will never provide the long-term stability consumers deserve and the well-regulated financial sector needs. For that, Congress must create a bipartisan, Senate-confirmed commission to lead the Bureau, as the House of Representatives originally passed under Speaker Pelosi. A commission will ensure consumer protection laws are no longer a pendulum swinging with each new director ... FINANCE OFFICERS SEE RECESSION SIGNS According to new data from the National League of Cities, almost two in three finance officers in large cities predict a recession could occur as soon as 2020. Importantly, cities typically feel changing economic conditions sooner than at the national level, so the downward trends cities are seeing currently likely suggests a broader economic downturn has already begun at that level and is on the horizon for the nation ... AT CBA THIS WEEK The annual fall in-person meetings continued this week with the Internal Audit Committee and EBS Faculty in D.C. More information on their meetings below! ... MONEY 2020 I'm heading to Money 2020 next week where I will see many members of the CBA family, regulators and key stakeholders for our industry. Stay tuned for my takeaways next week!


Don't forget to cheer on the Washington Nationals tonight in honor of Steve Zeisel!

Join Team CBA and do the "Baby Shark" - Gerardo Parra's walk-up song! 




1ST Constitution Bancorp and Shore Community Bank Announce Shore Community Bank Shareholder Approval of the Merger

First BanCorp. to Acquire Banco Santander Puerto Rico

Community Bank System to Expand Its Western New York Presence with Acquisition of Steuben Trust Corporation

LegacyTexas Financial Group, Inc. Announces Anticipated Effective Date of Merger with Prosperity Bancshares, Inc. and Intention to Delist Its Common Stock

Columbia Financial, Inc. Receives Regulatory Approvals For Acquisition Of Stewardship Financial Corporation

bankHometown Completes Merger with Millbury Savings Bank and Welcomes Robert J. Morton as President and CEO

Bank of Southern California, N.A. and CalWest Bancorp, the Holding Company for CalWest Bank, Announce Agreement to Merge

Santa Cruz County Bank Announces Completion of Merger; Expanded Board of Directors

BayCom Corp Completes Acquisition of TIG Bancorp

Centreville Bank and PB Bancorp, Inc. Sign Merger Agreement for Centreville Bank to Acquire Putnam Bank

Reliant Bancorp, Inc. to Acquire First Advantage Bancorp and First Advantage Bank

Blue Ridge Bankshares Inc. and Virginia Community Bankshares, Inc. Announce Regulatory Approvals for Proposed Merger

New Bancorp, Inc. Receives Stockholder Approval to Complete Pending Transaction with Teachers Credit Union



Banking conferences offer a lot of blah."


*CBA LIVE ditches the blah for ah-ha. 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. Save $300 with early bird rates through Friday, January 10, 2020!




Internal Audit Committee: Chair Janine Pappas, TIAA Bank & Vice Chair Jeremy Harlow, American Express


  • CBA's Internal Audit Committee met in D.C. this week for their annual fall meeting. On Thursday evening, Sponsor Protiviti's Doug Wilbert and Monica DeBellis provided the Committee with a training for operational resiliency, or the ability of an organization to withstand adverse changes in its operating environment, followed by a training today by Protiviti's Monica DeBellis and Erika Ray on next generation internal auditing and the agile audit approach.
  • Vice Chair Jeremy Harlow of American Express led members in discussion about the Committee's recent benchmarking survey on 2019 Internal Audit Trends. Discussion focused on solutions and regulatory concerns related to top audit risks and challenges based on the perspectives of institutions varying asset sizes.
  • David Palmer of the Federal Reserve Board discussed the FRB's perspectives on Supervisory Letter 13-1, as well as industry internal audit perspectives on compliance challenges and ways to improve the directives and policy goals of the Letter. Attendees openly discussed internal audit approaches, programs and regulatory concerns with David and addressed the three lines of defense model and risk management controls as applied to technological innovation.
  • Tim Lambert of the CFPB.discussed the Bureau's RFI on Tech Sprints and informed members about the policy considerations supporting the issuance of the RFI and the types of information the Bureau is seeking in comment letters collected in response. Committee members discussed with Mr. Lambert ways in which internal audit teams both leverage technology to conduct audits as well as to review technolgy uses within business lines.


EBS Faculty: With an average of more than 20 years in banking, each of our faculty members brings "in-the- trenches" experience and context for what it takes to be a successful retail banker. What sets our faculty apart is their dedication and accessibility to students; they serve as mentors to students throughout the program - and beyond.


CBA Executive Banking School faculty members were in town this week for their annual fall meeting to debrief the previous year's session, review the curriculum and welcome new faculty members to the program. 




CBA Commends House, Encourages Senate Action on Beneficial Ownership Bill: On Tuesday, the U.S. House of Representatives passed the Corporate Transparency Act (H.R. 2513), a bill that would end the abuse of anonymous shell companies and reform the anti-money laundering regulatory framework. CBA thanks the bill's key sponsors, Reps. Carolyn Maloney (D-N.Y.), Pete King (R-N.Y.), Blaine Luetkemeyer (R-Mo.), and Emanuel Cleaver (D-Mo.) for their leadership and urges the U.S. Senate to consider the bipartisan legislation:


CBA members work vigilantly and commit significant resources to ensuring criminals do not access the American financial system to launder ill-gotten gains. This legislation would strengthen those efforts by helping ensure criminal corporations are not formed in the first place.


The Corporate Transparency Act strikes an important balance between limiting unnecessary burdens on small businesses while still providing law enforcement officials the necessary information to do their jobs.


A copy of the joint trades letter is available here.


Supreme Court to Review CFPB Constitutionality Case: The Supreme Court announced last Friday it would review Seila Law vs. the Consumer Financial Protection Bureau, a case challenging the constitutionality of the CFPB’s single-director leadership structure. The Court’s order is available here.


In addition to hearing the merits of the Seila case, the Supreme Court also directed interested parties filing amicus briefs, included the majority party of the U.S. House of Representatives, to answer, “If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. §5491(c)(3) [the establishment of the CFPB] be severed from the Dodd-Frank Act?”

CBA earlier this month wrote the leaders of both parties in the House of Representatives regarding the possibility of the Supreme Court hearing the Seila Law case. The letter outlines the need for a bipartisan, Senate-confirmed commission instead of a sole director and encourages Congress to act, noting the Court’s decision could create further uncertainty at the Bureau. A copy of the letter is available here.


McKinsey Global Banking Annual Review: There was a lot of coverage of the McKinsey Global Banking Annual Review this week, yet two key points were overlooked in some of the coverage that highlight the strength of the U.S./North American banking system and the advantage large banks have.


What explains the difference between the 40 percent of banks that create value and the 60 percent that destroy it? In short, geography, scale, differentiation, and business model.


  • Geography: McKinsey found the domicile of a bank explains nearly 70 percent of underlying valuations. "Consider the United States, where banks earn nearly ten percentage points more in returns than European banks do, implying starkly different environments."


  • Scale: "Research confirms that scale in banking, as in most industries, is generally correlated with stronger returns." Be it scale across a country, a region, or a client segment. Having said that, there are still small banks with niche propositions out there generating strong returns, but these are more the exception than the rule. Within developed markets, however, it has been a tale of two worlds: "North America, with ROTEs of 16 percent in 2018," and Western Europe, where even after a 54-bps recovery, banks delivered ROTEs of just 6.5 percent in 2018.


  • Differentiation: "The current cycle has been marked by considerable disparity in the fortunes of North American and European markets. If North American banks have been a beacon of optimism," with average ROTE hitting 16 percent in 2018, banks in Europe have not achieved even half this rate.

  • Business Model: "Another key trend is the sharp variance in IT spending across developed and emerging markets, with developed markets spending approximately three times more as a percentage of revenue" … It comes as no surprise, therefore, that emerging markets have seen a high degree of fintech disruption, especially from platform companies that have led with significant spending on customer-facing technology.


CFPB Consumer Advisory Board Meeting: On Wednesday and Thursday, the CFPB’s Consumer Advisory Boards met for the first time since the Boards were restructured under Acting Director Mulvaney’s tenure. Under Director Kraninger, however, the Boards have functioned much as they have in the past, with only one substantive banker (CBA nominee Tim Welsh of U.S. Bank) serving on the Consumer Advisory Board.


During the meeting, CFPB staff discussed the Bureau’s progress through their rulemaking agenda, updates to their innovation policies, and concerns about consumer interactions with debt-settlement agencies. We remain hopeful more financial institutions will be added to the Consumer Advisory Board in the future to create a more dynamic and impactful discussion about issues facing consumers.


FDIC, Fed Seek Comments on CAMELS Ratings: Last Friday afternoon, the FDIC and Federal Reserve Board announced the agencies are inviting public comment on their use of the Uniform Financial Institutions Rating System, also known as the CAMELS rating system.


The agencies seek comments on the consistency of ratings assigned under the CAMELS system. The agencies are also interested in comments concerning how they use CAMELS ratings in enforcement actions and in reviewing bank applications.


At the CBA Leadership Summit in September, FDIC Chairman Jelena McWilliams explained she is interested in understanding whether there is uniformity in CAMELS ratings. The request for information is consistent with the Chairman’s “Trust Through Transparency” initiative and the agency’s ongoing efforts to examine the bank application process.


CBA applauds the FDIC and the FRB for working together to better understand this fundamental aspect of the banking system.




U.S. Bank Launches RTP, Online Bill Pay: Through a partnership with fintech Alacriti, U.S. Bank introduced a new digital payment service that provides consumers with the flexibility to make payments where, when and how they choose to. The eBill service, deployed via The Clearing House real-time payment network, provides consumers easy and safe ways to make payments on-time and help billers get paid faster. Of note, the service provides consumers the ability to pay bills at the last minute and still avoid potential late fees.


JPMorgan Chase to Include Ex-Criminal Convicts in Employee Pool: In addition to investing $7 million in commuity organizations to help people convicted of crimes, JPMorgan Chase has removed a box on its job applications that asks people about previous criminal convictions. About 10% of the bank's applicants hired last year had a criminal record and JPMorgan Chase officials said hiring standards have not been lowered in its effort to offer second chances.


ZestFinance Rebrand to Zest AI: CBA Associate Member ZestFinance announced this week its new name and rebrand to Zest AI, marking the company's evolution over the past decade to a leader in AI for credit. While the mission to provide fair and transparent credit to everyone remains the same, the new brand identity marks the company's evolution into a leader in AI for credit over the past decade and highlights the company's specific focus on employing automated and explainable machine learning.


Zachary Wasserman Named Huntington CFO: Effective November 4, 2019, Zachary Wasserman, formerly CFO of Visa's North American business, will succeed Mac McCullough who is retiring