Richard's Rapid Fire - October 4, 2019

October 4, 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 2020 is the place for clear, honest conversations. It’s where the leaders in retail banking go for answers to the most challenging questions and find clarity amid the clutter.
Register today to claim your spot – Early Bird rates are valid through January 10, 2020!
And, special shout out to our first CBA LIVE 2020 registrant – CBA Home Equity Committee member Mark Bosma of TIAA Bank!
Cajun Thoughts: ZELLE CONTINUES TO GROW Bank of America's Effie Gikas said the bank-owned person-to-person payment network Zelle continues to grow and while most of its users are millennials or Gen. Z, the app has reached consumers from all demographics. More than 200 banks offer the free app Zelle to their customers! ...CALIFORNIA TO ALLOW PUBLIC BANKS Gov. Gavin Newsom signed a bill into law on Wednesday allowing public banks to be established in California cities and counties. The bill was controversial as many believe the government should not be involved in the business of banking. The only other state with public banks is North Dakota ...RECORD-BREAKING GOVERNMENT-BACKED HOUSING DEBT Washington Post reported this week almost $7 trillion in U.S. housing debt in 2019 is backed by Fannie Mae, Freddie Mac and the Federal Housing Administration -- the most in U.S. history and 33% more than before the 2008 financial crisis. The federal government - under pressure from lenders, consumer groups and politicians - allowed well over the debt to income ratio as about 30% of mortgage payments are nearly half of the homeowner's income ... CHARLES SCHWAB GOES ZERO COMMISSION The largest publicly traded e-broker Charles Schwab cut fees on online stock trades to zero, consistent with many other online-brokers who have done the same. The zero-commission move will take effect on October 7, 2019 ... U.S. BANK'S TIM WELSH TO JOIN CFPB'S CAB Congratulations to CBA member and nominee Tim Welsh of U.S. Bank who who is among the new members of the CFPB's Consumer Advisory Board. A full list of new members is available below!
CBA Committee Leadership: The following new leaders began their tenure as CBA Committee Chairs and Vice Chairs on Tuesday, October 1, 2019:
  • Yvonne Blumenthal, U.S. Bank, Chair, Community Reinvestment Committee
  • Lloyd Brown, Citibank, Vice Chair, Community Reinvestment Committee
  • Kelly Christiano, Sallie Mae, Vice Chair, Education Funding
  • Richard Foster, Frost Bank, Chair, Small Business Banking Committee
  • Edumundo Hoffens, IBERIABANK, Vice Chair, Talent Management Committee
  • Jenny Rhodes, PNC Bank, Chair, Talent Management Committee
  • Christine Roberts, Citizens Bank, Chair, Education Funding
  • Mark Schultz, Capital One, Chair, Fair & Responsible Banking Committee
  • Ricardo Serrano, BBVA USA, Chair, Risk Committee
  • Bill Simpson, Regions Bank, Vice Chair, Risk Committee
Our committees are the backbone of CBA, helping form and guide policy decisions. So a special thank you to our new and returning committee leadership as well as our dedicated committee members!
Auto Finance Committee: Chair Rich Porrello, Huntington Bank Vice Chair David Hollodick, Bank of America
  • The Automobile Finance Committee meeting kicked off last Friday with a presentation from sponsor Equifax followed by a visit to the FBI to discuss a host of issues with members of their fraud team. Members also heard from Michael Benoit of Hudson Cook.
CFPB Committee: Chair Tangie Holland, Regions Bank & Vice Chair Brian Cahoon, BMO Harris Bank
  • The Consumer Complaints Subcommittee met on Wednesday and the full CFPB Committee met on Thursday to discuss all things CFPB. The Subcommittee heard from guest Scott Steckel, Chris Johnson and Derek Standarowski of the CFPB. Discussion centered around complaints and AI, categorization and the definition of a complaint.
  • The full CFPB Committee met with Jennifer Stockett and Tom Pahl of the CFPB and also heard from Christopher SicuranzaBrad Schaltenbrand and Siwen Tang with sponsor Navigant. Discussion focused on compliance considerations surrounding AI and robotics, exam changes and observations, and other hot button topics in the space.
Community Reinvestment Committee: Chair Yvonne Blumenthal, U.S. Bank & Vice Chair Lloyd Brown, Citi
  • The committee was joined by Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer, Deputy Comptroller for Community Affairs Barry Wides and Director of Banking Relations Ralph DeLeon with the OCC for a lively discussion on CRA modernization. Special thanks to sponsor Wolters Kluwer!
Risk Committee: Chair Ricardo Serrano, BBVA USA & Vice Chair Bill Simpson, Regions Bank
  • The Risk Committee met in person on Wednesday and began the day with a presentation from sponsor Vantage Score. Business discussion focused on key challenges facing banks in the management of risk, customer satisfaction and compliance, including interest rate risk, fraud mitigation, third party risk monitoring and product delivery to name a few. Members heard from Bill Haas of the OCC and did some pre-CBA LIVE planning.
CBA, SBFE Release Small Business Lending Trends Report: CBA and the Small Business Financial Exchange (SBFE) this week released the inaugural Small Business Lending trends report. The report will be released each quarter, examining key credit information for America's small businesses, including payment performance and credit utilization.
This new report offers valuable insights into small businesses’ credit performance as well as their confidence in the long-term economy. Examining these quarter-by-quarter trends will help economists have a fuller picture when making forecasts and advising policymakers.
In addition to offering data on delinquencies, credit utilization and charge-off rates, the report offers a brief analysis of each data set.
Key findings from the report, which examined data from the first quarter of 2019, include:
  • Small business credit performance has remained relatively consistent over the last two years;
  • Credit utilization has not rebounded to pre-recession levels;
  • Delinquencies have experienced modest fluctuation with an increase of 0.5 percent since the second quarter of 2018 while charge-offs are slightly below the same time period from two years ago.
The data used to compile the report includes information collected from SBFE members on small businesses and their payment performance on commercial credit accounts.
A full copy of the report is available here.
CFPB Announces Advisory Board MembersThe CFPB yesterday announced the appointment of new members to the Consumer Advisory Board (CAB), Community Bank Advisory Council (CBAC), Credit Union Advisory Council (CUAC) and Academic Research Council (ARC). CBA is pleased to announce that CBA Member and nominee Tim Welsh, Vice Chairman, Consumer & Business Banking at U.S. Bank is among the new members.
Former Acting Director Mick Mulvaney restructured the scope and size of the Bureau’s consumer advisory boards during his tenure in 2018, dismissing many longtime members, and making each board more streamlined in size. Director Kraninger expanded the focus of meetings to cover broad policy matters, increased the frequency of in-person meetings from two to three times a year, and increased term lengths for members to two years.
A full list of new members is below:
Consumer Advisory Board (CAB)
  • Chair of the CAB - Brent Neiser, Senior Director, National Endowment for Financial Education (Denver, CO)
  • Nikitra Bailey, EVP, Center for Responsible Lending (Durham, NC)
  • Nadine Cohen, Managing Attorney, Greater Boston Legal Services (Boston, MA)
  • Sameh Elamawy, CEO, Scratch Services, Inc. (San Francisco, CA)
  • Manning Field, COO, Acorns (Irvine, CA)
  • Clint Gwin, President & CEO, Pathway Lending (Nashville, TN)
  • Ronald Johnson, Former President, Clark Atlanta University (Atlanta, GA)
  • Tim Lampkin, CEO, Higher Purpose Co. (Clarksdale, MS)
  • Eric Kaplan, Director – Housing Finance Program, Milken Institute (Washington, DC)
  • Sophie Raseman, Director of Product, Brightside (San Francisco, CA)
  • Rebecca Steele, President/CEO, National Foundation for Credit Counseling (Washington, DC)
  • Tim Welsh, Vice Chairman Consumer and Business Banking, U.S. Bank (Minneapolis, MN)
Community Bank Advisory Council (CBAC)
  • Chair of the CBAC - Aubrey Hulings, VP, Operations Manager, The Farmers National Bank of Emlenton (Emlenton, PA)
  • Erik Beguin, Founder, CEO and President, Austin Capital Bank (Austin, TX)
  • Maureen Busch, VP Compliance and CRA Officer, The Bank of Tampa (Tampa, FL)
  • Patrick Ervin, EVP, Independent Bank (Troy, MI)
  • Shan Hayes, President and CEO, Heartland Tri-State Bank (Elkhart, KS)
  • Bruce Ocko, Senior VP Director of Mortgage & Consumer Lending, Bangor Savings Bank (Bangor, ME)
  • Valerie Quiett, SVP and Chief Legal Officer, Mechanics and Farmers (M&F) Bank (Durham, NC)
  • Heidi Sexton, EVP/Chief Compliance and Risk Officer, Sound Community Bank (Seattle, WA)
Credit Union Advisory Council (CUAC)
  • Chair of the CUAC - Sean Cahill, President & CEO, TrueSky Credit Union (Oklahoma City, OK)
  • Arlene Babwah, VP Risk Management, Coastal Federal Credit Union (Raleigh, NC)
  • Teresa Campbell, President & CEO, San Diego County Credit Union (San Diego, CA)
  • Rick Durante, VP, Director of Corporate Social Responsibility and Government Affairs, Franklin Mint Federal Credit Union (Chadds Ford, PA)
  • Doe Gregersen, Vice President & General Counsel, Landmark Credit Union (New Berlin, WI)
  • Brian Holst, General Counsel, Elevations Credit Union (Boulder, CO)
  • Racardo McLaughlin, VP Mortgage Originations/Operations (TwinStar Credit Union, Lacey, WA)
  • Rick Schmidt, President & CEO, WestStar Credit Union (Las Vegas, NV)
Academic Research Council (ARC)
  • Michael Baye, Bert Elwert Professor of Business Economics, Indiana University (Bloomington, IN)
  • Karen Dynan, Professor of the Practice of Economics, Harvard University (Cambridge, MA)
  • Terri Friedline, Associate Professor, University of Michigan (Ann Arbor, MI)
  • John Lynch, Jr., Director of the Center for Research on Consumer Financial Decision Making and Senior Associate Dean for Faculty and Research, University of Colorado Boulder (Boulder, CO)
  • Brigitte Madrian, Dean/Marriott Distinguished Professor, Brigham Young University (Provo, UT)
  • Tom Miller, Professor of Finance and Jack R. Lee Chair, Mississippi State University (Mississippi State, MS)
  • Joshua Wright, Professor, Scalia Law School at George Mason University (Arlington, VA)
OCC Amends Stress Test Rule: The OCC yesterday issued a final rule implementing the stress testing requirements of Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, consistent with Section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
The new rule is effective as of Nov. 24, 2019, and revises:
  • The minimum threshold for national banks and federal savings associations to conduct stress tests from $10 billion to $250 billion;
  • The frequency by which certain national banks and federal savings associations are required to conduct stress tests.
The rule also reduces the number of required stress testing scenarios from three to two and makes certain additional technical changes to the stress testing requirements.
A full copy of the final rule is available here.
OCC Releases Bank Supervision Operating Plan FY 2020: The OCC this week released its bank supervision operating plan for fiscal year 2020.
According to the plan, the OCC will focus on the following risk areas to guide their supervisory priorities, planning, and resource allocations:
  • Cybersecurity and operational resiliency, with emphasis on threat vulnerability and detection, access controls and data management, and managing third-party connections. Examiner focus should include information technology risk management evaluation and institutions’ information technology systems maintenance.
  • Bank Secrecy Act/anti-money laundering (BSA/AML) compliance, with emphasis on customer due diligence and beneficial ownership; determining whether BSA/AML risk management systems match the complexity of business models and products offered; evaluating technology solutions to perform or enhance BSA/AML oversight functions; and assessing the adequacy of suspicious activity monitoring and reporting systems and processes.
  • Commercial and retail underwriting practices, with a focus on evaluating credit risk appetites, risk layering, and portfolio risk exposure.
  • Commercial and retail credit oversight and control functions, including portfolio administration and risk management, independent loan review, concentration risk management, policy exception tracking, collateral valuation, stress testing, and collections management.
  • Impact of changing interest rate outlooks on bank activities and risk exposures, including deposit costs, funding migration, asset valuations, borrower debt service capacity, and housing affordability.
  • Preparedness for the current expected credit losses (CECL) accounting standard, including bank implementation plans and use of third-party vendors to assist in methodology, modeling, and management information systems development. Examiner evaluation of institution preparedness should consider the various CECL implementation dates.
  • Preparation for the potential phaseout of the London Interbank Offering Rate (LIBOR) as a reference rate after 2021, including impact assessments, correlated risk assessments, vendor management, and change management related to the implementation of an alternative index for pricing loans, deposits, other products and services, as well as operational and compliance risks.
  • Technological innovation and implementation, including use of cloud computing, artificial intelligence, digitalization in risk management processes, new products and services, and strategic plans.
A full copy of the OCC's FY 2020 operating plan is available here.
Fed’s Quarles on Leveraged Lending & Fed SupervisionFederal Reserve Vice Chair of Supervision Randal Quarles spoke late last week at Georgetown University Law Center saying regulators have been using their supervisory authority to push back on leveraged lending practices.
In his speechQuarles asserts the debt in the nonfinancial sector is “clearly a growing vulnerability” but emphasized the risk would likely worsen a downturn as opposed to threatening financially stability. He added the Federal Reserve has been supervising this issue through its Shared National Credit program, which conducts a semiannual review. The Federal Reserve has pushed back on banks developing weak underwriting practices.
Quarles' speech centered on the global evolution of macroprudential regulation and noted supervision would be a major focus of his work over the next two years of his vice chairmanship, especially supervision and due process.
He also suggested the Fed’s supervisory practices may have contributed to the volatility in short-term funding markets, where the Fed has been stepping in to provide billions of dollars in loans each day to meet higher-than-normal demand for cash.
The Fed’s rules allow large banks to hold either cash reserves or Treasuries to meet their requirements to keep a certain amount of high-quality liquid assets on hand. However, according to Quarles, it seems some examiners have been urging banks to prioritize cash reserves.
Removal of Federal Agency Heads: With the potential Supreme Court case challenging the leadership structure of the CFPB, a chart examining other prudential regulators' terms is below:
Citizens Bank Focus on Student Loan Refinancing: As part of its consumer banking business, Citizens Financial Group is focusing on refinancing student loans, said CEO Bruce Van Saun. He noted the average amount refinanced is about $50,000, which saves borrowers roughly $175 a month. We believe there is a role for both the federal government and private banks to play in helping students and their families responsibly finance higher education Learn about CBA's student loan reform recommendationhere.
Chase Continues Pittsburgh-Area Expansion: JPMorgan Chase has been approved to open a branch in Washington County, Penn., as the bank continues to expand in the Pittsburgh area. Chase is opening seven new branches in the area and Bank of America is also opening 12 branches by the end of November.
Bank of America's Customer Loyalty Program A Success: Bank of America is expanding its Preferred Rewards program, which has 6 million members with $475 billion in assets since beginning five years ago. The program has 10 types of benefits and members can join with just $20,000 in banking and investment accounts.
NCBA Appoints Liz Terry as Executive Director: This week, the National Creditors Bar Association’s (NCBA) Board of Directors named CBA family member and former CBA Team member Liz Terry as the Executive Director. Congratulations!