Advocacy
ICBA Urges Basel Exemption at Senate Hearing
ICBA reiterated its call for policymakers to exempt community banks from Basel III proposals in a statement for a Senate Banking Committee hearing. In its statement for the record, ICBA wrote that the proposed capital standards should not apply to financial institutions with $50 billion or less in assets.

Applying Basel III and the standardized approach to banks below this threshold would result in further industry consolidation and leave consumers with fewer choices in the banking system, ICBA said. The association also provided specific comments on how to modify the proposed guidelines if policymakers do not exempt community banks.

ICBA’s efforts got attention in the news media. A Bloomberg report featured community banker concerns aired at the hearing and cited Federal Reserve testimony pledging to further tailor the Basel III capital guidelines to community banks. ICBA’s push for a community bank exemption also made headlines this week in The Washington Post, Dow Jones Newswires and The Wall Street Journal. Additionally, a Better Markets blog post covered that organization’s letter to the committee calling on policymakers to apply the delayed implementation of the Basel III rules to community banks, but not too-big-to-fail institutions.

More about ICBA’s efforts to exempt community banks from the proposed capital guidelines is available on the association’s Basel III webpage. Read ICBA Statement. Read ICBA Release.


Washington
Fiscal Cliff Debate Has Real Implications for Community Banks
Washington policymakers this week moved toward negotiations over what to do about the “fiscal cliff”—the combination of higher tax rates and lower government spending scheduled to take effect in January. While Democrats and Republicans have made conciliatory gestures, however, they have not budged from their respective positions.

House Speaker John Boehner (R-Ohio) this week expressed optimism that policymakers could reach an agreement to avoid the fiscal policy cocktail threatening the economic recovery. In his first news conference following his reelection, President Barack Obama yesterday suggested that Congress could act as soon as next week to extend tax cuts for Americans and small businesses earning less than $250,000 a year.

However, an extension of these tax rates would still leave much to be resolved. The White House this week proposed $1.6 trillion in new taxes and $1.1 trillion in spending cuts. Meanwhile, congressional Republicans have instead sought lower tax rates across the board, closed tax loopholes and reduced spending. Failure to reach a deal by the end of the year would set off a cascade of higher rates and reduced spending that could send the economy back into a recession.

Obama’s proposal to extend “middle class” tax cuts for those earning less than $250,000, while allowing the current rates on others to expire, is particularly important for community banks and other small businesses. Small businesses taxed at the individual income tax rate, which employ more than half the private-sector workforce, would see their top tax rate rise from 35 percent to 44.7 percent next year. This pass-through small-business sector includes Subchapter S corporations—applying to more than 2,300 community banks.

An ICBA-commissioned study released earlier this year details the negative economic impact of these tax increases. According to the study, allowing these rates to increase would reduce investment in the United States by 2.4 percent and result in 710,000 fewer jobs, 1.8 percent lower wages and a 1.3 percent smaller economy.

Obama is scheduled to meet with congressional leaders tomorrow to resume deficit talks.


Deposits
Fiscal Cliff a Mole Hill Compared to TAG: Column
The looming “fiscal cliff” isn’t the only dangerous countdown clock threatening to hit zero at year’s end, according to a new Market Oracle column. The pending expiration of full FDIC coverage of noninterest-bearing transaction accounts also threatens the nation’s economic recovery, the column notes.

Money Morning and Forbes.com contributor Shah Gilani writes that the fiscal cliff is a mole hill compared to the scheduled end of the Transaction Account Guarantee program on Dec. 31. Gilani echoes ICBA warnings that allowing the program to expire will result in more concentrated deposits in too-big-to-fail financial institutions, greater risks to the financial system and less access to credit at the local level.

ICBA continues working with lawmakers to advance an extension of this important deposit coverage as soon as possible. The association encourages community bankers to continue expressing their support for extending the program by urging their members of Congress approve an extension. Contact Congress Today.



Agriculture
ICBA, Farm Groups Urge Passage of New Farm Bill
ICBA joined a group of 235 farm and rural organizations in a letter urging congressional leaders to pass a new five-year farm bill by the end of the year. “Failure to pass a new five-year farm bill before the year’s end will create significant budget uncertainty for the entire agricultural sector, including the rural businesses and lenders whose livelihoods are dependent upon farmers’ and livestock producers’ economic viability,” the organizations wrote. Read the Joint Letter.



Lending
Treasury Promoting Initiative To Boost Small-Biz Lending
The Treasury Department is encouraging community bankers to take advantage of an initiative to help community banks lend to creditworthy small businesses. The Small Business Jobs Act of 2010 allocated $1.5 billion to the State Small Business Credit Initiative to fund state programs that expand access to credit for small businesses. The funds support more than 140 state loan-guarantee, loan-participation, collateral-support and capital-access programs.

Treasury said that SSBCI programs offer community banks an opportunity to serve small-business borrowers that otherwise might not be able to receive a loan. The department is encouraging community banks to learn more about the programs available in their state by visiting the Treasury website.



Regulation
FDIC Announces Closure of Satellite Office
The FDIC announced that it will close its East Coast Temporary Satellite Office in Jacksonville, Fla., on April 5, 2014. The FDIC board of directors approved the establishment of the office in May 2009 to manage receiverships and liquidate assets from failed financial institutions primarily located in the Southeast. The FDIC said that based on a review of its workload and signs of improving health in the banking industry, its Dallas Regional Office will be able to absorb the remaining work of the satellite office by the second quarter of 2014.


Regulation
Regulators Release Additional Guidance on Sandy
The federal banking regulators issued supplemental guidance to their Oct. 30 statements about financial institutions and borrowers affected by Hurricane Sandy. The guidance notes that prudent efforts by institutions to meet customers’ cash and financial needs generally will not be subject to examiner criticism

The guidance also calls on financial institutions to perform a comprehensive review of affected borrowers’ financial condition to implement prudent loan-workout arrangements. Financial institutions may receive Communities Reinvestment Act consideration for community development loans, investments or services that revitalize or stabilize federally designated disaster areas in their assessment areas or in the states or regions that include their assessment areas, the guidance notes.



Federal Reserve
FOMC Minutes Show Support for Additional Bond Purchases
Minutes of the Federal Open Market Committee’s Oct. 23-24 meeting suggest support for additional asset purchases following the conclusion of the Federal Reserve’s “Operation Twist” program. According to the minutes, “a number of participants” suggested they support continuing purchases of long-term assets after the Fed runs out of short-term assets to sell. Under the current program, the Fed swaps short-term securities for longer-term ones.

Support was not unanimous, however. “Several” members of the panel questioned the effectiveness of the purchases and expressed concerns that sizable asset purchases might eventually have adverse consequences for the functioning of asset markets. Additionally, “a couple” of participants noted that an extended period of policy accommodation posed inflation risks.



Economy
Retail Sales Dip in October
Retail sales dropped 0.3 percent in October and were up 3.8 percent from a year ago, according to the Commerce Department. The September increase was revised up from 1.1 percent to 1.3 percent. Total sales for the August-October period were up 4.7 percent from the same period a year ago.



Economy
Producer Prices Down in October
Producer prices declined a seasonally adjusted 0.2 percent in October, the Labor Department reported. The decrease followed price increases of 1.1 percent in September and 1.7 percent in August. On an unadjusted basis, the Producer Price Index advanced 2.3 percent over the previous 12 months, the largest rise since a 2.8 percent increase for the 12 months ending in March 2012.



Poll
Take This Week’s Quick Poll
Take this week’s Quick Poll on the Go Local holidays campaign, and view results from the previous poll on the new format of ICBA NewsWatch Today. View the Archive. View the Archive.



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