Advocacy Agencies Issue Basel III Calculator The federal banking agencies today released a Basel III a regulatory capital estimation tool that allows every community bank to estimate the impact of the proposed rules released in June. The agencies released estimators for banks and thrifts and a separate one for bank holding companies and thrift holding companies.
The new calculator—which is an Excel spreadsheet—has been pre-populated with bank data from the June 30 call reports. Once the preparer fills in the bank’s FDIC certificate number, data specific to that bank will automatically appear on the spreadsheet.
Once the calculator is completed, ICBA strongly urges every bank to write a comment letter by the Oct. 22 comment deadline describing how the Basel III proposal will affect the bank’s risk-based capital ratios. Guidelines for drafting a comment letter, including a template and insertable talking points, can be found on the ICBA website.
ICBA also continues to call on community bankers to sign its petition calling on regulators to exempt community banks from the Basel III proposals. More information is available on ICBA’s comprehensive Basel III webpage.
Advocacy ICBA Expresses Concerns with Proposed Accounting Standards The Financial Accounting Standards Board’s proposal to update disclosures about liquidity risk and interest rate risk would have an adverse impact on community banks, ICBA told the board. The FASB proposal would require all banks, regardless of size, to include new, complex tabular disclosures in their financial statement footnotes to cover certain risks attributable to changes in liquidity position and interest rates.
Specifically, the board is asking for five new tables that would cover everything from expected asset maturities with estimated prepayment speeds to interest rate shock analysis based on hypothetical changes in the yield curve. The tables would need to be audited as part of the independent review of the bank.
In a comment letter to the board, ICBA wrote that community bank stakeholders would not be properly served by these disclosures because they would not be used to make more informed decisions about the health of the institution. ICBA noted that the level of detail provided does not give preparers enough information to properly complete the tables and, in some cases, would result in wide diversity in practice among otherwise similar banks.
Further, auditors would need to spend significant amounts of time and money seeking resources to adequately review the disclosures and their inputs. These costs would be passed on to clients in the form of higher audit fees. ICBA wrote that these concerns are already exhaustively addressed by regular call report filings with prudential regulators and direct safety and soundness examinations.
In addition to filing the comment letter, ICBA has met with members of the FASB board and staff twice to discuss its concerns with the proposal.
Regulation Regulators Release New Rules on Overseeing Financial Conglomerates Global regulators released new principles to improve oversight of international financial conglomerates. The principles are designed to close regulatory gaps, eliminate supervisory “blind spots” and ensure effective supervision of risks arising from unregulated financial activities and entities.
The principles were released by the Basel Committee on Banking Supervision, the International Organization of Securities Commissions and the International Association of Insurance Supervisors. They are organized into five categories: supervisory powers and authority, supervisory responsibility, corporate governance, capital adequacy and liquidity, and risk management.
Regulation Discover Refunding $200M to Customers for Deceptive Marketing The FDIC and Consumer Financial Protection Bureau announced a joint public enforcement action requiring Discover Bank to refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty. The penalty was a result of a joint investigation by the agencies concerning deceptive telemarketing and sales tactics used by Discover to mislead consumers into paying for various credit card “add-on products,” such as payment protection, credit score tracking, identity theft protection and wallet protection.
The agencies said Discover’s telemarketing scripts contained misleading language likely to deceive consumers about whether they were actually purchasing a product. In addition to the restitution and monetary penalty, Discover agreed to stop deceptive marketing, provide refunds without further action by consumers and submit to an independent audit.
Economy Rural Economic Index Up Slightly Creighton University’s index of rural economic performance rose slightly in September but remained below growth-neutral for the third consecutive month. The Rural Mainstreet Index survey of bank CEOsin 10 states rose in September to 48.3 from 47.1 in August. Creighton University economist Ernie Goss said the drought continues to dampen economic activity for businesses linked to agriculture, such as ethanol producers and agriculture-equipment sellers.
After declining for three straight months, the farmland-price index moved higher to its highest level since May. Farmland-price projections varied, with areas suffering the most from drought expected to grow the least.
Meanwhile, farmers increased their demand for loans, with the loan-volume index climbing to 70.2 from 67.6 in August. This marks the seventh consecutive month the index has risen. The checking-deposit index weakened to 48.3 from 49.1 in August, while the index for certificates of deposit and other savings instruments rose to 38.4 from 33.0 in August.
Regulation FDIC Hosting Audio Calls on CFPB Mortgage Proposals The FDIC announced upcoming teleconferences on the Consumer Financial Protection Bureau's significant mortgage-related proposals. The calls, scheduled for 2 p.m. (Eastern time) Thursday, Sept. 27, Wednesday, Oct. 10, are free, but registration is required. Learn More.
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