Kansas Bankers Association March on D.C. Top Takeaways

This past September, the Kansas Bankers Association (KBA) leaders participated in a march on Washington, D.C. to advocate for the banking community. As a graduate of the KBA Bank Leaders of Kansas (BLOK) group, Pinion’s Heather Campbell joined the march and the week of meetings and discussions with various bank regulators and legislative members. 

Have you ever wished you could pull back the curtain on Washington or wondered what happens in these meetings? Campbell, a Certified Internal Auditor for the firm, shares her highlights and top takeaways from her trip to Capitol Hill:

The first day of meetings were with regulators from the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).  Below are the main topics we discussed.

Meeting with Director of CFPB

• Small Business Lending Data Collection (1071)

  • The KBA Group expressed concerns about the rule, especially regarding the proposed loan threshold of 25 loans per year. The hope is to increase the loan threshold to 1,000 loans per year. This request was acknowledged but no other comments were made.
  • Another issue raised was with the number of points to be collected and the difficulty community banks would have trying to obtain the information from the small businesses they serve. The KBA Group requested the data points to be collected stick to the 13 points mandated in the Dodd-Frank Act.
  • Director Rohit Chopra indicated the CFPB is currently reviewing this and shared the following:
    • Do not assume this data collection is the same as HMDA.
    • The CFPB is not looking to obtain duplicate information.
    • The CFPB is researching to determine what information is already being asked for and is trying to understand the differences in the information being obtained.

• Data Aggregation (1033)

  • The goal of the KBA group was to urge the CFPB to protect consumers data as it leaves the secure bank system by working with bank regulators to bring data aggregators under direct supervision.
    • Director Chopra responded by maintaining the group is also looking to have safe data aggregation and security. This brought up several important questions:
      • Who is responsible for the security of the data? The banks or the data aggregator?
      • What regulations will the data aggregators have? Will it be based on GEO location or browsing? How will security and consumer control be maintained?
    • The fundamental issue is maintaining security and consumer control.

Meeting with the FDIC

The key areas of focus for the FDIC were asset exposures for commercial real estate, interest rate risk and liquidity and long-term holdings. Included in the discussion were Martin Gruenberg, Chairman; Doreen Eberley, Director of Risk Management Supervision and Mark Pearce, Director of Depositor and Consumer Protection.

We discussed the following items:

• Overdraft Programs – KBA brought to attention the concern about examination practices regarding the concern of multiple non-sufficient fund (NSF) fees are assessed.

  • Per the FDIC representatives, the main issue is more to do with NSF fees rather than overdraft fees, especially the representment and disclosures.
    • The greatest risk is customer harm, which can cause a UDAAP violation.
    • Remediation for a UDAAP violation is typically a five-year lookback, but the basis of this issue is data, and a two-year lookback has been accepted for the overdraft issue.
    • See the March 2022 Supervisory Highlights for more information.

• Climate Risk Management (ESG) Scoring and Climate Disclosure Mandates H.R. 8507
  • The KBA group expressed concerns with ESG being more of a political tool and not a financial risk.
  • The FDIC representatives indicated there have been draft principles put out for comment only.
  • Another comment was this is not a near term issue but could be a long-term issue.
  • Suggestions were to review the bank’s risk assessment to include the management of financial risk and implications of ESG.

• Central Bank Digital Currency
  • The KBA is urging regulators to enact similar regulations on this type of currency.
  • The FDIC comments indicating a referral to the Financial Institution Letter Notification of Engaging in Crypto-Related Activities dated April 7, 2022.
  • The FDIC is still in the initial stages of evaluating digital currency and will need to continue to do research.
• The FDIC representatives indicated they would be asking the following questions of their banks:
  • How are you managing this?
  • What is your planning and strategic response?
  • Do you maintain regular contact with Borrowers?
  • Are you taking a prompt response, as needed?

Meeting with the OCC

This meeting was with Beverly Cole, OCC Deputy Comptroller. The following was discussed:

• Climate Risk Management
  • The question for our banks related to this is: What are you doing to understand the impact or risk to the bank related to climate and why?
  • At this point (September 20, 2022) there is not a specific procedure related to climate risk management.
• Central Bank Digital Currency
  • The OCC is not taking a position currently.
  • The OCC has not seen any banks using digital currency as collateral and does not have procedures on what to do if a bank does use it.
• CRA Modernization
  • Each institution is encouraged to submit information explaining the specifics of how the regulation will affect them.
• OCC Priorities
  • Safety and soundness
  • Individual strategic plan
  • Interest rate risk/liquidity
  • Credit risk – only if the portfolio and lenders have changed.
  • More of a look at those areas that have been rated as a one or a two in the past.
  • Do not assume a letter asking about lending areas means you are wrong. Please send a response from the bank asking for clarification.
  • If there is a disagreement with your examiner – elevate it. The goal is to get it resolved and the Deputy Comptroller cannot correct something about which they do not know
  • Do not send form letters when requesting a change. Personalize the letter to reflect how the change affects your bank.

Pinion is a boots-on-the-ground advocate for community banks across the nation. We work to help policymakers understand the priorities, concerns, and obstacles to your success. Connect with a Pinion community bank advisor to understand how we can help overcome your challenges.