Tennessee Bankers

This Week Newsletter

January 30, 2017 - Issue No. 1704

Treasury Nominee Mnuchin: Bank Regulation Should Be Tailored to Activity

Treasury Secretary nominee Steven Mnuchin strongly endorsed efforts to provide regulatory relief for regional, midsize, and community banks in written answers submitted to members of the Senate Finance Committee after his confirmation hearing last week.
"[T]aking a fresh look at all aspects of the Dodd Frank legislation should be one of our highest priorities," he wrote. "It is important that we have a regulatory environment that supports credit flows to all aspects of our economy, particularly in rural and less populated areas, and that small- and mid-sized institutions are not suffering from an inappropriate regulatory burden."

Mnuchin emphasized—as TBA and other banking trade groups have long advocated—that regulation must be tailored based not only on asset size. "I believe in a regulatory framework that is determined by complexity and activity, not simply size," he said. "I endorse rethinking regulatory requirements facing large regional banks in order to regulate the banking sector in a more effective manner. In particular, we should examine whether it is appropriate for financial institutions that engage almost exclusively in traditional banking activities with consumers and businesses to be subject to measures intended for our largest and most complex financial institutions."

He said that his top priority in addressing financial sector regulation is to spur economic growth, adding that any efforts to revisit the Dodd-Frank Act will be in "addressing regulatory issues that limit banks' abilities to lend to small and medium-sized business that will create economic growth and create more jobs." Read the questionnaire.

Rep. Kustoff Appointed to House Banking Subcommittees

House Financial Services Committee Chairman Jeb Hensarling last Thursday, Jan. 26, released the Republican rosters for the committee's six subcommittees. Congressman David Kustoff (R-Tenn.) was named to three subcommittees: Financial Institutions and Consumer Credit; Oversight and Investigations; and Terrorism and Illicit Finance. View the complete list of subcommittees.

Court Dismisses ICBA Credit Union Lawsuit

A federal judge last Tuesday, Jan. 24, dismissed a lawsuit brought by ICBA challenging the NCUA's member business lending rule that took effect on Jan. 1, 2016. The rule and amendments weakened the statutory MBL cap, including making it easier to exclude nonmember loans from the cap calculation.

Judge James Cacheris said that ICBA lacked standing to sue, ruling that it could not demonstrate harm from the 2016 regulatory changes. In an unusual move—contrary to Supreme Court precedent that judges not rule on the merits of the case if standing is not granted—he also ruled that NCUA did have the discretion to interpret the statutory language as it did and that the challenge to the MBL rules were time-barred because the underlying 2003 rule was not sufficiently "reopened" in 2016 to allow the challenge. Read ICBA's release. Read the ruling.

NCUA Proposes New Forms of Alternative Capital

In other NCUA news, the agency recently requested feedback on an advance notice of proposed rulemaking to allow credit unions to raise alternative forms of capital to meet the capital requirements that apply to federally insured credit unions.

The NCUA is proposing to ease restrictions on low-income credit unions issuing "secondary capital," which counts toward their net-worth ratio and risk-based net-worth ratio. It also would authorize all credit unions to issue "supplemental capital instruments" that would count toward their risk-based net-worth requirement.

The proposal envisions federally insured credit unions able to issue subordinated debt that could count as capital under the NCUA's current capital requirements. The NCUA said the proposal could have an impact on the credit union tax exemption, which it says is based on Congress recognizing that "most credit unions could not access the capital markets to raise capital."

The advance notice of proposed rulemaking is open for a 90-day comment period.

Senators Seek to Raise Cybersecurity Profile on Hill

Sens. Cory Gardner (R-Colo.) and Chris Coons (D-Del.) last Wednesday, Jan. 25, introduced legislation that would create a Senate Select Committee on Cybersecurity, raising the profile of the important issue on Capitol Hill. Jurisdiction over cyber issues is currently shared or divided among several other Senate committees.

The new committee would include the chairmen and ranking members of the Senate Appropriations, Armed Services, Banking, Commerce, Foreign Relations, Homeland Security and Governmental Affairs, Intelligence, and Judiciary Committees, in addition to at-large members. Sen. Corker (R-Tenn.), Chairman of Foreign Relations Committee, would thus serve on the Cybersecurity Committee. Read more.

OCC Issues Guidance on Third-Party Risk Management Procedures

The OCC last Tuesday, Jan. 24, issued a set of supplemental exam procedures to help examiners assess banks' third-party risk management programs. The updated procedures are designed to tailor examinations to bank risk and complexity, and expand on the core assessment contained in the "Community Bank Supervision" booklet of the Comptroller's Handbook. View the exam procedures.

Fair Lending Enforcement Under the Trump Administration Webcast Set for Feb. 15

Fair lending continues to be an area of emphasis for federal banking regulators and a significant risk management issue for large and small institutions. This Fair Lending Enforcement Under the Trump Administration webcast, which takes place Feb. 15, focuses on internal risk management and risk assessment, avoiding a targeted examination and the practicalities of fair lending compliance.


This program covers the basics of fair lending laws and regulations along with current issues and areas of regulatory emphasis. Types of discrimination, examination procedures and preparation, and fair lending program requirements are described as well as best practices. Particular attention will be given to fair lending in the indirect-auto lending arena and the use of statistics in light of the U.S. Supreme Court's recent decision on disparate impact.


The registration deadline is Feb. 9. Click here to sign up.

WEBCAST: Past, Present, and Future CRA Compliance for Community Banks

Past, Present, and Future CRA Compliance for Community Banks is designed for compliance professionals and supervisors, as well as those new to CRA. The underlying purpose and background of CRA help to put CRA in perspective for those responsible for community development. Also listed are technical rules for small, intermediate-small, and large banks' as well as factors taken into account by examiners in assessing CRA performance. The potential repercussions related to expansion plans are addressed in practical terms.
It describes CRA requirements for small, intermediate-to-small, and large banks. Examination preparation is emphasized, along with best practices for CRA risk management in the current regulatory environment. Community development, the lending, investment, and services' tests and peer comparisons are considered as well as the advantages of taking a proactive approach to performance context.


This webcast takes place Feb. 16. Click here to get the early registration discount.

This Week with FinancialPSI

Community banks are under heightened regulatory pressure to safeguard their customer's confidential data. Bank examiners are starting to focus attention to the bank's cyber liability insurance policy, security breach expense coverages, and security breach contingency plans.
According to the NetDiligence 2015 Cyber Claims Study, nearly 20 percent of reported breaches occurred within the financial services sector. Having a properly structured cyber liability and breach response expense insurance policy has never been more crucial given the increased risk exposure and various policy forms in the marketplace. These policies are not only written to cover entities, but also directors and officers. FinancialPSI's Brian Mobley has five questions bankers should ask when discussing cyber liability policy protection


FinancialPSI is a subsidiary of the Tennessee Bankers Association. For more information on how they can provide your bank with insurance solutions, click here.

Pinnacle Expands into Three States

Pinnacle Financial Partners Inc., Nashville, announced last week it is acquiring BNC Bancorp, parent of High Point, N.C.-based Bank of North Carolina, for approximately $35.70 per share, or a total of $1.9 billion, based on the acquirer's 20-day trailing average closing price as of Jan. 20. Post-merger, Pinnacle will have $20 billion in assets, $14 billion in loans and $15 billion in deposits, on a pro forma basis. It will operate in four states, with BNC's current president and CEO, Richard Callicutt II, serving as chairman of Virginia and the Carolinas. BNC CFO David Spencer will serve as executive vice president. Callicutt and three other BNC directors will also join Pinnacle's board. Pending regulatory and shareholder approvals, the deal is expected to close in the third quarter.

TBA On the Road

  • Colin Barrett and Tim Amos travel to DC with bankers from the 8th district to meet with Congressman David Kustoff and Senators Bob Corker and Lamar Alexander.
  • TBA's government relations team returns to the legislature as the General Assembly resumes session after the organizational break.
  • Colin Barrett and FinancialPSI's Brian Mobley head to West Tennessee for bank visits.
  • TBA hosts CEO Forums in Nashville.

See where TBA goes while "on the road" by following @TNBankers.

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