Tennessee Bankers

This Week Newsletter

June 19, 2017 - Issue No. 1724

Fed Hikes Rates; One More Increase Expected in 2017

The Federal Open Market Committee decided last Wednesday, June 14, to raise the target federal funds rate by 25 basis points to a range 1 to 1.25 percent and to begin shrinking the Fed's balance sheet this year. The decision was approved 8-1, with Minneapolis Fed President Neel Kashkari voting against it.

This will mark the second increase in 2017 and the fourth since the committee resumed rate hikes in December 2015. FOMC members noted that economic growth remained moderate and that the labor market had strengthened. They also expected inflation, which has been running somewhat below the committee's 2 percent benchmark, to stabilize around 2 percent in the "medium term."

Treasury Department Issues Sweeping Regulatory Reform Recommendations

The Treasury Department last Monday, June 12, issued a 150-page report making dozens of recommendations for how Congress and regulatory agencies can streamline bank regulation to promote economic growth. The report came in response to President Trump's executive order outlining core principles of financial regulation and calling for a comprehensive review of the regulatory structure.

The report called for significant tailoring of regulatory requirements and made recommendations on capital, liquidity, community banks, mortgage lending, and structural regulatory reform. While some of Treasury's recommendations require Congressional action, Mnuchin estimated that "70 to 80 percent" can be put into motion by regulators immediately through their independent rulemaking authority. Read the Treasury Report.

TBA Joins Minnesota Bankers Challenge to Feds' 'Expansive' Redefinition of Redlining

Noting the need for consistency and certainty in Fair Lending enforcement, the Minnesota Bankers Association on Monday filed a friend-of-the-court brief in support of a Minneapolis-area community bank's motion to dismiss federal allegations of redlining. ABA, ICBA, and 40 state bankers associations, including TBA, joined the brief.

MBA and the other associations argued that the Department of Justice, which brought redlining allegations against Minnesota-based KleinBank, did so using a novel definition of redlining rather than the definition clearly spelled out in interagency guidance. Despite consistently favorable Community Reinvestment Act ratings and offering no evidence of intent to discriminate, DOJ evaluated KleinBank's lending not against its CRA assessment area but what it called a "proper assessment area" incorporating all of the two counties that included Minneapolis and St. Paul.

"If the Court were to find in favor of the DOJ in this case, the current definition of redlining and the evidentiary standards needed to prove this type of discrimination would both be eliminated," the amicus brief said. "Under those new standards, the mere existence of a majority-minority neighborhood located outside a bank's assessment area would automatically equate to redlining ... Changing the redlining definition and evidentiary standards in that manner would immediately subject banks all across the country to new legal, regulatory, and reputational risk."

Keep Rep. Fleischmann in Thoughts and Prayers

After the attack during a Congressional baseball practice Wednesday, June 13, the TBA asks you please keep Rep. Chuck Fleischmann (R-Tenn.), those who attended the practice, and first responders, in your prayers. The Congressman was there when the shooting took place, and other than being scraped up avoiding the gunman, he is okay.

TBA Membership Meetings Kick off August 22 in Seven Regional Sites

A highlight of the year for the newly elected TBA Chairman and the TBA team is the opportunity to travel across the state to meet with the majority of our members during Membership Meetings. Held this year August 22-25 and 28-30; we hope that you will make plans to join your regional peers and Chairman Lee Moss for one or more of the meetings is most convenient for you. The luncheons will be held from 11:30 a.m.–1:00 p.m. with sites in Manchester, Chattanooga, Kingsport, Knoxville, Nashville, Memphis, and Jackson. During the luncheon, the TBA team will review the initiatives that are the present focus of your association. Registration is now open.

Compliance Alliance Hot Topic Question

Q: In regard to flood requirements, some borrowers have buildings, with little to no value or that will be torn down after closing, located on the property we are financing that is in a flood zone. Do we have to require flood insurance for these?

A: Generally, yes—there's not an exception in the regulations for buildings that have little value or will be torn down after closing. If the value is less than the minimum deductible, the bank would have to note that in the file and get a statement from the insurer to that effect. If that's not the case, the bank may consider "carving out" buildings from the security it takes on the loan. Note that the bank should fully analyze the risks of this option. Specifically, it should consider whether it would be able to market the property securing its loan in the event of foreclosure and whether there are any zoning or other issues that would affect its collateral.

Not a Compliance Alliance member? Learn more by attending a live demoTuesday, June 20 at 10:00 a.m. CT or Thursday, June 22 at 1:00 pm C.T. Compliance rules and regulations change quickly! For timely compliance updates, subscribe to Compliance Alliance's email newsletters.

FPSI This Week: Is Your Bank ERISA Compliant?

The Employee Retirement Income and Security Act of 1974 (ERISA) requires all employers to have a written Summary Plan Description (SPD) for each separate welfare benefit plan (e.g., medical, dental, 125 plan, life, disability, etc.), informing participants of eligibility requirements, benefits, claims and appeals procedures, and rights under ERISA. Now the Department of Labor Audits are reviewing ERISA documents more often.

Although insurance providers may provide some information required for SPD compliance, it is a common mistake by employers to think that the summary insurance information they receive from their insurance provider meets their SPD requirements. A common approach is to combine all SPDs into one overall SPD Wrap notice, tying in the required ERISA language and simplifying the SPD notice process. This document can also provide your company with an added layer of security should the Department of Labor come calling. For more information on how to better protect your bank or company with an ERISA wrap, please contact your local Financial PSI representative or the agency manager, Brian Mobley.

TBA On the Road

  • FPSI holds its board of directors meeting in Nashville.
  • TBA participates in the Governor's ceremonial bill signing of the Elderly and Vulnerable Adult Financial Exploitation Protection Act championed by TBA and sponsored by Sen. Mark Norris and Rep. Kevin Brooks.
  • The TBA Young Bankers Division holds its board of directors' summer meeting in Union City.
  • Stacey Langford travels in West Tennessee visiting members.
See where TBA goes while "on the road" by following @TNBankers.