On Tuesday, April 18, Governor Haslam signed into law TBA’s legislation (SB 2684 / HB 1707) that allows banks to pledge out-of-state bonds as collateral for public deposits. The law imposes certain requirements on other states’ bonds if pledged—that they be AA- rate, an equivalent rating, or higher rating; are bank qualified; and are not a structured debt instrument.
The legislation will take effect on July 1, 2018.
The only mandatory legislation the General Assembly is charged with passing each year is a balanced budget for the upcoming fiscal year. The House last Tuesday, April 17, passed its version of the state’s $37.5 billion budget for the 2019 fiscal year, with the Senate passing a slightly different version the following day. The bill then went back to the House where members voted 81-2 to accept the Senate changes in the budget.
With the budget approval now behind us, General Assembly members are expected to adjourn mid-week. Their final days of session will be spent taking up bills “behind the budget,” meaning those that will have a focal impact on the state, and any legislative matters that remain outstanding.
The Senate last Wednesday, April 18, used a little used legislative procedure to reverse the CFPB’s 2013 guidance on indirect auto lending. In a 51-47 vote, the Senate passed a Congressional Review Act resolution that would invalidate the guidance, which sought to impose limits on how and what indirect lenders pay car dealers who provide financing and how much discretion dealers have to set loan terms and rates.
Normally the CRA can only be used to invalidate regulatory actions issued within the previous 60 legislative days, but late last year, the Government Accountability Office formally ruled that the guidance constituted a rule. Even though issued without notice and comment, it was a general statement of policy with general applicability. That ruling restarted the CRA clock.
The House on April 13, by a bipartisan vote of 300 to 104, passed H.R. 4790, which would simplify the Volcker Rule. The bill designates the Federal Reserve as the rulemaking agency over all affiliates in a banking group and delegates examination and enforcement authority to a bank’s primary federal banking agency. It also provides a clear exemption from the Volcker Rule for banks that have $10 billion or less in consolidated assets.
Testifying before the House Financial Services Committee last week, Federal Reserve Vice Chairman for Supervision Randal Quarles outlined several ways in which the Fed has already or is in the process of tailoring the regulatory framework to promote efficiency, transparency, and simplicity. Quarles identified reforms to living wills, the capital planning process for the largest banks, liquidity requirements, and holding company control determinations.
Specifically, he said he supported permanently shifting the living will process to a biennial basis instead of annually, calibrating liquidity requirements for global systemically important banks differently than non-GSIBs and streamlining the process for determining “control” under the Bank Holding Company Act. He added that the Fed is considering whether to expand a recent rule streamlining the CCAR process for more institutions.
President Trump last Monday, April 16, announced the nomination of Michelle Bowman to fill the designated community bank seat on the Federal Reserve Board of Governors. This marks the first time the position has been filled since it was created by Congress during the Obama administration. A fifth-generation banker, Bowman held a senior role at Farmers and Drovers Bank in Council Grove, Kan., for more than six years prior to assuming her current role as Kansas Bank Commissioner in 2017.
Trump also announced the nomination of economist and monetary policy specialist Richard Clarida to serve as Federal Reserve vice chairman. Clarida is currently a global strategic advisor at Pimco, an American investment firm, and previously served as assistant Treasury secretary for economic policy under the George W. Bush administration.
A new joint proposal from the Federal Reserve, FDIC, and the OCC will give banks the option to phase in the regulatory capital effects of the Current Expected Credit Loss standard. The agencies will accept comments on the proposal for 60 days after publication in the Federal Register.
The CECL standard, which goes into effect in 2020 for SEC registrants and 2021 for other banks, requires an estimate of expected credit losses over the life of the portfolio to be effectively recorded upon origination. However, under the proposal, banks will have the option of phasing in the day-one regulatory capital effects of CECL over three years.
In addition to technical changes related to large banks, the agencies also proposed to exclude consideration of CECL within stress testing until the 2020 cycle. This would avoid splitting two different accounting standards within the nine-quarter forecasting horizon. View the proposal.
The Agriculture Enterprise Fund (AEF) is an incentive program that supports Governor Haslam’s priority of job creation and economic development by facilitating agricultural development in Tennessee. The AEF is a product of the Governor’s Rural Task Force. It is administered by the Department of Agriculture in conjunction with the Department of Economic and Community Development.
The AEF will award grants (up to 25 percent of a project’s budget) to starting or expanding agricultural, food, and forestry businesses; farmers, nonprofits, local governments, and other entities in Tennessee, or those whose project will be located in Tennessee. Successful grant recipients must demonstrate a strong potential for impact on local farm income, access to markets, increased capacity, or agricultural innovation. Priority will be given to businesses located in at-risk counties, distressed counties, and counties adjoining at-risk or distressed counties.
More information, including the application, is available here.
On April 9, 2018, the agencies adopted a final rule amending regulations requiring appraisals of certain real estate transactions. The final rule increases the threshold level at or below which appraisals are not required from $250,000 to $500,000 for commercial real estate transactions. A commercial real estate transaction has been defined as a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property. It excludes all transactions secured by a single 1-to-4 family residential property and thus construction loans secured by a single 1-to-4 family residential property are excluded.
If you'd like more information, Collinsworth can be reached at 615-417-9942 or by email. The final rule took effect on April 9, 2018.
Be sure to also sign up for a free 30-minute webinar from Evolve VCS on "Preparing Acceptable and Supportable In-House Real Estate Evaluations." Took register for the webinar, which takes place May 1 at 9:30 a.m. CST, click this link, enter the meeting number 622 803 491, click "Join," then click "Register."
The Southeastern School of Commercial Lending (TSSCL) is an intensive, one-week school that exposes students to the major issues commercial lenders face. The school shows how the economy and business structure affect lending decisions. Eleven different instructional modules address topics such as how businesses operate and the ways their financing needs arise, meeting the multiple financial needs of customers through effective relationship banking, and understanding the role of a company’s management and how to analyze and evaluate management.
TSSCL run May 20-25 at the TBA Barrett Training Center in Nashville.
As part of the business of the Leadership Convention, members of the division elected new officers and directors to lead the division during 2018-2019. Division Chairman Michelle Bing, Bank3, Union City, presided over the business activities of the convention.
The 2018 Leadership Convention was held April 15-17 with over 130 members participating. View the photo recap here. Make plans to attend next year's Leadership Convention at the Westin Chattanooga, April 7-9, 2019.
TBA's GR team and bankers travel to Washington, D.C. for the ABA GR Summit and ABA Emerging Leaders program.
TriStar Bank of Dickson President and CEO Ted Williams, TDFI Commissioner Greg Gonzales, and Colin Barrett head to D.C. to participate in the Appraisal Subcommittee meeting. The ASC is considering a waiver on appraisals for commercial loans filed by Williams. If approved, this would impact Dickson, Cheatham and Davidson counties.