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CSBS Examiner

A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors


 In This Issue...

 Upcoming Events...

Day One: Examiner Training, Web-based (ongoing)MSB Examiner Training, Mortgage Examiner Training, and Bank Safety & Soundness Examiner Training. CSBS's Day One platform allows examiners to begin training on their first day on the job instead of delaying training while waiting for an on-ground school to become available. These innovative online training modules enable examiners to get up to speed more quickly.

Fraud Identification Training (ONLINE), April 24-May 26: This course examines financial institution practices and procedures that would be considered red flags, potential examination procedures that would identify such weaknesses, and the corrective measures needed to improve them. The course consists of 21 case studies drawn from regulatory agencies, and lessons learned from each of them.

Real Estate Appraisal Review (ONLINE), April 24-May 26: The Real Estate Appraisal Review course analyzes how the regulatory agencies and supervised institutions use appraisal reports, describes the various types of appraisal reports, explains the appraisal valuation process, identifies and describes the relevant factors about the property and the market, describes the identification aspects of highest and best use analysis step of the appraisal valuation process, describes and applies the methods of valuing land, describes, identifies, and measures the forms of depreciation, describes and applies the cost, sales comparison, and income approaches to valuation, and defines pertinent appraisal terms. Link: 

Effective Meetings with Management, San Antonio, TX, May 15-19: The Effective Meetings with Management School is based on expanding communication skills with upper and lower-level management, managing effective meetings in the workplace, dealing with conflict, and delivering difficult messages. It also includes an out-of-the box approach on fact finding interviews to enhance examiner skills and abilities to think on their own and utilize all the resources available to them.

Trust Examiner School, San Antonio, TX, May 15-19: The Trust Examiner School features a blended learning format that is designed to provide attendees with a practical overview of the trust industry and prepares them to conduct examinations of trust departments and trust companies. Focusing on both an introduction to the trust industry and the trust examination components, the school is taught by veteran industry experts and trust examiners.

CSBS State-Federal Supervisory Forum, New Orleans, LA, May 23-25: The Forum is an annual gathering of senior executives in key leadership positions with state and federal regulatory agencies.

Effective Meetings with Management, La Quinta, California, June 12-16: This school is based on expanding communication skills with upper and lower-level management, managing effective meetings in the workplace, dealing with conflict, and delivering difficult messages. It also includes an out-of-the box approach on fact finding interviews to enhance examiner skills and abilities to think on their own and utilize all the resources available to them.

Introductory BSA/AML Examiner School, La Quinta, California, June 12-16: This school provides a strong base for attendees’ BSA compliance knowledge and adds value to their regulatory agency, financial institution, or money service business.  The session includes focused “hands-on exercises” relating to core BSA examination procedures that reinforces what attendees learn and permits them to apply their knowledge to real-life situations.

Senior School, San Francisco, CA, June 26-30: This school is designed to meet the specific leadership training needs of state financial regulators who are rising into supervisory and/or management positions within their departments, serve as an examiner-in-charge in the field, or currently hold a managerial position within the agency. 

Legal Seminar, Park City, UT, July 24-26: Provides a forum for state banking department attorneys, assistant attorneys general assigned to the department, and other regulatory attorneys.

Deputy Seminar, Park City, UT, July 26-28: An opportunity for key banking department officials to gather to learn about upcoming issues, share challenges, and learn potential solutions.

"It’s been a long way, but we’re here.” – Alan Shepard, who became the first American to enter space on this day in 1961.

"It’s been a long way, but we’re here.” – Alan Shepard, who became the first American to enter space on this day in 1961.

White House Looks to Different Rules for Big and Small Banks

National Economic Council Director Gary Cohn spoke to community bankers Thursday, clarifying the Trump Administration’s position on what a modern version of the Glass-Steagall Act may look like, according to several news sources. Cohn told community bankers at the White House that he foresees different rules for large banks and small banks as the most effective approach to creating a barrier between commercial and investment banking.

The Administration has not yet outlined an action plan for achieving this goal, but have reiterated it as a priority.  In his daily press briefing, Press Secretary Sean Spicer echoed the sentiments expressed by Cohn. “The President’s pro-growth agenda, including instituting what he has called a 21st century Glass-Steagall, will allow these banks to spend less time complying with unnecessary requirements, many of which were designed to police much larger entities,” said Spicer.

2017 National Community Bank Survey Now Live

For the fourth year, CSBS and the Federal Reserve are conducting the National Survey of Community Banks. The survey is designed to gather quantitative and qualitative feedback from community banks on the current regulatory environment. The results are shared at the annual Community Bank Research Conference, where state and federal regulators gather with community bankers to discuss new research. To participate in this year’s community bank survey, find more information here.

For the next several weeks, the CSBS Examiner will take a look back at some of the direct conversations state regulators held with community bankers leading up to the 2016 conference. This week, we look at the results of discussions with Texas.

A Look Back – Texas

TILA-RESPA Integrated Disclosure rules are a consistent concern amongst Texas community bankers. On the topic of regulatory burden, one Texas community banker reported spending as much as $120-150k on compliance. Other Texas bankers reported that, on average, TRID delays closings by 7-10 days. Texas bankers also expressed concerns that TRID examinations are subjective in nature, and that examiners have their own interpretation of what constitutes a violation.

Texas community bankers cited the Home Mortgage Disclosure Act, or HMDA, as especially burdensome. One Texas community banker commented that disclosures are far too detailed to be meaningful to customers, and that “every comma, period, abbreviation and minutiae are regulated.” However, many bankers commented that HMDA was not nearly as burdensome as it was initially.

Fair lending law was also consistently commented on as burdensome. Texas community bankers noted that fair lending examinations are far too subjective in nature, and that a bright line needs to be established as per the size of the bank. Texas bankers commented that the CFPB seems to “regulate by enforcement and not regulation”, and that regulation “by fear seems to be the theme.” One community banker emphasized that consumers are being harmed by the regulatory approach to fair lending laws, and that “scoring and documentation is actually causing consumers who do qualify and are willing to take the loan are paying more than before.”  Qualified mortgages also present concerns to Texas community bankers, who commented that many banks are no longer originating mortgages because of the regulatory burden, and that they do not make any “real money.” Bankers noted that if a community bank holds the loan in their portfolio and assumes the risk, that loan should be seen as a qualified mortgage.

Texas bankers expressed concerns with current and pending rules related to small dollar lending.  Overall, Texas bankers are not optimistic about the CFPB’s rulemaking and whether it will increase community bank entry into the small dollar lending space.  

2017 Community Banking Research and Policy Conference: Papers Due June 16

The Federal Reserve System and CSBS are accepting papers for the 2017 Community Banking research and policy conference. The conference committee is seeking papers that explore all aspects of community banking, including but not limited to: the role of community banks in the U.S. financial system; advantages and disadvantages of the community bank business model; the effects of government policy on community banks; significant challenges faced by community banks; and new opportunities for community banks. This year's conference will be held Oct. 4 5 at the Federal Reserve Bank of St. Louis. The deadline for submitting papers is June 16.

Around the Agencies

OCC: The OCC announced that Comptroller Thomas Curry will step down, effective today. Keith A. Noreika will serve as Acting Comptroller of the Currency.

Closing Comment

“Getting customers to understand, accept and willingly adopt the changes we make is critical. However, that really is Step B. Too often, Step A is overlooked. The first step is helping our own employees understand, accept and willingly promote the changes a bank is implementing. The odds of success for just about any changes to products, strategies, business models, etc. are directly tied to whether our teams are truly on board.”

      - Dave Martin, founder of Bankmechanics, in an op-ed for the American Banker.

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