Monthly Archives:' December 2013

Risks Facing National Banks and Federal Savings Associations

National banks and federal savings associations continue to face a number of risks as they seek to improve profits in the face of slow economic growth and a prolonged low interest rate environment. Banks are layering risk back into the system in ways that are difficult to quantify at this point in the cycle. That is why risk management must remain a top priority according to the Office of the Comptroller of the Currency’s semiannual assessment of risk.

The OCC’s Semiannual Risk Perspective for Fall 2013 details risks facing the banking industry:

  • Strategic risk remains elevated as many banks re-evaluate their business models and risk appetites to generate returns against the backdrop of slow economic growth and low interest rates. OCC examiners will focus on banks’ strategic business and new product planning to ensure banks maintain appropriate risk management processes.
  • Cyber threats are growing in sophistication and frequency, and require heightened awareness and appropriate resources to identify and mitigate the associated risks.
  • Competition for limited lending opportunities is intensifying, resulting in increased risk tolerance and loosening underwriting standards, particularly in new or unfamiliar loan products. The recent rise in long-term interest rates underscores the vulnerability for banks that reach for yield, as they could face significant earnings pressure, possibly to the point of capital erosion, if interest rates increase further.
  • Bank Secrecy Act and Anti-Money Laundering risks continue to rise as money laundering methods evolve, electronic bank fraud increases in volume and sophistication, and banks fail to incorporate appropriate controls into new products and services.
  • Price volatility has been very low for a long time. Light securities dealer inventories suggest limited risk appetite for market making, raising the possibility of more significant market volatility and price risk as quantitative easing policies change.

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Agencies Adopt Final Rules Exempting Certain Higher-Price Mortgage Loans from Appraisal Requirements

Six federal financial regulatory agencies today issued a final rule that creates exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans. The exemptions are intended to save borrowers time and money while still ensuring that the loans are financially sound.

The appraisal requirements for higher-priced mortgages were established by Section 1471 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Under Section 1471, closed-end mortgage loans are considered to be higher-priced if they are secured by a consumer’s home and have interest rates above a certain threshold.  Section 1471 requires creditors to obtain a written appraisal based on a physical visit of the home’s interior before making these loans.

The final rule provides that loans of $25,000 or less and certain “streamlined” refinancings are exempt from the Section 1471 appraisal requirements, which go into effect on January 18, 2014.

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Federal Banking Agencies Statement on Supervisory Approach to Originating Qualified Mortgages

The FDIC, OCC, NCUA and FRB issued an interagency statement on the supervisory approach to originating qualified mortgages under the CFPB’s ability-to-repay and qualified mortgage rule. The statement is intended to clarify supervisory expectations under the Community Reinvestment Act and safety-and-soundness requirements for supervised institutions. Under the CFPB’s rule, there is a presumption of compliance with the ability-to-repay requirements for loans that meet the definition of a “qualified mortgage.” The agencies noted that supervised institutions that originate both qualified mortgages and loans that do not meet the definition of qualified mortgage based on “business strategies and risk appetites” will not be subject to safety-and-soundness criticism based solely on the loan’s status as a qualified mortgage or a non-qualified mortgage. They also noted that the CRA and the rules are compatible, and that they do not believe that an institution’s decision to originate only or predominately qualified mortgages, “absent other factors,” would adversely affect the institution’s CRA evaluations.

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Agencies Issue Rule Amending Definitions in Bank Secrecy Act

Two agencies (FinCEN and  FRB) issued a final rule largely adopting their 2012 proposal to amend the definitions of “funds transfer” and “transmittal of funds” under regulations implementing the Bank Secrecy Act. In light of the amendments to the Electronic Fund Transfer Act and its implementing regulation, Regulation E, FinCEN proposed to amend the definitions of “funds transfer” and “transmittal of funds.” Without such amendments, such transactions would no longer be subject to the Recordkeeping and Travel Rules’ requirements. The final rule responds to comments to: (1) clearly state that the amended rule does not change the current scope of the obligations of financial institutions under the Recordkeeping or Travel Rules, and (2) delay finalizing the amended rule until the CFPB’s remittance transfer rule was finalized and became effective. On January 3, 2014 the final rule becomes effective.

17th Subchapter S Bank Association Conference

Save the Date for the 17th Annual Subchapter S Bank Association’s Annual Conference being held on October 23-24th, 2014 at The Hilton Palacios Del Rio in San Antonio, TX. We also will be hosting the 2nd Annual Community Banking in a New World Conference the day before on October 22nd at The Hilton Palacios Del Rio. Both are great conferences to attend packed with useful information and networking opportunities with others in the industry.

This year, for the first time, the conference is being held at the newly renovated Hilton Palacios Del Rio Hotel right on the banks of the San Antonio river walk. After Day 1 of the conference we’ll meet for a good ole Texas reception where you can network and discuss operations with other professionals in your industry and get to know our speakers on a personal level. There’ll also be plenty of time to savor some good ole Mexican food or stroll along the San Antonio River Walk and enjoy al fresco dining, shopping, lush landscapes, quaint pathways, cascading waterfalls, outdoor art and relaxing patios.

Group Room Rate: $209 per night  (additional $25 fee per person)
Each individual guest must make their own reservations by calling:

1-800-HILTONS by September 30, 2014.

They must identify themselves as members of Subchapter S Bank Association, in order to receive the room rates that have been established for the Group.

All reservations must be guaranteed and accompanied by a first night room deposit or guaranteed with a major credit card. Reservations cancelled within 72 hours prior to the arrival date will be charged for the first night’s room and tax. Check-in time is 3:00 PM on the day of arrival and check-out time is 12:00 PM on the day of departure. Guest services can arrange to check bags for those arriving early when rooms are unavailable.

Reserve your room now!