Monthly Archives:' January 2015

Invited Comments on Small Bank Holding Company Policy Statement

The Federal Reserve Board on Thursday invited public comment on a proposed rule to expand the applicability of the Board’s Small Bank Holding Company Policy Statement (Policy Statement) for small bank holding companies as well as certain savings and loan holding companies. Additionally, the Board announced reduced reporting requirements for certain bank holding companies and savings and loan holding companies.

The Policy Statement facilitates the transfer of ownership of small community banks by allowing their holding companies to operate with higher levels of debt than would otherwise be permitted. Institutions subject to the Policy Statement are not subject to the Board’s regulatory capital requirements. Currently, bank holding companies with less than $500 million in total consolidated assets may be subject to the Policy Statement. Eligible firms must also meet certain qualitative requirements with respect to nonbanking activities, off-balance sheet activities, and publicly-registered debt and equity. The proposed rule allows bank holding companies and savings and loan holding companies with less than $1 billion in total consolidated assets that meet the qualitative requirements to qualify.

The Board also adopted an interim final rule to exclude from the Board’s regulatory capital requirements savings and loan holding companies with less than $500 million in total consolidated assets that meet the qualitative requirements in the Policy Statement. Bank holding companies with less than $500 million in total consolidated assets that meet the qualitative requirements in the Policy Statement are already excluded from the Board’s regulatory capital requirements.

The proposed rule and interim final rule would implement a law passed by the U.S. Congress in December 2014. Comments on the proposal and interim final rule will be accepted through March 4, 2015.

In addition, the Board has taken steps to relieve regulatory reporting burden for bank holding companies and savings and loan holding companies that have less than $1 billion in total consolidated assets and meet the qualitative requirements of the Policy Statement. The Board has proposed to eliminate quarterly consolidated financial reporting requirements (FR Y-9C) for these institutions, and instead require parent-only financial statements (FR Y-9SP). The proposal would also eliminate regulatory capital reporting for savings and loan holding companies with less than $500 million in total consolidated assets from the FR Y-9SP. The Board has filed a request with the Office of Management and Budget to make these changes effective on March 31, 2015, while it completes the notice and comment process.

Comments on the regulatory reporting changes will be accepted for 60 days after publication.

Small Bank Holding Company Policy Statement

FDIC Issues Statement on Providing Bank Services

On January 28, 2015, the FDIC issued a Statement on Providing Banking Services to encourage institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers. The FDIC noted that individual customers within broader customer categories present varying degrees of risk, and some institutions may be hesitant to provide certain types of banking services due to concerns that they will be unable to comply with the associated requirements of the Bank Secrecy Act (BSA). The FDIC released the statement to announce that financial institutions that can properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customer operating in compliance with applicable state and federal law. Further, the FDIC believes when an institution follows existing guidance and establishes and maintains an appropriate risk-based program, the institution will be well-positioned to appropriately manage customer accounts, while generally detecting and deterring illicit financial transactions.

Federal Reserve Publishes Strategies for Improving U.S. Payment System

The Federal Reserve believes that the U.S. payment system is at a critical juncture in its evolution. The nature of commerce and end-user expectations for payment services is changing and unfortunately payment security and the protection of sensitive data is being threatened. Due to this, The Federal Reserve System released a paper outlining its next steps in developing a process to speed up electronic payments and settlements. Their goal is to continue to push toward a payments system that would offer greater speed, security, efficiency, cross-border options and stakeholder collaboration.

In order to meet their goals, the Fed plans to launch task forces on faster payments and payment security to give bankers and other payments industry stakeholders a more formal way to share input. Starting this year and continuing into 2016, the faster payments task force will lay out a policy framework for the new system and identify practical approaches for implementing it. Simultaneously, the payments security task force will develop appropriate security standards and expand the Fed’s anti-fraud and payments risk management offerings.

As part of the project, the regional Federal Reserve Banks will extend operating hours for the National Settlement Service in phases. Early this year, opening hours will be extended by an hour and a half each day, and by year’s end opening will correspond to the 9 p.m. opening of Fedwire on the previous date. The Fed said its longer-term goal is weekend or 24-hour service, and added that it would promote greater use of same-day ACH and expand its international payment services.

The Fed will hold a webinar on Thursday, Jan. 29, at 1 p.m. EST at which Fed Governor Jerome Powell and Kansas City Fed President Esther George will answer questions submitted by industry participants. Read the paper. Listen to the webinar and submit questions.

Hatch Works to Reform Tax Code

Senate Finance Committee Chairman Orrin Hatch, R-Utah, and Ranking Member Ron Wyden, D-Ore., today announced the co-chairs of the five working groups they created to advance tax-reform efforts in the 114th Congress. The groups will work with the Joint Committee on Taxation (JCT) to review current tax law, analyze available reform options and produce a comprehensive report that can serve as a foundation for bipartisan tax reform legislation. The report is expected to be released by the end of May.

The five working groups are community development and infrastructure, co-chaired by Sens. Dean Heller, R-Nev., and Michael Bennet, D-Colo.; business income tax, co-chaired by Sens. John Thune, R-S.D., Ben Cardin, D-Md.; individual income tax, co-chaired by Sens. Chuck Grassley, R-Iowa, Mike Enzi, R-Wyo., and Debbie Stabenow, D-Mich.; international tax, co-chaired by Rob Portman, R-Ohio, and Chuck Schumer, D-N.Y.; and savings and investment, co-chaired by Sens. Mike Crapo, R-Idaho, and Sherrod Brown, D-Ohio.

In a speech on the Senate floor Congressman Hatch outlined seven principles needed to guide comprehensive tax reform forward, saying such reform should embrace economic growth, fairness, simplicity, permanence, competitiveness, promoting savings and investments, and revenue neutrality.

In the coming weeks and months, I plan to reveal additional steps.  I plan to involve many of my colleagues on both sides of the aisle, particularly those who will be joining me on the Senate Finance Committee.  My hope is that, as this conversation continues, a path toward real bipartisan tax reform will begin to take shape.  Of course, it’ll take more than just a talk and discussion.  It’ll take hard work, commitment, and, of course, compromise.”

Read More of Congressman Hatch’s Seven Principles for Comprehensive Tax Reform

Guidance on the Texas Franchise Tax Historic Structure Credit

The Texas Comptroller of Public Accounts issued guidance Jan. 14 on the certified rehabilitation of certified historic structures tax credit effective for franchise tax reports that were originally due on or after Jan. 1. Texas law provides a franchise tax credit for the certified rehabilitation of certified historic structures, up to 25 percent of eligible costs and expenses. To qualify for the credit: 1.) The structure must be placed in service on or after Sept. 1, 2013; 2.) The entity must have an ownership interest in the structure during the calendar year the structure was placed in service after the rehabilitation; and 3.) The total amount of eligible costs and expenses incurred by the entity must exceed $5,000.

The Comptroller also gives five steps to Establish the Franchise Tax Credit:

  1. Contact the Texas Historical Commission (THC) for information on how to certify the rehabilitation of a certified historic structure. THC will assist you with the process of obtaining a Certificate of Eligibility.
  2. Contact a certified public accountant to obtain an audited cost report that itemizes the eligible costs and expenses incurred by the entity in the certified rehabilitation of the certified historic structure.
  3. Prepare the Texas Franchise Tax Historic Structure Credit Registration (Form AP-235).
  4. Mail the following three documents to the Comptroller’s office:
  5. Upon approval the Comptroller’s office will send you a Historic Structure Credit Certificate (Form 05-901) in the mail.

More resources and information are available here.

Community Banks Effect on the Economy

The Federal Reserve Banks of New York, Atlanta, Cleveland & Philadelphia released the Joint Small Business Credit Survey Report of 2014. The report gives a snapshot of small business lending activity across 10 states. Started in 2010 by the New York Fed, The Small Business Credit Survey gathers information about small business performance, financing needs and borrowing experiences. In the report, it notes that Community banks play a critical role in funding fast-growing small businesses. According to a survey, 22% of small businesses that applied for credit in the first half of 2014, 34% applied to a community bank, and of those, 59% saw their applications approved.

Community banks were aggressive in meeting small business credit needs, with 90% of newer firms with profits and growing revenues getting approvals. Of these high-growth firms, about half received credit approvals from money center and regional banks. Larger banks focused their approvals on mature small businesses, according to the survey.

The survey also found significant variability in what kinds of small business applied for credit. Just 18% of “microbusinesses” — those with under $250,000 in annual revenues — applied, while 58% of businesses with revenues over $10 million did. Microbusinesses were more likely to fund operations and growth out of personal savings.

Small businesses that sought credit were primarily seeking to expand. Nearly half sought a line of credit, about one-third applied for a business loan, and a quarter applied for a credit card. Twenty-three percent of applicants sought a Small Business Administration loan. Most applicants sought under $100,000 in financing.

Among the survey’s more hopeful findings was that nearly 40 percent of small businesses seeking credit said their primary purpose was to expand their business. Other interesting findings include:

  • Over half of the credit applicants sought loans or lines of credit of $100,000 or less.
  • One-third of the businesses indicated that their financing costs have increased over the last 12 months.
  • The top reason given for being rejected for a loan was a low credit score.

Bank Regulators Release Public Section of Resolution Plans

Yesterday, the Federal Reserve and the FDIC issued a joint press release making available the public sections of resolution plans of firms with less than $100 billion in qualifying nonbank assets.  Each plan, commonly known as a living will, must describe the company’s strategy for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure of the company. These plans must include both public and confidential sections.

Companies subject to the rule are required to file their resolution plans on a staggered schedule. The largest bank holding companies are required to submit their plans on or before July 1 each year. Nonbank financial companies that are designated by FSOC also must submit on or before July 1. All other firms generally are required to submit their plans on or before December 31 each year.

The public portions of these “living wills” are available on the Federal Reserve and FDIC websites.

Bank Agencies Host EGRPRA Outreach Meetings

Federal banking agencies will hold an outreach meeting on February 4, 2015, at the Federal Reserve Bank of Dallas as part of their regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). This will be the second outreach meeting that the OCC, FDIC, Board of Governors and the Federal Reserve have held throughout the country.

The meeting will feature panel presentations by industry participants and consumer and community groups. It also provides an opportunity for interested persons to present their views on any of the 12 categories of regulations listed in a June 2014 Federal Register notice that started the EGRPRA public comment process. Comptroller of the Currency Thomas J. Curry, Governor Jerome H. Powell, and Chairman Martin J. Gruenberg are scheduled to attend the meeting in Dallas. In addition, Commissioner of the Texas Banking Department Charles G. Cooper will attend, and state banking regulators are invited to participate through the State Liaison Committee of the Federal Financial Institutions Examination Council (FFIEC).

The agencies also plan to hold an outreach meeting focused on rural banks. These meetings may be viewed live online at

OCC Releases Paper on Community Bank Collaboration

Today, the Office of the Comptroller of the Currency’s (OCC) released a paper entitled ” An Opportunity for Community Banks:Working Together Collaboratively.” In the paper the OCC’s express it’s views for collaborative efforts by community banks to pool or share resources to reduce costs and leverage specialized expertise. In the paper the OCC discusses ways for community banks to work together with their peers to lower expenses, obtain compliance, and compare products and services. The OCC believes, “as diverse as community banks are, they share the same commitment to supporting the
communities they serve. With this in mind, the OCC sees an opportunity for community
banks to share resources and expertise to the mutual benefit of all involved.”

Community Banker Tapped to Fed Board

On January 6, 2014, President Obama nominated former community banker, Allan Landon, to a seat on the U.S. Federal Reserve’s board. Landon, a partner at private investment fund Community BanCapital, was chief executive of the Bank of Hawaii from 2004 until 2010. Previously, he had worked as the bank’s chief financial officer and as CFO at First American in Tennessee. After months of pressure by the community banking industry, which is regulated by the Fed and which has argued that the Fed’s seven-member board should include at least one person with relevant experience of the community banking sector. Mr. Landon would become the first Fed governor with community banking experience since Elizabeth A. Duke left the board in 2013. Landon was nominated to fill the remaining term of Sarah Bloom Raskin, who stepped down in March after being picked by Obama to become deputy Treasury secretary. The White House indicated Landon would be nominated to fill the final year of Raskin’s term, which ends Jan. 31, 2016, and a full 14-year term after that.

“Allan Landon has the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy. He brings decades of leadership and expertise from various roles, particularly as a community banker.  I’m confident that he will serve our country well.”” President Obama said.