Monthly Archives:' February 2015

Brick & Mortar Banks Still Most Popular

On February 19th, the FDIC released a study showing that despite the increased use of online and mobile banking, bank & mortar banking offices continue to be a primary means through which FDIC insured institutions deliver financial services to their customers. As of June 2014, some 6,669 banks and thrifts continued to operate 94,725 brick & mortar offices. Futher the study found that more than 90 percent of total banking offices take the form of stand-alone, full-service offices. A distant second are those offices located in another retail establishment, such as grocery stores. Together, in-store offices and stand-alone office make up 96 percent of offices.

The study found that four main factors have contributed to the changes in the number and distribution of banking offices since 1935:

Population growth. The study found that office growth has outpaced the nation’s population growth over the long term and has tended to follow regional migration patterns. Between 1970 and 2014, the U.S. population grew by over 50 percent, while the number of offices more than doubled.

Banking crises. Historically, net declines in branch offices have followed periods of financial distress, such as the Great Depression, the S&L and banking crisis of the 1980s, and the most recent financial crisis. The onset of the 2008 financial crisis brought about an increase in failures, with over 100 bank failures on average each year between 2008 and 2012.

Although the study notes that banks of all sizes have closed offices since 2008, just 15 institutions have accounted for one-third of all gross office closings. These include some of the nation’s largest banks. In addition, other large institutions pared back their extensive office networks as part of their post-crisis restructuring efforts.

Legislative changes. The relaxation of branching laws in the 1980s and 1990s appears to have increased the prevalence of banking offices by removing legislative constraints on the size and geographic scope of the branch networks that each bank could operate. Also, interstate banking expanded when the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 established a uniform standard by which an institution headquartered in one state could branch into, or acquire banks in, any other state, and allowed institutions operating subsidiary charters in different states to combine them into a single interstate bank.

Technological innovation. The study found little evidence that the emergence of new electronic channels for delivering banking services has substantially diminished the need for traditional branch offices where banking relationships are built. Since 1970, banks have introduced a series of new electronic channels for delivering banking services.

New Cyber Threat Intelligence Integration Center Announced

On February 10, Lisa O. Monaco gave prepared remarks on behalf of the White House announcing the establishment of a new Cyber Threat Intelligence Integration Center (CTIIC) under the auspices of the Director of National Intelligence. Currently, no single government entity is responsible for producing coordinated cyber threat assessments.  The CTIIC is intended to fill this gap in  a similar function for cyber as the National Counterterrorism Center does for terrorism—integrating intelligence about cyber threats; providing all-source analysis to policymakers and operators; and supporting the work of the existing Federal government Cyber Centers, network defenders, and local law enforcement communities.  The CTIIC will not collect intelligence—it will analyze and integrate information already collected under existing authorities.

Before announcing the agency Monaco addressed the need of the agency by stating, “The range of cyber threat actors, methods of attack, targeted systems, and victims are expanding at an unprecedented clip. The pace of cyber intrusions has also ticked up substantially—annual reports of data breaches have increased roughly five-fold since 2009.  And the seriousness of those breaches is also rising, causing significant economic damage. In short, the threat is becoming more diverse, more sophisticated, and more dangerous.”

She further state, “Like counter-terrorism, meeting cyber threats requires a whole-of-government approach that uses all the appropriate tools available to us—including our global diplomacy, our economic clout, our intelligence resources, our law enforcement expertise, our competitive technological edge, and, when necessary, our military capability.” She also cautioned the private sector cannot and should not rely on the government to solve all of its cybersecurity problems. Challenging all to improve our defenses—employing better basic preventative cybersecurity, like the steps outlined in the Cybersecurity Framework announced last year.

See White House’s Remarks

Technical Assistance to Meet Regulatory Requirements

Today, the FDIC released it’s third video developed to assist bank employees in meeting regulatory requirements. These videos address compliance with certain mortgage rules issued by the Consumer Financial Protection Bureau (CFPB). The first video, released on November 19, 2014, covered the Ability to Repay and Qualified Mortgage Rule. The second video, released on January 27, 2015, covered the Loan Officer Compensation Rule. The third video, released today, covers the Mortgage Servicing Rules. The three technical assistance videos are intended for compliance officers and staff responsible for ensuring the bank’s mortgage lending and servicing operations comply with CFPB rules.

The FDIC’s technical assistance videos and additional information can be accessed atL

New Market Tax Credit Legislation Introduced

Yesterday, Congressmen Pat Tiberi (R-OH), Richard Neal (D-MA), and Tom Reed (R-NY) introduced a bill that would make permanent a tax credit proven to create jobs and encourage community investment. The New Markets Tax Credit, established in 2000, attracts capital by providing private investors with a 39 percent credit against federal income taxes for investments made in some of the most distressed areas in the country. This bill would extend and expand this program.

“Since its inception in 2000, the New Markets Tax Credit has shown that it is a federal program that works—spurring investment that that grows local economies and generates jobs in the most distressed communities across the nation.” Rep. Neal said. “In the last fourteen years, the New Markets Tax Credit has generated $63 billion in capital for projects in low income communities resulting and created over 744,000 jobs in traditionally overlooked communities.”

“However, barring Congressional action, this critical initiative will soon end. That is why I am proud to introduce legislation with Reps. Tiberi and Reed to make the New Markets Tax Credit permanent, and ensure another decade of key investments reach Western Massachusetts,” Rep. Neal added.

“The New Markets Tax Credit is a powerful tool to bring rebirth in our communities.” said Reed. “Making this tax credit permanent would ensure that successful projects will continue to remake our communities. It helps fulfill our commitment to erasing poverty and caring for communities.”

U.S. Senator Roy Blunt (R-MO) plans to introduce companion legislation in the Senate.

EGRPRA Outreach Meeting

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (the Agencies) are holding a series of outreach meetings to review their regulations under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA).The first meeting was held in Los Angeles in December of 2014. The second Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) Outreach Meeting was held at the Dallas Fed on February 4, 2015. The purpose was to receive information on regulatory burden. The agenda was stacked with well known community bankers and community development entities. Kennedy Sutherland LLP attended the meeting and made brief remarks and provided a additional comments for review. As of the hearing, only 44 comments had been filed regarding the regulations under the EGRPRA. The next outreach meeting will be held at the Federal Reserve Bank of Boston on May 4, 2015.

Reauthorizing NMTC Program

The Obama administration announced that it plans to continue to allocate funds to permanently reauthorize the New Markets Tax Credit (NMTC) program in 2016. In addition, it will requests $5 billion of allocation authority per year, as well as authority to offset alternative minimum tax (AMT) liability. The budget also proposes a new Manufacturing Communities Tax Credit (MCTC), with $2 billion in tax credit authority in each of three years through 2018. The proposal would also allow the Community Development Financial Institutions (CDFI) Bond Guarantee program to continue operating with a cap of $1 billion per year, but with no budgetary cost for new issuances.