January 14, 2021

Parson Appoints Two Bankers To Housing Commission

Gov. Mike Parson has appointed Danny Chadakhtzian of Des Peres and Stephen Parshall of Columbia to the Missouri Housing Development Commission. Parshall’s appointment was confirmed by the Missouri Senate today; Chadakhtzian is awaiting confirmation.

Chadakhtzian has served as the regional chairman of Simmons Bank in St. Louis since 2019. Chadakhtzian previously was the market president of Simmons Bank. He has more than 19 years of banking experience in the St. Louis area.

Parshall joined UMB Bank in 2013 as senior vice president of commercial lending. He is responsible for business development, relationship management and credit in central and greater Missouri for UMB. Previously, Parshall was second vice president of government accounts for Central Trust Bank and was responsible for relationship management of government, association and nonprofit client portfolios.

Created in 1969, the commission oversees the financing, development and preservation of affordable housing for Missourians.

ABA, NCRC: Fintech Firms With Bank Charters Should Be Subject To CRA

In an American Banker op-ed, American Bankers Association President and CEO Rob Nichols and National Community Reinvestment Coalition CEO Jesse Van Tol expressed opposition to moves by the Office of the Comptroller of the Currency to grant banking charters to fintech firms that would allow them access to the banking system while circumventing many of the rules and regulations that banks are required to adhere to, such as the Community Reinvestment Act regulations.

The CEOs flagged in particular a recent charter application submitted by Figure Bank, which would allow the firm to gather uninsured deposits. If approved, the firm could then apply for membership in the Federal Reserve system while avoiding full CRA compliance, which is only required for firms that gather deposits insured by the FDIC.

“In the case with Figure’s OCC application, it is proposing a substitute plan that is vague on details, offers no clear measures for holding it accountable to meet the needs of underserved communities, and without a clear timeline for implementation,” Nichols and Van Tol wrote. “The OCC itself has not explicitly outlined how these substitute plans would work outside of full CRA compliance while still equally meeting the needs of underserved communities.”

The CEOs called on the OCC to deny the Figure application, and to “look to Congress to define the scope, benefits and obligations of a banking charter.” 

ABA Urges Withdrawal Of CRA Information Collection Survey

The American Bankers Association and a coalition of trade associations have called for the withdrawal of the OCC’s Community Reinvestment Act information collection survey. In a letter to the agency, the groups requested that the survey be withdrawn due to “significant procedural, operational, and technological changes in order to access and report the required data.”

The information requested is data that banks do not currently have and in some cases will need to construct, the groups wrote, adding that “foundationally, any new CRA benchmarks or performance measures should be based on data that is collected on a go-forward basis rather than requiring banks to engage in the labor-intensive exercise of reconstructing information.”

Fed To Remove Caps On Coin Distribution

The Federal Reserve announced that it will return to regular coin distribution for all coin denominations beginning tomorrow (Jan. 15). The Fed had previously capped coin orders because of coin circulation issues that resulted from the COVID-19 pandemic.

The Fed noted that while coin circulation “has not fully returned to normal patterns,” steady deposits from financial institutions and increased production at the U.S. Mint have enabled it to remove coin allocations. The Fed said it will continue to monitor coin circulation and urged all FedCash Services customers “to continue to order only what they need to meet near-term demand and to deposit any excess coin to the Federal Reserve.”

Meanwhile, the U.S. Coin Task Force will continue its work to understand how the pandemic affected coin circulation, identify lessons learned and develop recommendations to help avoid future disruptions.

IRS Recommends Streamlining, Modernizing Improvements To Congress

The Internal Revenue Service has submitted a report to Congress, as required by the 2019 Taxpayer First Act, outlining a strategic plan to enhance taxpayer service and experience. The report centers around three strategic goals: enhancing the taxpayer experience, enhancing the IRS employee experience and improving operational efficiencies.

As part of its strategy to improve the taxpayer experience, the IRS said it would do the following.

  • set near-term and long-term goals to expand digital services
  • guide taxpayers to resources and communications channels to resolve their issues
  • provide proactive outreach and education
  • reach underserved communities
  • create a community of partners, including public, private and nonprofit entities
  • develop a data management strategy that includes an agencywide understanding of the taxpayer experience, emerging needs and expectations and operational data

The report also includes additional budget requests required to achieve the outlined detailed objectives. Congress must now review the report and contemplate further action.

DOL: Employers May Voluntarily Provide FFCRA Paid Leave In 2021

In an update to its recent “Questions and Answers” guidance document, the Department of Labor confirmed that an employer is not required to provide an employee with Families First Coronavirus Response Act paid leave after Dec. 31, 2020, even if the employee did not use all available FFCRA leave in 2020. However, the employer may voluntarily decide to provide an employee with such leave (Q&A #104).

The FFCRA, which expired Dec. 31, 2020, requires banks and other employers with fewer than 500 employees to provide paid sick leave and paid FMLA leave for employees with qualifying COVID-19-related reasons. The FFCRA also permits employers to take a payroll tax credit for those expenses. The stimulus legislation signed by President Trump in late December provided that, if the employer provides paid sick or FMLA leave for the time period between Jan. 1, 2021, through March 31, 2021, the employer can take a tax credit in the same manner as the employer could have taken the credit had the paid leave been provided before Dec. 31, 2020.

In the new Q&As, DOL also warned employers to ensure it pays employees for FFCRA leave “taken or requested during the effective period of April 1, 2020, through Dec. 31, 2020” (Q&A #105). Although no employer is required to provide paid leave beyond Dec. 31, 2020, the inclusion of the word “requested” in the Q&A suggests that DOL expects any employer that commits to paying FFCRA leave beyond Dec. 31 to follow through on that commitment. 

OCC Finalizes Controversial ‘Fair Access’ Proposal

The Office of the Comptroller of the Currency today finalized a controversial proposal stating that banks should provide access to services, capital and credit based on their risk assessment of individual customers and not make broad-based decisions that affect whole categories or classes of customers. This action comes as Brian Brooks prepares to step down as acting comptroller of the currency today.

The final rule, which is minimally changed from the proposal, requires covered national banks and federal savings associations (generally, those with $100 billion or more in assets) to provide financial products and services to businesses on proportionally equal basis and not deny service except based on documented failure to meet quantitative standards. Among other things, the final rule limits the discretion of covered banks to determine which businesses they will provide services to, stating that “the OCC expects banks to apply quantitative, impartial risk-based standards in evaluating individual customers, including when considering reputation risk, qualitative factors, and a borrower’s industry” and that “it is not sufficient to evaluate these characteristics solely on a subjective basis.”

The American Bankers Association had vigorously opposed the proposal, writing in previous comments that the OCC lacks the statutory authority to pursue such a rulemaking, nor did it meet procedural requirements for issuing the proposal. ABA also expressed concerns that the OCC seriously underestimated the cost burden that it would impose upon covered banks.

“We are disappointed that the OCC has chosen to rush through this ill-advised rulemaking on the Acting Comptroller’s last day in office,” said ABA Senior Vice President Hugh Carney. “In addition to short-circuiting the traditional rulemaking process and failing to take into account thoughtful comments from thousands of stakeholders, we believe it is a mistake for the OCC to mandate which businesses banks must service. Banks are in the best position to manage their risks and maintain their safety and soundness. Given those procedural and substantive concerns, we urge that this rule not take effect.”

The rule is set to take effect on April 1, 2021, but that date may be extended as the incoming administration decides how to proceed.

Brainard: Agencies To Seek Feedback On Potential Artificial Intelligence Rules

In remarks at a virtual event hosted Jan. 12 by the Federal Reserve, Fed Governor Lael Brainard said that the federal banking agencies are in the process of drafting a request for information on the risk management of artificial intelligence applications in financial services as they consider “whether additional supervisory clarity is needed to facilitate responsible adoption of AI.”

While acknowledging the potential of AI to improve accuracy and fairness of credit decisions and improve overall credit availability, Brainard discussed some of the pitfalls of these emerging technologies, including the “black box problem” that can arise with complex machine learning models when the operation of the model cannot be fully understood.

“Bank management needs to be able to rely on models' predictions and classifications to manage risk,” Brainard said. “They need to have confidence that a model used for crucial tasks such as anticipating liquidity needs or trading opportunities is robust and will not suddenly become erratic.” She added that “regulators must provide appropriate expectations and adjust those expectations as the use of AI in financial services and our understanding of its potential and risks evolve.”

CFPB Issues Statement On Serving Consumers With Limited English Proficiency

The Consumer Financial Protection Bureau has issued a statement encouraging financial institutions to expand access to financial products and services for consumers with limited English proficiency. The statement provides guidance on how banks can provide access to credit in languages other than English “in a manner that is beneficial to consumers, while taking steps to ensure financial institutions’ actions are compliant with [the Equal Credit Opportunity Act], prohibitions about [unfair or deceptive acts and practices] and other applicable laws.”

The statement followed a request for information from the bureau on ECOA. In a blog post, the CFPB acknowledged that the feedback received from the industry “indicated that financial institutions recognize the importance of providing financial products and services to LEP consumers but are cautious of running afoul of statutes and regulations.”

The statement outlined several guiding principles for serving LEP consumers that address the following.

  • pilot programs or other phased approaches or rolling out LEP-consumer-focused products and services
  • the development of compliance approaches related to these products and services
  • the mitigation of compliance risks by providing LEP consumers with clear and timely disclosures
  • special purpose credit programs
The CFPB also offered guidelines for developing compliance solutions when serving LEP consumers.

OCC’s Brooks To Step Down 

The Office of the Comptroller of the Currency’s Brian Brooks announced that he will step down from his role as acting comptroller of the currency, effective today (Jan. 14). OCC Chief Operating Officer Blake Paulson, a career bank examiner, will take over as acting comptroller on Brooks’ departure.

Next DEI Open Forum Scheduled For Jan. 19

The American Bankers Association will host another free open forum on diversity, equity and inclusion in the banking industry at 1:30 p.m. Tuesday, Jan. 19, for bankers to discuss current DEI challenges and topics, exchange leading practices and ideas and learn more about implementing DEI programs and initiatives at individual banks. The open forum will feature a speaker on the topic of neurodiversity. 

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