March 12, 2020

Community Banking Amid Coronavirus 19 Concerns

As community banks across the country grapple with market and economic dynamics heavily influenced by COVID-19, or the coronavirus, separating data from speculation can be a difficult challenge. Planning for a wide range of outcomes is the best way to manage risk and prepare to seize opportunities. Community banks can best plan for the near future by relying on two of their greatest strengths: their ability to implement change quickly and their intimate knowledge of the dynamics of the markets they serve. MBA associate member Fenimore Kay Harrison Ford has outlined key points from its work with community banks in recent weeks and from experience with previous market challenges, grouped by the various roles that banks play in their markets.

Nichols Shares Industry Response To Coronavirus At Meeting With President

As the World Health Organization officially labeled the 2019 novel coronavirus a global pandemic, American Bankers Association President and CEO Rob Nichols joined CEOs from some of the nation’s largest banks at a White House meeting with President Trump on Wednesday to discuss the financial industry’s response.

Nichols emphasized that ABA is working to help banks of all sizes “build continuity and resiliency programs so we can keep the banking system open to support our customers and clients who in many cases are facing a time of need.” He added that “that’s what banks do … stick by their customers in good times and challenging times, and that’s what all the banks in the United States are doing today.” 

Attendees at the meeting also discussed steps that banks are taking to accommodate customers and ensure the well-being of employees and the continuance of daily operations, such as:
  • offering assistance to affected customers through fee waivers, hardship programs, additional small business support, extended banker availability hours and other measures
  • advising customers who are experiencing financial difficulties to contact bank managers and lenders for help
  • donating funds to support the domestic and global response and to aid public health relief efforts
  • implementing remote work for noncustomer facing staff
  • increasing social distancing measures for all customer-facing staff
  • restricting staff travel
To help ABA respond to inquiries from policymakers about the banking industry response to the coronavirus, the association is asking banks to share specifics about how they are helping customers affected by the virus and its fallout in the economy. Bankers may email information to

Agencies Issue Pandemic Planning Guidance For Banks

With the number of reported cases of the novel coronavirus increasing in the U.S., the Federal Financial Institutions Examination Council has issued guidance for banks on business continuity planning in the face of a pandemic. The agencies noted that plans should provide for a preventive program, a documented strategy scaled to the stages of a pandemic outbreak and a comprehensive framework to ensure the continuance of critical operation, a testing program and an oversight plan.

Policymakers Urge Banks To Work With Borrowers Affected By Coronavirus

Recognizing the potential effects of the 2019 coronavirus disease on bank customers, financial regulators issued a statement calling on banks to work constructively with borrowers and others affected by the virus in their communities. The agencies emphasized that “prudent efforts that are consistent with safe and sound lending practices should not be subject to examiner criticism.”

The agencies also said that to help mitigate staffing challenges banks may experience as a result of the virus, “regulators will expedite, as appropriate, any request to provide more convenient availability of services in affected communities” and “work with affected financial institutions in scheduling examinations or inspections to minimize disruption or burden.” 

State Associations Urge Action On SAFE Banking Act

MBA was among 50 state bankers associations urging Senate Banking Committee leaders to support the SAFE Banking Act, a bill that would provide a safe harbor for depository institutions seeking to serve legitimate cannabis-related businesses in states where such activity is legal. The associations called for a markup of the bill “as soon as possible.” 
The bill was passed by a bipartisan majority in the House last year but has since stalled in the Senate. Senate Banking Committee Chairman Mike Crapo, R-Idaho, in December expressed concerns about the bill related to public health and safety, legacy cash, money laundering and interstate commerce. 
“Although there are admittedly broader public policy questions at play, we ask that you evaluate and address this pressing banking problem, which is within your power to resolve,” the associations said. “Doing so will reap immediate public safety, tax and regulatory benefits while Congress continues to grapple with broader decisions about national drug policy.” 

ABA Writes Lawmakers In Support Of ECORA Act

In letters to House and Senate members, the American Bankers Association urged lawmakers to support the Enhancing Credit Opportunities in Rural America Act, a bill that would end taxation of interest earned from agricultural real estate loans. This would not only reduce servicing costs for community banks providing these types of loans, it also would level the playing field between banks and the tax-advantaged Farm Credit System, making it easier for banks to support the farm sector through real estate loans.

Amid persistent difficulties for the ag sector, “it is estimated that ECORA could reduce the average interest rate on a farm and ranch real estate loan by 1.5% to 2%,” ABA said. “This legislation offers a straightforward solution to help farmers and ranchers during this time of lower farm incomes without creating new government payments or programs.”

ABA Supports OCC’s Proposed EGRPRA-Recommended Rule Changes

In a letter to the Office of the Comptroller of the Currency, the American Bankers Association offered support for several proposed rule changes, including those sought by the association during the Economic Growth and Paperwork Reduction Act feedback process. The OCC proposed the following.
  • repealing employment contract requirements for federal savings associations
  • increasing flexibility and reducing burden for thrifts converting from mutual to stock ownership
  • removing requirements for OCC-supervised banks to provide the agency with audited statements in connection with small securities issues
The agency also sought feedback on amending its fiduciary rules to expand the list of acceptable collateral for self-deposited trust funds to include additional types of instruments and amending the recordkeeping requirements for fiduciary accounts to include state law retention minimums. 

FDIC: Deposit Growth Picks Up Slightly In 2019

While banks continued to see deposit growth over the past year, it lagged the five-year average for annual growth, according to the latest issue of the FDIC Quarterly. Reviewing figures from the latest FDIC Summary of Deposits, the article noted that year-over-year merger-adjusted deposit growth at community banks was at 5.5%, on par with the five-year annual rate of 4.9%. Noncommunity banks, meanwhile, saw deposit growth of 3.9%. It was the second year in a row that community banks’ deposit growth outpaced that of noncommunity banks.

From June 2018 to June 2019, all insured deposits nationwide rose by $510 billion, or roughly 4.2%. As bank consolidation continued and branch networks continued to shrink, deposits per institution increased by 8.4% and deposits per office rose 6.2%.

The total number of bank branches in the U.S. fell over the last year by 1.9%, a slightly slower rate than the previous two years but still more than the five-year average annual decline of 1.8%. Unlike the previous year, 2019’s decrease was driven largely by community banks (2.3%) versus noncommunity banks (1.7%), the FDIC noted. However, over the past five years, the decline in branches was slowest in rural areas —just 6.1%, compared with a 9.2% reduction in metropolitan area branches and an 8.5% dip in micropolitan areas.

CFPB To Issue Advisory Opinions, Encourage Self-Reporting

As part of its efforts to prevent consumer harm, the Consumer Financial Protection Bureau announced it will issue advisory opinions to help companies understand legal and regulatory obligations. Advisory opinions issued under the program will include interpretations of the CFPB’s existing rules and will be published in the Federal Register, unlike the bureau’s current guidance process, under which responses on regulatory inquiries are available only to the requesters. 
“Advisory opinions will ensure that companies know what compliance entails and what constitutes a violation,” CFPB Director Kathleen Kraninger said. The bureau added that it will provide additional procedures on how the requests will be addressed and prioritized. 
Meanwhile, the CFPB revised a 2013 bulletin on “responsible business conduct,” particularly in self-assessing compliance, self-reporting likely violations, remediating the harm from those violations and cooperating with the bureau.
“[I]f an entity meaningfully engages in responsible conduct, the bureau intends to favorably consider such conduct, along with other relevant factors, in addressing violations of federal consumer financial law in supervisory and enforcement matters,” the bulletin said. It further outlined several options available to the bureau to recognize responsible conduct and the factors that the bureau will consider in weighing responsible conduct. 

Fed Releases CRA Data Tables

As previewed in a speech earlier this year by Federal Reserve Governor Lael Brainard, the Fed has published new Community Reinvestment Act analytics data tables. The tables are intended to provide insight into the historical relationship between bank lending activity and the conclusions and ratings that regulators assigned on CRA performance evaluations.   
This new resource includes four main data tables.
  • a retail loan table, which presents HMDA Loan Application Register and CRA small business and small business farm data
  • a performance evaluation table, which presents aggregated CRA performance evaluation data for the years between 2005 and 2017
  • a merged data table reflecting both the retain loan and PE tables
  • an assessment area definitions table, which shows assessment area geographic data

ARRC Allows More Time to Comment On SOFR Spread Adjustment Methods

The Alternative Reference Rates Committee has extended the comment deadline for public feedback on methodologies for calculating spread adjustments on financial products that reference the London Interbank Offered Rate. Comments are due Wednesday, March 25.
These adjustments are designed for financial institutions to use in contracts that incorporate the ARRC’s recommended fallback language or for other contracts where a spread-adjusted Secured Overnight Financing Rate, the ARRC’s preferred Libor replacement, can be selected as a fallback.

FDIC Extends Comment Deadline On Signage Modernization Proposal

The Federal Deposit Insurance Corporation announced it will extend until April 20 the comment deadline for its request for information on how it can modernize and revise its official signage and advertising rules. With the RFI, the agency is seeking to ensure that its rules, which were last updated in 2006, are keeping pace with changes in how financial products and services are delivered and how consumers interact with financial services providers.

Compliance Q&A Addresses Rural Area Appraisal Options

In the March/April issue of the ABA Banking Journal, the Regulatory Compliance and Policy Inbox column covers what options bankers in rural areas have to mitigate appraiser shortages. The answer addresses conditions in the S. 2155 regulatory reform law and implemented by regulators under which rural properties are exempt from appraisal requirements. 

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