BANKING EXPECTATIONS

FOR THE NEW CONGRESS

Margaret Liu Senior Vice President and Deputy General Counsel

Conference of State Bank Supervisors

Banking Expectations for

the New Congress

Day with the Superintendent

Iowa Division of Banking

April 16, 2015

Margaret Liu

Conference of State Bank Supervisors

Overview

• The 114th Congress by the Numbers

• The People

• The Issues

The 114th Congress by the Numbers

• House Remains Republican-Controlled

• 245 Republicans; 188 Democrats; 2 vacancies

• Republicans gained 13 seats

• Largest GOP majority since World War II

• Senate Flipped from Democrat to Republican control

• 54 Republicans; 44 Democrats; 2 Independents

(caucus with Democrats)

• Republicans gained 9 seats

4

People House -- Financial Services

Committee

• Differences in leadership styles and philosophies

• Chairman Jeb Hensarling (R-TX)

• Ranking Maxine Waters (D-CA)

• Financial Institutions Subcommittee

• Chairman Randy Neugebauer (R-TX)

• Ranking Member Lacy Clay (D-MO)

5

People -- Senate Banking Committee

• Chairman Richard Shelby (R-AL)

• Ranking Member Sherrod Brown (D-OH)

• Financial Institutions Subcommittee

– Chairman Pat Toomey (R-PA)

– Ranking Member Jeff Merkley (D-OR)

6

The Issues -- Community Banking

• Mortgage Lending

• Supervision and Examinations

• Targeted Regulatory Relief

• Leadership Matters

7

Community Banking – Mortgage Lending

• Relief from CFPB’s Ability-to-Repay Rule

– Greater flexibility for balloon loans in rural areas (H.R.

1259; S. 871)

– Qualified Mortgage status for all mortgages held in

portfolio (H.R. 1210)

• Basel III and Mortgage Servicing Rights

– Study and implementation delay (H.R. 1408)

8

Community Banking – Supervision and

Exams

• Exam Fairness and Reform Act (S. 774)

– Report and exit interview deadlines

– Independent appeals of material supervisory

determinations through FFIEC

– Anti-retaliation

• Exam Cycle

– Raising the asset cap for 18-month exam cycle (H.R.

1553)

– Establishing 24-month exam cycle (H.R. 1233)

• Call Report

– Short-form call report (H.R. 1233)

9

Community Banking –Regulatory Relief

• Gramm Leach Bliley Annual Privacy Notice Relief (H.R.

601; S. 423)

• Federal Reserve Small Bank Holding Company

Statement

– Raise upper limit from $1 billion to $5 billion (H.R.

1233)

• De-Risking and Operation Choke Point

– Cutting off funding (H.R. 1413; S. 477)

– Regulators and account terminations (H.R. 766)

10

Community Banking – Leadership

Matters

• Federal Reserve Board – Requiring at least one

Governor with community bank or community bank

supervisory experience

– Enacted into law, January 2015

– Nomination of Allan Landon pending

• FDIC Board – At least one member with State bank

supervisory experience

– H.R. 1601 tightens existing requirement

11

Community Banking – A Definitional

Approach

• Challenge of defining community banks

• Challenges posed by solely using asset thresholds to

define community banks

• Looks to asset size plus other qualitative factors:

– Local deposits;

– Local lending;

– Local management;

– Business model

12

Community Banking – CSBS Initiatives

• CSBS-Federal Reserve Community Bank Research

Conference

– September 30-October 1, St. Louis

– Integrating industry town halls, industry survey, and academic

research

– https://www.stlouisfed.org/bank-supervision/2015-community-

banking-conference

• Cybersecurity – Executive Leadership on Cybersecurity

– http://www.csbs.org/CyberSecurity/Pages/default.aspx

– Outreach events

• EGRPRA

Other Financial Services Priorities

• Relief for mid-size, regionals, and super-regionals

• CFPB structural and governance reform

• Cybersecurity

• Dodd-Frank oversight

– CFPB

– FSOC

• Ex-Im reauthorization

• Federal Reserve reform

• Housing finance reform

14

Key Dates to Watch

• May 31 -- Highway Trust Fund expires

• June 30 – Ex-Im Bank authorization expires

• September 30 -- Federal government FY 2015 funding

expires

• Late October/Early November -- Debt ceiling expected to

be reached

15

Outlook

• Consensus still tough

• Possible compromises on corporate tax reform, trade,

and infrastructure

• Possible financial services related legislation

– Community bank regulatory relief

– Raise threshold for designating BHCs as SIFIs from

$50 billion to some higher number ($250 billion) or

some qualitative assessment

Thank You