Rob, thanks for the CRA podcast. Very interesting insights at this point in the process.
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Neil Stanley
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Original Message:
Sent: 10-26-2023 15:58
From: Rob Blackwell
Subject: CRA, Swipe Fees, Slowing Loan Growth: This Week's Top Stories
The world's oldest known dog passed away at the age of 31, Harvard Business Review listed 10 beliefs that interfere with organizational change, and the House elected Rep. Mike Johnson (R-LA), an ally of former President Trump, to be speaker of the House. Here's what else you might want to read this week:
"Community Reinvestment Act Rule Finally Crosses the Finish Line"
Key changes include new evaluations based on loan activity instead of branch locations (to address the rise of online banking); revised criteria for small, midsize, and large banks (as well as a new intermediate category of banks between $600 million and $2 billion in assets); and more incentives for community development. "[The final rule] will better achieve the purposes of the law by encouraging banks to expand access to credit, investment, and banking services in low- and moderate-income communities," Fed Chair Jerome Powell said Tuesday.
To be sure, there's a lot to digest in the 1,400-page final rule, which takes effect Jan. 1, 2026. American Banker's Ebrima Sanneh joined Banking with Interest this week to discuss the new standards, how the final rule differs from the proposal, and how the industry could respond. Listen here.
Sanneh also published a separate article on whether banks will sue over the new CRA rules, which the industry has long threatened to do.
"Fed Wants to Lower 'Swipe Fees,' a Potential Blow to Banks and Credit Card Giants"
A day after finalizing the CRA rules, the Fed proposed deep cuts to the cap on interchange fees that would result in a charge of 17.7 cents on the average debit-card transaction of $50, down from 42.5 cents. Banking groups objected, arguing that the proposal should be reproposed because it relies on nonpublic data and analysis. Read five ways merchants are attempting to offset these fees at the point of sale.
"Smaller Banks to Score from Large Lenders' Higher Capital Requirements – Survey"
Thirty-seven percent of bank leaders think community banks will benefit the most from Basel III endgame rules, and 39% think regionals and superregionals will benefit the most, according to IntraFi's most recent quarterly survey of executives at nearly 600 banking institutions. Just 19% of respondents thought fintechs would benefit the most. Another article discussed how three quarters of respondents to the same survey expect loan demand to decline or remain flat over the next 12 months, as interest rates are expected to remain higher for longer.
"Is It Time To Worry About Banks' Business Lending?"
Slack loan demand contributed to negative loan growth among regional banks last quarter. "Hard to justify a new project when you're paying 9% or 10%," one analyst quipped. Be sure to check out these tips on managing the risks of a C&I book in a low-growth environment.
"Which Deposit-Raising Tactics Are Bad, and Which Are Good?"
Financial institutions seeking to attract deposits (or prevent them from going out the door) tend to rely on past tactics without assessing their efficacy under current market conditions, writes Peer Intelligence participant and the CorePoint CEO Neil Stanley. He warns that certain strategies for attracting and retaining deposits can actually be quite destructive and highlights several questions for banks and CUs to consider before selecting a course of action.
"Chopra: Open Banking Helps Small Banks 'Steal the Lunch' of Big Banks"
A recently proposed rule that would give consumers more control over their financial data would also give small banks a competitive edge over their larger counterparts, the CFPB chief said at the National Bankers Association conference. "You cannot look at open banking as a compliance burden only … the more we focus on what the business opportunity is, about how you can steal the lunch of your bigger competitors, that is going to be key," Rohit Chopra argued.
In other CFPB news, the bureau submitted a report to Congress stating that last year credit card companies charged consumers $105 billion in interest and $25 billion in fees. The CFPB is in the midst of finalizing a proposed rule that would cap credit card late fees at $8.
"Is Cybersecurity Insurance Worth the Higher Premiums?"
Cybersecurity is critical. However, that doesn't necessarily mean community banks need to be insured for it, especially as premiums go up, experts say. Average premiums for cyberinsurance went up 8.4% in the first quarter of this year after rising 15% in the fourth quarter of 2022.
"OCC Applying 'Supply Chain Mindset' to Bank-Fintech Scrutiny: Hsu"
Any arrangement where several parties participate in delivering financial products to consumers will receive greater scrutiny, according to the acting comptroller, who says the OCC is working on how to tailor oversight to an evolving financial services supply chain. Be sure to check out this article on the pros and cons of acquiring fintechs.
"When AI Suspects Money Laundering, Banks Struggle to Explain Why"
Banks are relying more heavily on artificial intelligence to spot money laundering and other financial crimes. However, while the technology has shown promise, many AI models are black boxes. As a result, banks often struggle to provide the transparency and documentation regulators seek.
"Smaller Banks Look to Shrink Their Way Back to Health"
Regionals have been stealing all the headlines lately. Many of them, such as SVB, simply got too big in recent years. Now they're slimming down in an effort to get healthy by exiting business lines, laying off staff, and trimming loan portfolios.
"Goldman Sachs Leads Small Biz Campaign Against New Bank Rules"
The bank that sparked fury up and down Main Street for its lavish bonuses in the wake of the 2007-2008 financial crisis is now advocating for small businesses, claiming the Basel III endgame proposal will have a chilling effect on lending at a dangerous time for the economy.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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