Overview / Major Events With the first legislative funnel looming on February 19, the pace of Week 5 was frenetic (more than 150 subcommittee meetings were held over the last four days as the race to keep issues alive went into overdrive). Next week the bulk of the work shifts to the standing committees where policy bills must be approved by the end of that week in order to remain eligible for the remainder of the year. Watch for next week’s newsletter to get a more complete picture of what survived and what failed (keeping in mind that tax bills and spending bills are exempt from the funnel deadlines). Senate Votes to Terminate Medicaid Managed Care Senate Democrats continued their assault on the efforts of Governor Branstad to transition the state’s Medicaid system from a state-run fee-for-service model to a privately run managed care model. Iowa’s Medicaid system costs Iowa taxpayers more than $1 billion a year, with billions more in federal tax dollars also administered by the state to provide health care for Iowa’s poor. Early in 2015, Governor Branstad embarked on a process to transition the provision of Medicaid services and join nearly 30 other states that use a managed care model to help control costs and improve patient outcomes. The Iowa Hospital Association has led the charge to stop this effort and this week the Iowa Senate passed legislation to terminate the contracts that have been signed with private health care companies to take over the Medicaid system on March 1 (assuming the state receives the go-ahead from the federal government to proceed). |
The 86th Iowa General Assembly will officially begin on January 11, 2016. As we near the start of a new legislative session it is fitting to review what exactly Community Bankers of Iowa advocates for on the Hill, both in Iowa and Washington DC. Below are the current policy resolutions CBI supports and advocates for on behalf of Iowa’s independent, community banks and bankers. Download Policy Issues (PDF) State Issues 1. CBI continues to support beneficial and fair competition among insured depository institutions through active enforcement of Iowa’s laws relating to multi-bank holding company deposit concentration and CBI will remain active in any ongoing dialogue to ensure that existing limitations remain and enforceability continues.
2. CBI supports parity for Iowa-based financial institutions with out-of-state entities. 3. CBI supports the right of individual states to regulate financial institutions within their borders, regardless of charter source and selection. As a result, CBI opposes blanket preemption of state laws designed to protect the welfare of Iowa’s citizens by any federal agency or regulator and supports legislation or regulations that defer to state-established minimum standards over federally-established minimum standards for Iowa financial institutions. 4. CBI supports legislation designed to provide parity to Iowa banks in cases where federally chartered banks have privileges or permissible activities not allowed to state chartered banks to better enable Iowa chartered banks to remain competitive and thereby better able to serve Iowa consumers. 5. CBI supports state policies that strengthen, diversify, and promote adding value to Iowa’s agricultural production including alternative fuel and energy production. CBI Urges You to Read the Summary of the FASB Proposal
The Financial Accounting Standards Board has proposed an Accounting Standards Update on credit losses that will require every community bank in the country to revise the way they account for their loan loss reserves (ALLL) and the way they account for their securities. Please read the Summary and Questions and Answers below. Also, we encourage you to send a comment letter to FASB ([email protected]) expressing your views on the proposal. A link to a sample letter is provided below. Please use this letter as a guide and customize to your bank’s specific concerns. READ THE FULL PROPOSAL
Why is FASB proposing changes to the allowance for credit losses? There is a general consensus that the recent financial crisis was caused and prolonged by the delayed recognition of credit losses stemming from the adoption of the incurred loss model. The lack of forward-looking information in loss estimates and the reliance on multiple credit impairment models resulted in carrying values for financial instruments that were overstated. How does the proposal change the current provisioning method? The current incurred loss model and the historical loss model would be replaced by an expected credit loss model that would require the bank to generate an estimate of contractual cash flows not expected to be collected. The generation of estimated cash flows would be based on reasonable and supportable forecasts. Banks would be prohibited from generating an estimate of credit losses based solely on the most likely outcome. The proposed expected credit loss model would apply to both loans and investment securities. When is FASB expected to issue a final accounting standards update on these changes? FASB has announced that they expect to finalize the allowance changes in the first quarter of 2014. Does the proposal result in a day one loss for new loans recorded on the balance sheet? Yes. When a loan is initially recognized on the balance sheet the net present value of contractual cash flows not expected to be collected would be recorded under the loan loss provision. Two weeks ago the National Association of Attorneys General (NAAG) sent a sign-on letter to attorneys general across the nation urging the implementation of chip and PIN technology in their states. The letter, to be sent to major card brands and issuers after those attorneys general added their signatures, sets forth the belief that chip and PIN should be the standard in the US and should be implemented without delay. This letter contains several mis-characterizations of security technology currently being used in the financial services industry, and directly contradicts the official positions of all four federal bank regulators, including the CFPB.
In response to this letter sent by the NAAG, CBI in conjunction with the Iowa Bankers Association and the Iowa Credit Union League have issued a statement to Iowa's Attorney General Tom Miller asking that he either decline to sign the above mentioned NAAG letter, or to withdraw his support if already given. The House voted 303-121 to pass CBI-advocated legislation to delay enforcement of the TILA-RESPA Integrated Disclosure rule that took effect Oct. 3. H.R. 3192 would provide a reasonable hold-harmless period through Feb. 1, 2016, for good-faith efforts to comply with the TRID rule.
The Senate has yet to act on the grace period, and the White House may veto the bill if it reaches the president's desk. however, the bipartisan vote in the House is above the 2/3 majority needed to override a veto. DOWNLOAD TRID RULE SUMMARY GUIDE CBI Affiliate member Iowa Finance Authority (IFA), the National Association of Local Housing and Finance Agencies (NAHLFA) and a host of other leading state and national organizations have teamed to present a first-of-its-kind bipartisan national summit on housing policy. Co-sponsored by CBI, the Building America Summit--a National Discussion on Housing and Finance will be held October 14-15 at the Iowa Events Center in Des Moines, beginning at 12:00 noon. **If you will already be in the Des Moines area to attend our Fall Community Banking Summit on the afternoon of Oct. 14, consider attending this historic event earlier in the day as well.** The Summit will bring together industry leaders from both sides of the political aisle to discuss housing and economic policy prescriptions to keep our nation moving forward. Attending the discussion will be 2016 presidential candidates, leading federal housing officials, national housing industry officials including state agency directors and senior staff, and other influential housing and finance industry leaders. Attendance is FREE for CBI member banks and Affiliate/Associate members! For more information and to register, visit the Building America Summit website. Community Bankers of Iowa Political Action Committee has been vigilant in defense of the views and needs of independent bankers. CBI has evolved their political efforts to concentrate on issues that are of benefit to Iowa's community banks and their local economies. Our ability to bring forward those issues and projects and to coordinate with other like minded organizations, is supported by our ability to make political contributions to candidates and legislators. 100% of contributions stay right here in Iowa. Who May Contribute? A bank may solicit contributions from stockholders, directors and administrative officers. Other bank employees may voluntarily contribute to the PAC, but under Iowa law cannot be directly solicited for contributions. Regardless of your role in the operation of your bank, your contribution to the CBI PAC is an investment in the future of your bank. Directly affect the future of community banking legislation! Consider joining the CBI Legislative Action Committee to assist with formulating strategies and tactics on the state and federal levels. More information. NOTE: The CBI PAC cannot accept corporate contributions, anonymous contributions, or a contribution in the name of or on behalf of another person. by Charles S. Morris, Vice President and Economist, Federal Reserve Bank of Kansas City and Kristen Regehr, Assistant Economist, Federal Reserve Bank of Kansas City Reprinted with permission of Community Banking Connections®. Copyright 2015 Federal Reserve System. Legal Disclaimer: The analyses and conclusions set forth in this publication are those of the authors and do not necessarily indicate concurrence by the Board of Governors, the Federal Reserve Banks, or the members of their staffs. Although we strive to make the information in this publication as accurate as possible, it is made available for educational and informational purposes only. Accordingly, for purposes of determining compliance with any legal requirement, the statements and views expressed in this publication do not constitute an interpretation of any law, rule, or regulation by the Board or by the officials or employees of the Federal Reserve System. Community bank profitability declined sharply during the 2007–09 financial crisis and recession. Profitability has improved since the crisis, primarily due to declines in loan-loss provisions. Net interest income — the largest source of revenue for community banks — has remained flat, however, and is below pre-crisis levels. According to many observers, including community bankers, the low interest rate environment has made it difficult for financial institutions to earn an adequate spread on loans since the recession ended. In addition, bankers say weak lending opportunities and loan demand have contributed to reduced interest income. This article summarizes the findings of a recent study that discusses the factors that most influence community bank net interest income and the extent to which these factors are contributing to the current low levels of net interest income [1]. Additionally, the article examines whether net interest income (since the crisis and recession began) is abnormal relative to historical experience. The results of the study suggest the lack of recovery in community bank net interest income seven years after the start of the financial crisis and recession is not unusual given economic and banking conditions. |
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