April 14, 2023
MBA Task Force Discusses Deposit Insurance Modernization
The MBA Deposit Insurance Modernization Task Force held its first meeting April 12. The members of the task force represent banks across the state and all asset classifications. The task force discussed numerous options for the future of deposit insurance, including raising limits, enacting a regular inflationary adjustment and moving to significantly higher limits for noninterest bearing transaction accounts.
MBA will now begin researching these options to outline costs and benefits before the next meeting of the task force. The goal is to develop materials for distribution to congressional offices that are working on their own modernization proposals so that direct feedback from bankers is included in any legislative effort.
“In meetings with congressional staff during MBA’s recent Washington visit, lawmakers asked for our input because they will be heavily involved in the conversations concerning deposit insurance,” said John Klebba, CEO of Legends Bank in Linn and chair of MBA’s task force. “Our goal is to outline recommendations that protect the interests of every bank in our state.”
SBA Lifts 7(A) Lender Moratorium, Loosens Underwriting Requirements
MBA opposes new rules from SBA
The Small Business Administration issued a final rule that would lift the moratorium on the number of nondepository lenders in the 7(a) program. Through the 7(a) program, banks and other lenders provide loans to underserved small businesses. The number of nondepository institutions in the program has been capped at 14 institutions for decades, but that cap is eliminated under the rule.
The final rule, effective May 12, creates a new type of small-lending company to make 7(a) loans: “Community Advantage SBLCs (Small Business Lending Company).” SBA stated it has the resources to license, service and provide oversight to three new SBLCs and that each new SBLC has the potential to increase 7(a) lending by approximately 425 loans per year throughout the next four years. The final rule also removes the loan authorization as a required document for 7(a) loans. In a change from the rule as proposed, SBA will require Community Advantage SBLCs to maintain a loan loss reserve account as determined in the SBA administrator’s discretion.
SBA also issued a separate final rule that removed the nine-factor underwriting standard for 7(a) loans found in existing regulations. The rule, effective May 11, replaced that standard with a requirement that lenders use “appropriate and prudent generally acceptable commercial credit analysis processes and procedures consistent with those used for [the lender’s] similarly sized, non-SBA guaranteed commercial loans” or use a “business credit scoring model.”
MBA opposes SBA’s lifting, without limit, the moratorium on the number of nondepository institutions that can become 7(a) lenders while at the same time loosening underwriting standards.
“Banks are best positioned to provide services to underserved small businesses, and the success of the current SBA 7(a) program proves this,” said MBA President Jackson Hataway. “Banking is a highly regulated industry, and there are no assurances that nondepository institutions will have to meet the same regulatory standards.”
Nichols: Americans Can Be Assured Banking Sector Is Strong
The important thing for Americans to know following the failures of Silicon Valley Bank and Signature Bank is that the overall banking sector is resilient, well-capitalized and has solid liquidity, American Bankers Association President and CEO Rob Nichols said during a recent interview for C-SPAN’s Washington Journal news program.
“What happened at these two institutions is not symbolic or suggestive of a systemic challenge that the sector is facing,” he said.
In response to questions from the host and viewers across the country, Nichols spelled out some of the differences between SVB and Signature from other banks. He noted the depth and diversity of the U.S. banking system and the important role that banks of all sizes play in the economy.
“We are the envy of the world with regard to our banking system,” Nichols said in describing the benefits that community, midsize, regional and large banks provide the economy. “Each serves a unique niche within the U.S. economy that is really important. That’s, in part, why we have the world’s largest and most dynamic and robust economy, because of the banking system.”
His message reiterates statements from banking associations and bankers nationwide. As previously shared, MBA issued a media statement in mid-March noting that “Missouri’s banking industry remains a source of strength and stability. Banks in Missouri maintain strong capital levels, ample liquidity and record levels of loan loss reserves, allowing them to successfully absorb economic shocks.” Many MBA members shared similar messages to their customers and communities.
During the interview, Nichols also noted that the Federal Reserve, Federal Deposit Insurance Corporation and Government Accountability Office are reviewing if regulators failed to spot warning signs in the leadup to the failure of SVB or if new regulation may be necessary.
“We think the Fed had the necessary tools to control what was happening at SVB,” he said about the latter. “I think we really need to get a sense of the facts first before we encourage a broader rule writing of the banking sector.”
He also cautioned against rushing to raise capital levels for the nation’s banks, emphasizing that it could be a misstep to do so. “We’re going into a period of potential economic uncertainty, and the idea of ratcheting up capital requirements in a way that could impede economic activity is something that should be considered very carefully,” Nichols said.
Data Submission Deadline Nears for MBA Salary Survey
MBA encourages its members to participate in the 2023 MBA Bank Compensation & Benefits Survey. This annual survey collects data on nearly 100 full-time positions, as well as information on employee benefits, director, incentive compensation and retention/recruiting information.
“The information that banks share in the salary survey will help them be even more competitive and successful in today's job market,” said MBA Vice President Rachael Preston.
The deadline to submit data online is Monday, May 1.
Survey results will be available later this summer. Results are reported by asset categories and geographic regions. All data are reported in summary format to prevent identification of a specific bank's compensation information. All data submitted remains confidential and will be used for no other purposes.
MBA members participating in the 2023 survey may purchase the results at the discounted price of $155. Participants purchasing the survey results also will receive a custom benchmarking report.
MBA Accepting Applications for Banking Leadership Missouri
Bankers seeking to enhance their leadership abilities and knowledge of the banking industry are encouraged to apply for MBA’s 2023-24 Banking Leadership Missouri program. The 12-month program is designed specifically for bankers with broader responsibilities, those in a management role or bankers who have potential for senior management.
“Banking Leadership Missouri focuses on developing a solid understanding of the banking industry and the skills necessary for leadership that participants can put into practice immediately,” said Cheri Messerli, MBA senior vice president. “Many graduates of Banking Leadership Missouri now lead their banks in various capacities, including CEO, president, vice president, director and manager.”
The program begins in June 2023 and concludes June 2024. A maximum of 25 Missouri bankers will be selected to participate in the ninth class of Banking Leadership Missouri. Applications are due Friday, May 5.
MBA to Host ‘She Gets It’ Leadership Series
MBA is partnering with state banking associations across the country and noted leadership speaker AmyK to bring a special online leadership program specifically designed for women bankers.
The “She Gets It Mastermind – Learn the Language of Self-Leadership” is a foundational, six-week program that will help attendees regroup, recenter and reset.
“This series provides tools and resources to focus on your priorities, fuel your energy and align your actions with your ideal life and career,” said MBA Senior Vice President Cheri Messerli.
The program begins April 25 and concludes June 6. Each session 90-minute session begins at 9 a.m., and sessions will be recorded.
Additional details are posted online.
MBA Hosts Free Webinar on Mitigating Risk for NSF Fees on Representments
MBA is hosting a free webinar from 9 to 10:30 a.m. Tuesday, April 25, on mitigating supervisory and litigation risk for nonsufficient funds fees on representments and authorizing positive settle negative overdrafts. Kersten Holzhueter and Bryant Lamer, partners with the Spencer Fane law firm, will present the webinar, which is for MBA members only.
Regulators continue to scrutinize overdraft fees and overdraft protection programs. In August 2022, the Federal Deposit Insurance Corporation issued a new supervisory guidance on multiple representment NSF fees, which outlined the agency’s thoughts on “consumer compliance risks associated with assessing multiple non-sufficient funds (NSF) fees arising from the re-presentment of the same unpaid transaction.” Even before the FDIC issued this publication, consumer attorneys were filing class action lawsuits across the country challenging overdraft and NSF fees. The FDIC’s newest publication will embolden those attorneys to file even more cases. This webinar will explain the theories asserted in class action lawsuits and recommended steps for defending against those claims.