May 4, 2023

Breen, Gohn, Kussman Nominated for MBA Offices

MBA is pleased to announce the nominations of the following to serve as officers on the MBA Board of Directors.

• Chairman: Adrian Breen, executive chairman and CEO/president of The Bank of Missouri, Perryville
• Chairman-Elect: David M. Gohn, president/CEO of West Plains Bank & Trust Company
• Treasurer: Patrick Kussman, president/CEO of Regional Missouri Bank, Marceline

They were selected by MBA’s Nominating Committee and will stand for election Wednesday, June 14, at MBA’s 133rd Annual Convention and Trade Show in Branson. If elected, their terms begin in June.

MBA Voices Concerns on New Rule Affecting Mortgage Loans

MBA expressed its concerns to several federal agency directors about a new rule from the Biden administration affecting mortgage loans that has significant impacts for consumers.

As previously shared, the rule — effective May 1 — from the Federal Housing Finance Agency changes the calculations used to structure mortgage fees. Specifically, the changes address a borrower’s credit score and down payment sizes. Individuals with a higher credit score will see increased mortgage fees while those with lower credit scores will see decreased fees.

Consumers who “have done everything possible to prepare themselves for homeownership should never be penalized or burdened with junk fees imposed at the direction of the housing GSEs and the FHFA that are levied for political purposes,” wrote MBA President Jackson Hataway.

Hataway also said that “fee and rate reductions offered as inducements to people who are not prepared for homeownership are predatory” and noted that “when consumers … are tricked into thinking they can afford a home without establishing safe and prudent ownership skills, the potential for financially devastating outcomes for those consumers increases dramatically. The first unexpected expense or life hardship that occurs can trigger the downward trajectory toward foreclosure.”

MBA’s comments were sent to FHFA, the Consumer Financial Protection Bureau and the Federal Reserve System. The letter also included concerns expressed by Congressman Blaine Luetkemeyer and 27 state treasurers, including Missouri Treasurer Vivek Malek and former state treasurer and now Missouri State Auditor Scott Fitzpatrick.

MBA Files Comment Letter on Credit Card Late Fees

MBA urged the Consumer Financial Protection Bureau not to follow through with its proposal that would eliminate a longstanding safe harbor that banks of all sizes rely upon when setting late fees on credit card payments.

MBA’s comment letter addressed the agency’s proposal to amend Regulation Z, which implements the Truth in Lending Act, to better ensure that late fees charged on credit card accounts are “reasonable and proportional” to the late payment as required under TILA. The proposal:

• cuts the safe harbor dollar amount for late fees from $30 to $8 and eliminates a higher safe harbor dollar amount for late fees for subsequent violations of the same type
• eliminates the annual inflation adjustment for the safe harbor amount that was provided by the Federal Reserve Board in 2010
• caps late fee amounts at 25% percent of the required payment

In the comment letter, MBA General Counsel Keith Thornburg noted the Federal Reserve Board fully addressed credit card late fees decades ago.

The CFPB proposes draconian cuts to the TILA cap on credit card late fees that will requires lenders to charge prime borrowers more to subsidize non-prime borrowers,” Thornburg said. “The result will be less credit at higher costs for all, and some nonprime borrowers will lose complete access to credit card services as banks and other issuers manage the risks and costs that will result from the CFPB’s reckless and imprudent actions.”

FDIC: ‘Targeted’ Coverage Best Option for Deposit Insurance Reform

A “targeted” deposit insurance system in which additional coverage would be extended to business payment accounts would be the best option for balancing financial stability and depositor protection relative to its costs, the Federal Deposit Insurance Company said in its long-awaited review of the system.

FDIC issued this proposal as a “starting point” in discussions to improve deposit insurance. The review, prompted by recent bank failures, considered three options for reforming the Deposit Insurance Fund.

• the limited coverage option that exists now
• an unlimited option that would cover all deposits
• a targeted system with additional coverage for business payment accounts

The FDIC said the latter was the most promising option but acknowledged there are “significant, unresolved practical challenges” to implementing it. Any modification to the coverage level must be approved by Congress.

MBA staff and the MBA Deposit Insurance Modernization Task Force are reviewing the report in detail. Their goal is to ensure that any solution for deposit insurance guarantees equal competitive footing for all banks. The task force also has been in close contact with Missouri’s congressional delegation on this topic, and they are broadly supportive of MBA’s efforts.

The FDIC report did not weigh in on a possible special assessment fee to make up for the hit to the DIF resulting from the agency’s systemic risk exemption declaration for Silicon Valley Bank and Signature Bank. The agency plans to issue that decision at a later date.

Agency Reports on Bank Failures Highlight Supervisory Missteps, Call for Changes

Three federal agencies issued reports last Friday assessing recent bank failures in March, as well as supervision and agency actions.

• The Government Accountability Office released a report on agency actions. The report noted that supervisors failed to escalate their concerns about the banks’ management of risk related to deposits in the months preceding the failures.
• The Federal Deposit Insurance Corporation report on the failure of Signature Bank cited management failures and excessive exposure to the volatile crypto sector as reasons for the collapse. The report also identified matters for further study, including the need for more examiner guidance on supervising banks that are overly reliant on uninsured deposits.
• The Federal Reserve issued a review of Silicon Valley Bank supervision. Federal Reserve Vice Chairman for Supervision Michael Barr said Fed supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity, and the bank experienced “a textbook case of mismanagement.”

These findings underscore MBA’s overall position on the regulatory impact of these failures — they were driven by problems with regulators, not with regulation,” MBA President Jackson Hataway said. “This is an important element that we must keep at the forefront of the legislative and regulatory discussions.”

Fed Raises Interest Rates by 25 Points

The decision by the Federal Open Market Committee to raise the target range for the federal funds rate by 25 basis points to 5% to 5.25% marked the 10th consecutive increase. However, the FOMC did not indicate whether members believe further increases would be necessary, unlike in previous meetings where they suggested future rate hikes were possible.

“The U.S. banking system is sound and resilient,” the FOMC said in a statement. “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation. The extent of these effects remains uncertain.”

The FOMC last voted to raise rates in March, less than two weeks after the failures of Silicon Valley Bank and Signature Bank. The committee noted that economic activity expanded at a modest pace in the first quarter of 2023. It also said that job gains have been robust in recent months, the unemployment rate has remained low and inflation remains elevated.

Deadline Nears for Banking Leadership Missouri Applications

The deadline to submit applications for MBA’s 2023-24 Banking Leadership Missouri program is Friday, May 5. 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. Bankers seeking to enhance their leadership abilities and knowledge of the banking industry are encouraged to apply.

“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.