The Federal Reserve will temporarily stop all examination activity for banks with less than $100 billion of assets as it shifts supervisory priorities due to the coronavirus pandemic, the central bank said Tuesday. The Fed is shifting its supervisory focus to monitoring and outreach to "help financial institutions of all sizes understand the challenges and risks of the current environment." The agency said it will be minimizing examination activities in order to do so, with the greatest reduction at smallest banks. The temporary shift will last until at least the end of April, when the Fed will reassess whether conditions have changed.
CDBA and the major banking trades wrote congressional leaders to strongly urge that the provisions which would enhance and incentivize SBA's 7(a) loan program be included in the final CARES Act legislation. Private-sector banks and credit unions, whether they currently participate in SBA lending or not, will be turning to the SBA’s 7(a) loan program as the way to deliver capital and economic relief to the economy while conventional lending recedes in the wake of the current economic turmoil. However, in order to quickly stimulate essential lending, lenders need the tried and true enhancements that would encourage banks and credit unions to lend and borrowers to seek capital now.
The stakes are high for the financial services industry as lawmakers battle over the details of a new stimulus package to provide economic relief for businesses and consumers affected by the coronavirus outbreak. Although Senate Democrats blocked a vote on a package sponsored by Majority Leader Mitch McConnell, R-Ky., a whole host of provisions benefiting banks, credit union and other financial firms appears still to be on the table in McConnell's plan and other proposals being floated on Capitol Hill. McConnell's package included several industry-backed measures intended to make it easier for banks to lend and protect client funds. His bill would authorize an expansion of Federal Reserve liquidity programs, delay a controversial new accounting standard for loan losses, give the Federal Deposit Insurance Corp. the authority to guarantee business transaction accounts, provide regulatory relief for troubled debt restructurings, and ease a capital requirement for community banks. Democrats, who decried Senate Republicans' package as putting corporations over workers and families, have offered up a number of their own proposals to help consumers in the midst of the pandemic. These proposals include a temporary cap on interest rates for consumer loans, a moratorium on negative credit reporting, and a temporary ban on overdraft fees. Here is a cheat sheet of the proposals that have been floated by Republicans and Democrats as Congress is working out how to provide relief to banks and consumers during the national emergency.
Banks and credit unions are eager to take advantage of newfound flexibility for restructuring loans battered by the coronavirus outbreak. Federal regulators and the Financial Accounting Standards board gave lenders a helping hand Sunday, agreeing that short-term loan modifications tied to the pandemic do not have to immediately count as troubled-debt restructurings. Normally, any concession made to a borrower would trigger classification as a TDR. In the aftermath of the financial crisis, restructured loans at banks topped $140 billion at the end of 2011. Clearly, regulators are hoping to head off a similar surge due to the coronavirus outbreak. The issue had also gained the attention of some lawmakers. Many banks, including Howard, the $4.4 billion-asset Camden National in Maine, and the $6.7 billion-asset Tompkins Financial in Ithaca, N.Y., started approving temporary deferments and other loan modifications for hard-pressed clients well in advance of Sunday's statement.
Congress is negotiating a sweeping stimulus package to offset the cascading damage wrought by the coronavirus. The package includes $500 billion for two waves of direct payments to taxpayers and an additional $500 billion in loans for businesses. To help small businesses specifically, those of us in the nonprofit small business lending space are coming together to ask Congress to apportion $1 billion of the $500 billion earmarked for businesses to go to the Community Development Financial Institutions Fund. The fund, which has strong bipartisan support, promotes economic revitalization in distressed communities throughout the country by supporting the work of the nation's network of community development financial institutions, or CDFIs. A supplemental appropriation of $1 billion to the fund will allow CDFIs across the country to leverage $12 billion in capital that will be deployed to communities in need.
Restaurants and shops are closed across the U.S. to try to slow the spread of the coronavirus. The Federal government has started to address the resulting economic pain with an emergency declaration by President Donald Trump releasing $50 billion for public-health measures and congressional passage of a multi-billion dollar relief bill providing some paid sick leave and extended unemployment benefits, among other assistance. Fortunately, the U.S. Senate stepped up on Thursday to do more. Senate Republicans released a trillion-dollar economic recovery proposal that includes $1,200 direct payments to many Americans, reduces the tax liability of large corporations and provides support for ailing industries like airlines. A crucial part is a plan by Senator Marco Rubio of Florida for government grants and loans of up to $10 million to eligible small- and mid-sized businesses, conditional on those businesses retaining their employees during the crisis. As the legislative process continues, the bill can be improved. A critical step would be to ensure that government grants would extend to non-payroll expenses, such as rent. In addition, the size of the program needs to be significantly increased from its current $300 billion. Bolder action than Rubio has proposed is required. The coronavirus has delivered what could be a knockout blow to small business.
The Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (collectively, the agencies) recognize the potential for Coronavirus Disease (also referred to as COVID-19) to adversely affect the customers and operations of financial institutions. On March 9, 2020, the federal financial institution regulatory agencies and state bank regulators issued a statement to encourage financial institutions to meet the financial services needs of their customers and members in areas affected by COVID-19.
Promontory Interfinancial Network has named banking industry veterans Camden Fine and Ed Yingling to its board and former American Banker Editor-in-Chief Rob Blackwell as its chief content officer and head of external affairs. Fine was the head of the Independent Community Bankers of America for 15 years before retiring in 2018, while Yingling worked at the American Bankers Association for 26 years in various roles, including president and CEO. After leaving ABA in 2010, Yingling worked as a partner at Covington & Burling until departing in 2018 to run Edward Yingling Government Affairs. Fine is now the president and CEO of Calvert Adivsors. When they ran their respective trade groups, Fine and Yingling frequently had different perspectives about banking policy. The ICBA often took positions counter to the interests of large banks, but the ABA has both large banks and small banks among its members.
The new CEO of Houston's only black-owned bank is counting on a budding relationship with Citigroup to expand its product set and boost profits. Laurie Vignaud joined Unity National Bank of Houston in January from Capital One, where she was senior vice president of community development banking. She took the helm two months after the failure of City National Bank of New Jersey in Newark cut the ranks of banks owned or operated by African Americans to 21 — about half of what existed before the financial crisis. Vignaud said she is convinced that the 34-year-old Unity must embrace a new business model to survive. Unity is one of seven banks owned or operated by minorities enrolled in the Treasury Department's Financial Agent Mentor-Protégé program. The initiative pairs big banks that process financial transactions for the government with minority depository institutions. The smaller banks can earn fee income by taking on some of the workload. A key objective is to keep the smaller banks viable, which in turn will help them continue to address the needs of underserved communities. A handful of large banks, including Citi, JPMorgan Chase and U.S. Bancorp, are working with the minority-focused banks.
The CDFI Fund recently awarded 23 CDFIs Capital Magnet Fund awards for FY 2019. Among the awardees were Beneficial State Bank, Legacy Bank and Trust, United Bank, and Virginia Community Capital. The Capital Magnet Fund helps to create and preserve affordable housing for low-income families and economically distressed communities by attracting private capital. The Capital Magnet Fund awards competitive grants to CDFIs and qualified non-profit housing organizations. These organizations use the grants to develop, rehabilitate, reserve, and purchase affordable housing, particularly housing targeted to Low-, Very Low-, and Extremely Low-Income families.