Rep. French Hill hosted an all-day discussion Monday (June 17) at the local offices of the Arkansas Bankers Association (ABA) to hear concerns about key legislative and regulatory issues facing Arkansas’ financial and banking community.
Hill, a former Little Rock banking executive and ranking Republican member of the House Committee on Financial Services, said he held the Arkansas Bankers roundtable so he could meet with Arkansas bankers still struggling to comply with so-called Dodd-Frank regulations put in place following the Great Recession.
“As many of you have heard me say before, community banks are bearing the brunt of Dodd-Frank Act even though they did not cause or contribute to the 2008 crisis,” Hill said during his opening remarks at Monday’s event co-sponsored by the ABA, the Arkansas Community Bankers Association and the Kroll Bond Rating Agency.
“We all know that the ‘Washington-knows-best, one-size-fits-all’ mentality does not benefit the nation’s banks ultimately only hurting the customers they serve,” continued Hill. “I know the challenges these regulations place on your firm and I’ve been working hard to try to get regulatory relief.”
GREAT RECESSION AFTER-EFFECTS STILL LINGER
At Monday’s event, there were two panels related to regulations approved by Congress following the subprime mortgage crisis and near collapse of U.S. financial markets a decade ago. The first discussion focused on the Financial Accounting Standard Board (FASB) accounting rules approve in 2016 that are designed to give investors more forward-looking information on credit losses.
Those new standards adopted by the international accounting body, known as the Current Expected Credit Losses or CECL, forces lenders to establish a reasonable reserve to cover a loss on a loan or finance lease once it is known with reasonable confidence that a loss may occur.
During the Great Recession of 2008, FASB officials said, that tendency was revealed to have left lenders catastrophically under-reserved against losses. In late 2018, U.S. banking regulators approved a final rule requiring banks to phase in the new CECL standard over three years beginning in 2020. That final rule was to become effective April 1, 2019 but was delayed until July 1, 2019 due to the government shutdown in January.
A week ago, Rep. Hill joined with a bipartisan group of 10 congressional lawmakers to introduce the CECL Consumer Impact and Study Bill of 2019 sponsored by Rep. Vicente Gonzalez, D-Texas, and Rep. Ted Budd, R-Carolina.
“As it relates to CECL, I recently introduced legislation as a cosponsor that would require a delay implementation until a quantitative impact study could be performed and then it would still delay it a year after the study’s completion,” Hill said.
Concerning the roundtable on the Home Mortgage Disclosure Act, the discussion at Monday’s event focused on updated banking reporting requirements on the federal law first passed in 1975 to give policymakers the information needed to identify and combat lending discrimination. Under HMDA, banks and other mortgage lenders must report information like the types of property, loan amounts, and the sex, race and ethnicity of borrowers.
Those requirements were updated by the Dodd-Frank finance reforms under the administration of former President Barack Obama, which offers a clearer picture of what’s happening with lenders, officials said. Supporters say those rules also prevent illegal redlining practices that allow lenders to turn down African Americans, Hispanics and other minorities for mortgages and other loans with credit profiles matching approved white borrowers.
Under President Donald Trump, the Consumer Financial Protection Bureau issued a guidance in August 2018 to clarify that banks that originate fewer than 500 open- or closed-end home mortgage loans annually may take advantage of HDMA data collection and reporting relief. Last month, the CFPB proposed to relax that HMDA reporting even more.
MARIJUANA BANKING, TECH ADVANCES
The other panel discussion at Rep. Hill’s roundtable included a long back-and-forth on the U.S. Treasury Department’s well-known Financial Crimes Enforcement Network, or FinCEN guidance in 2014 where the Obama administration laid out a process for financial institutions to open accounts for marijuana-related businesses.
That discussion mostly dealt with how the Arkansas banking community has shied away from offering financial services to the state’s fledging medical marijuana industry because of federal regulations that still prohibit cultivation, distribution and possession of pot, and establish significant penalties for these crimes. The FDIC and other industry regulators still warn banks that provide financial services to marijuana businesses that they could face charges of aiding and abetting money laundering and racketeering.
Hill said he backs the Secure and Fair Enforcement — or SAFE — Banking Act that is possibly headed for a House vote in coming weeks. That bill, which has 206 co-sponsors, would shield banks from federal penalties for providing financial services to medical or adult-use marijuana businesses.
“I was a supporter of this legislation and it seems like it should be moving to the House floor in the near term,” Hill told several bankers gathered at the Little Rock summit. “I know that’s something that many in this room are supportive of and I will continue to monitor its progression through Congress.”
Hill also mentioned that as the ranking GOP member of the newly formed House Financial Services Committee task force, he is part of a bipartisan legislative group studying the impact of financial technology innovation and artificial intelligence on the banking industry.
“With the Venture Center’s work in Little Rock and their partnerships with FIS and ICBA, this is a great opportunity to elevate their work as well as hear from you on ways we can continue to innovate with new players and incumbent firms,” Hill said of the recent Fintech accelerator programs housed at the Little Rock Technology Park.