MIB Policy Resolutions for 2020-2022

The following constitutes the resolutions of the Montana Independent Bankers Association (MIB), which such resolutions broadly describe the Association’s major policy objectives for the 2020-2022 time period.

REVISION OF STATE OF MONTANA BANKING CODES

  • MIB supports the Department of Financial Institution and its efforts to update the codes that govern Montana financial institutions.
  • It is important, financial institutions that are regulated by the State of Montana continue to have a voice in the development of the new codes.

RELIEF FROM CRUSHING REGULATORY BURDEN

  • Both the State Legislature and Congress need to provide meaningful regulatory relief for community banks so that they may meet the credit needs of their customers, serve their communities, and contribute to their local economies.
  • Legislatures and Congress need to expand and refine a tiered regulatory and supervisory system that recognizes the significant differences between community banks and large, complex institutions.

ENDING TOO-BIG-TO-FAIL

  • The continued growth and dominance of a small number of too-big-to-fail banks has created an overly concentrated financial system, and systemic risk, and harmed consumers and business borrowers.
  • MIB and ICBA supports legislative and regulatory changes that would curb or end advantages currently enjoyed by too-big-to-fail banks.
  • The U.S. Justice Department must end the double standard with regard to prosecutions.

DE NOVO COMMUNITY BANK FORMATION

  • MIB supports a flexible and tailored supervisory policy with regard to de novo banking applicants. Capital standards, exam schedules, and other supervisory requirements should be based on the pro forma risk profile and business plan of the applicant and not on a standard policy that applies to all de novo bank applicants.

DUAL BANKING SYSTEM; REGULATORY CHOICE

  • MIB strongly supports the dual banking system where bank chartering and supervision is divided between the federal government and the states.
  • ICBA strongly supports the independence of each bank supervisor but encourages enhanced and improved cooperation and consultation among the agencies.
  • A new office in the Treasury Department – Assistant Treasury Secretary for Community Financial Institutions – should be created to coordinate federal policy for our nation’s community banks.

MEMBERSHIP

  • Montana Independent Bankers Association (MIB) exclusively represents Montana’s community banks of all sizes and types. MIB is dedicated to maintaining the highest value membership available for community banks that provide financial services to all of the people in Montana.
  • Independent Community Bankers of America (ICBA) is the exclusive voice for community banks on the national level.

TIERED REGULATION FOR COMMUNITY BANKS

  • MIB supports and advocates for Tiered Regulation for Community Banks.  Community banks need regulatory relief to support the financial needs of their customers, serve their communities, and contribute to their local economies.
  • MIB urges Congress and the regulatory agencies to continue to expand and refine a tiered regulatory and supervisory system that recognizes the significant differences between community banks and large, complex institutions in terms of the risks they pose to consumers and to the financial system.
  • To preserve their original purpose, thresholds for regulatory accommodations and exemptions based on asset size and transaction volume should be continually reviewed and adjusted upward as community banks consolidate and the average asset size of banks increases.

CFPB SMALL BUSINESS LOAN APPLICATION DATA COLLECTION

  • MIB supports the repeal of Dodd-Frank Section 1071 which requires the CFPB to implement HMDA-like data collection and reporting requirements for small business lending.  If the repeal proves infeasible the MIB supports the CFPB to use its authority under the Dodd-Frank Act to exempt community banks from data collection and reporting, limit any collection to data points required by statute, and prioritize protecting customer privacy as it considers new data reporting requirements.
  • Small business lending is a complex business that cannot be “commoditized” in the same way as consumer lending.
  • Each small business loan has customized terms based on an analysis of numerous factors. Complex lending should not be subject to simplified, rigid analysis, which might give rise to unfounded fair lending complaints.

 

Cybersecurity

  • Community banks should not be required by regulators to use one framework, tool or assessment over another to identify and mitigate cybersecurity risk. Community banks should maintain their existing flexibility to use the framework, tool or assessment that best fits their size and complexity.

 

Data Security and Fraud

  • All participants in the payments and financial systems, including merchants, aggregators, and other entities with access to customer financial information should be subject to Gramm-Leach-Bliley Act-like data security standards.
  • Banks should be notified of a potential and/or actual breach as expeditiously as possible in order to mitigate losses. The costs of data breaches should ultimately be borne by the party that incurs the breach. Barring a shift in liability to the breached entity, community banks should have continued access to various cost recovery options, including account recovery programs and litigation.

 

Bank Secrecy Act

  • MIB strongly supports the collection of beneficial ownership information by the appropriate government agency at the time an entity is formed rather than requiring financial institutions to assume this burden. However, financial institutions should have access to that information to assist them in performing customer due diligence.
  • MIB strongly recommends raising reporting thresholds with future increases linked to inflation to reflect an emphasis on quality over quantity.
  • Community banks should receive compensation for their anti-money laundering and anti-terrorist financing oversight and policing activities on behalf of the federal government either through tax credits or other financial compensation or through reduced regulatory burden in other areas.
  • MIB recommends that nonbank institutions that perform “bank-like” functions and offer comparable financial services be subject to the same anti-money laundering and BSA laws and regulations as banks.

 

Tax-Exempt Credit Unions

  • MIB strongly urges state and federal governments to end the unwarranted tax subsidy of the credit union industry.  In addition, credit unions should not be given expanded powers as long as credit unions remain exempt from taxation and regulations.

 

COMMUNITY BANK ACCESS TO CAPITAL

  • MIB supports legislative and regulatory changes that would improve the ability of community banks to raise capital.
  • Subchapter S of the tax code should be updated to facilitate capital formation for community banks by increasing the shareholder limit for Subchapter S eligibility, allowing the issuance of preferred shares, and permitting individual retirement account (IRA) shareholders.

 

Fintech Charter

  • MIB has strong concerns with the Office of the Comptroller of the Currency’s (OCC’s) intention to issue special purpose national bank charters for financial technology (fintech) companies that could be used to access the banking system and avoid state consumer protection laws. The MIB believes that any new federal charter should be subject to the same standards of safety, soundness, and fairness as other federally chartered institutions.
  • MIB has concerns about the regulatory advantage currently enjoyed by online marketplace lenders and supports a regulatory framework for online lenders that is no less stringent than the framework that applies to community banks.

 

CRYPTOCURRENCIES

  • The widespread issuance of cryptocurrency would be a significant and irreversible development that would alter global digital commerce and the global financial system. MIB has concerns regarding threats posed by cryptocurrency to privacy, money laundering, terrorist financing, fraud, consumer protection, and financial stability.
  • MIB urges policymakers to ensure public trust and mitigate risks as the study of cryptocurrency proceeds. Any regulatory regime applied to cryptocurrency should be comparable to the multitude of regulations applicable to traditional, functionally similar payments products and services offered by the banking system.

AGRICULTURAL POLICY

Community Banks and the Rural Economy

  • Community banks of less than $10 billion in asset size hold approximately 80 percent of all banking sector agriculture loans. Approximately 3,000 community banks have agriculture-related portfolios of at least $5 million. Community banks remain the only banking presence in more than 600 counties (nearly 20 percent of all U.S. counties) and hold the majority of bank deposits in rural counties.

 

USDA Guaranteed Loans. USDA’s guaranteed loan programs allow community banks to lend to higher risk borrowers with a guarantee of repayment. Loan size limits should be increased to ensure they continue to meet the needs of farmers and ranchers.

Farmer Mac. Farmer Mac should continue to focus on its primary mission of improving secondary market access for community banks’ agricultural lending.

Farm Credit System. FCS lenders enjoy unfair advantages over rural community banks and leverage their tax and funding advantages as a government sponsored enterprise (GSE) to siphon the best loans away from community banks. The FCS is the only GSE that competes directly against private sector lenders at the retail level.

 

TAX POLICY

  • Tax laws should promote robust economic activity and a vibrant community banking sector and foster saving and investment.
  • The tax-exempt status of interest paid on municipal finance for all recipients is critical to municipalities and should be preserved.

 

Call Report

  • MIB supports legislative and regulatory changes to provide real relief for community banks by adopting a true short-form call report.

Current Expected Credit Loss Model

  • MIB opposes any implementation of the current expected credit loss (CECL) model for small community bank loans and investment securities by the banking regulators that contradicts the view of the FASB that smaller community financial institutions should utilize existing processes to project future credit losses when providing for the loan loss provision.
  • MIB believes that regulators should supply small community banks with clear, practical, and easy-to-implement methodologies for calculating the periodic provision for estimated credit losses that allows for the seamless incorporation of their existing processes.  For community banks that do introduce modeling into their loan loss provisioning processes, inputs to models should be community or transaction specific and not based on more global economic factors that may be difficult to source, maintain, or apply in a practical manner.

 

MORTGAGE LENDING

  • Community Banks Are Responsible Lenders. As relationship lenders who underwrite based on firsthand knowledge of their customers and communities and who thrive based on the strength of their reputations, community banks have every incentive to make fair, commonsense, and affordable loans. They do not need prescriptive regulations to compel them to do so.
  • Small Servicer Exemption Limit Must Be Increased. To preserve the role of community banks in mortgage servicing, where consolidation has clearly harmed borrowers, the CFPB’s small servicer exemption limit should be increased from 5,000 loans to 30,000 loans or a maximum principal balance of $5 billion in mortgages serviced. New regulation has approximately doubled the cost of servicing with a direct impact on the consumer cost of mortgage credit.

MUTUAL AND SAVINGS INSTITUTIONS

  • MIB supports and defends the choice of mutual ownership before all regulatory and legislative bodies. Mutuality is a viable charter alternative that should be accorded parity in all respects with other charter forms.

 

CLOSE ILC LOOPHOLE TO MAINTAIN SEPARATION OF BANKING AND COMMERCE

  • Corporate conglomerates or other companies engaged in commercial activities should not be allowed to own full-service banks in violation of the longstanding U.S. policy of maintaining the separation of banking and commerce.
  • Allowing large retail or technology conglomerates to own banks violates the U.S. policy of maintaining the separation of banking and commerce, jeopardizes the impartial allocation of credit, creates conflicts of interest, a dangerous concentration of commercial and economic power, and unwisely extends the federal safety net to commercial interests.

 

 

COMMUNITY BANKER REPRESENTATION

  • To ensure community bank views are considered by key policy bodies, MIB supports the appointment and election of community bankers to public and private sector boards, advisory groups and task forces that influence the development of regulations and policies affecting the banking industry.

MONTANA INDEPENDENT BANKERS POLITICAL ACTION COMMITTEE (MIBPAC)

  • MIB directors, officers, and employees of all member banks and associate members to contribute to MIBPAC.
  • MIB encourages CEOs, directors, officers and employees to contribute to ICBPAC. All banks that achieve 100 percent PAC participation from their board of directors are eligible for membership in ICBPAC’s Directors Club.

STRENGTHENING MEMBERSHIP

  • Through banker-to-banker recruiting, MIB magazine, and member benefits, MIB is desiring to increase its strong membership base.
  • MIB supports and encourages all community banks to join ICBA, the nation’s voice for community banks, exclusively represents community banks of all sizes and types. ICBA is dedicated to maintaining the highest value membership available to community banks.

INCREASING COMMUNITY BANK COMPETITIVE ADVANTAGE

  • MIB encourages community banks to identify and develop new sources of revenue, control costs, and maintain profitable investments in order to compete effectively and serve their communities.
  • Through the strength of associate members, MIB supports exclusive value-added products and services designed to enhance the competitive position of community banks.

BANK EDUCATION

  • MIB in conjunction with and ICBA provide timely, high-quality and relevant educational programs and services designed to promote community bank growth and prosperity.
  • MIB and ICBA provide timely, high-quality and relevant educational programs and services designed to promote community bank growth and prosperity.
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