legislative and regulatory changes: a banking perspective

Legislative and Regulatory Changes: A Banking Perspective

RMA, Triad Chapter Meeting – 10/4/11

Nathan BattsSenior Vice President & CounselNorth Carolina Bankers Association919-781-7979 / [email protected]

mailto:[email protected]

OverviewOverview

State Federal

STATE

Overview of the General Assembly Recent Legislation

Satisfactions of Security Instruments Filing Fees Paid to Registers of Deeds Home Foreclosure Prevention Project Payable on Death Account Beneficiaries Unclaimed Property Program Deed of Trust Provisions

Banking Law Rewrite

Overview of the General Assembly

Senate: consists of 50 members; House: consists of 120 members

Meets in regular session beginning in January of each odd-numbered year, and adjourns to reconvene the following even-numbered year, typically in May, for a shorter session primarily focused on amendments to the budget

Overview of the General Assembly

Adjournment resolution from 9/14 sets 11/7 as the next date to reconvene

Will primarily focus on: Revising the state House and Senate

district maps Revising the districts for the election of

members of the U.S. House of Representatives

Recent Legislation from the NCGA

S.L. 2011-246 (Effective 10/1/11) This law changes the methods for

recording satisfactions of a security instrument with the Register of Deeds. Under prior law, a person could either file a certificate of satisfaction or the original documents appropriately annotated to show satisfaction. This bill eliminates presentment of the original documents as a means of filing satisfaction.


S.L. 2011-296 (effective 10/1/11) This bill stabilizes revenues for

Registers of Deeds. It sets a new fee for recording mortgages and deeds of trust of $56 for the first 15 pages and $4 per page for each additional page.

Sunsets on July 1, 2013, at which time the legislature will determine if the change has worked out as projected or if adjustments are needed.


S.L. 2011-288 (effective 7/1/11) Transfers management and funding of

the state home foreclosure prevention project from the North Carolina Office of the Commissioner of Banks to the North Carolina Housing Finance Agency


S.L. 2011-236 (effective 10/1/11) This bill makes it clear that payable on

death (POD) accounts may have a beneficiary that is not a natural person (trust, charities, corporations, and any other legal entity will qualify). POD accounts may only have a single beneficiary, if the beneficiary is not a natural person.


S.L. 2011-230 (effective 10/1/11) This bill removes the requirement that

a holder of unclaimed property provide to the Treasurer detailed information on the property and the apparent owner regardless of the value.

Replaces with a lesser reporting standard for property that is valued at less than $50.


S.L. 2011-312 (effective 10/1/11) This is a lengthy bill that modernizes

the statutes governing Deeds of Trust. It has numerous provisions and focuses on such matters as releases, short sales, future advances, satisfactions, and releases.

One the Horizon: Banking Law Rewrite

S.L. 2011-353: Joint Legislative Study Commission on the Modernization of NC’s Banking Laws

14 study commission members: 5 from the House, 5 from the Senate, 2

from state-chartered banks, 2 from consumer advocacy organizations

Issue report to the 2012 Session of the General Assembly

FEDERAL

Key Leadership Developments Capital Purchase Program Small Business Lending Fund Credit Union Business Lending Highlights of the Dodd-Frank Act Reg Burden Reduction The Future of Banking

Key Leadership Developments

September 8, 2011 - Senate Banking Committee approves the following nominations and sent them for floor consideration by the full Senate: Martin Gruenberg to be Chairman of

the FDIC Thomas Curry to be Comptroller of the

Currency

Key Leadership Developments

Former Ohio Attorney General Richard Cordray has been nominated to lead the Consumer Financial Protection Bureau (CFPB) Republican Senators have vowed to

block the confirmation process without changes to the CFPB’s leadership structure

Capital Purchase Program (CPP)

CPP created by Treasury in October 2008 to stabilize the financial system (part of TARP)

Treasury provided $205 billion of capital to 707 financial institutions through the purchase of senior preferred shares, which included warrants for future Treasury purchases of common stock.

Capital Purchase Program (CPP)

At the time, the total “eligible” pool of financial institutions was about 8,400

Financial institutions participating in the CPP pay the Treasury a five percent dividend on senior preferred shares for the first five years following the Treasury’s investment and a rate of nine percent per year, thereafter.

Capital Purchase Program

3-year anniversary Approximately 400 financial

institutions still have TARP funds Most less than $1 billion in assets

Small Business Lending Fund

Enacted into law as part of the Small Business Jobs Act of 2010, the Small Business Lending Fund (SBLF) is a fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion


Up to $30 billion was authorized by Congress

Initial dividend rate was, at most, 5%. If a bank’s small business lending increases by 10% or more, then the rate falls to as low as 1%. If lending does not increase in the first two years, the rate increases to 7%. After 4.5 years, the rate will increase to 9%.


More than 900 applications Just 332 institutions were approved Only about $4 billion distributed Funding expired on Sept. 27 with

$26 billion left on the table

Credit Union Business Lending

The number of North Carolina credit unions has declined from 227 in 1992 to 95 in 2011

While the number of competing institutions is down, total credit union membership is up. There were 1.36 million credit union members in 1992, and the number has grown to 3.28 million today.

Credit Union Business Lending

“Small Business Lending Enhancement Act of 2011”

S. 509 H.R. 1418 Would raise the member business-lending

cap for credit unions from 12.25 percent to 27.5 percent of total assets

Under existing law, credit unions can make business loans under $50,000 in amount without these applying toward the cap

Highlights of the Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) 3,078 reg proposal pages, 1,795 final

regs and guidance pages as of 8/26/11 CBO estimates it will result in $27

billion in new private-sector fees and increase budget deficits by $6.3 billion over a 10-year period


$250,000 FDIC deposit insurance coverage made permanent

Will eventually double the size of the Deposit Insurance Fund (DIF)

CBO estimates that increasing the deposit insurance limit will cost banks and credit unions $9 billion through 2020, plus increasing the size of the DIF will cost an additional $6 billion


Creation of the Financial Stability Oversight Council (FSOC) The Council is charged with identifying

threats to the financial stability of the U.S. and promoting market discipline

10 voting members and 5 nonvoting In July, released a final rule on

designating firms for systemic oversight and its first report on emerging threats


“Living Wills” / Resolution Plans In September, FDIC and the Federal

Reserve issued a final rule that applies to bank holding companies with consolidated assets of $50 billion or more and nonbank financial companies that the FSOC designates as systemically significant

Interim final rule applies to banks above $50 billion


New annual and semi-annual “stress tests” for institutions

In September, the FDIC also approved final guidelines governing assessment-rate adjustments for banks with more than $10 billion in assets Adjustments up or down by 15 basis

points


Creation of the Consumer Financial Protection Bureau (CFPB) Direct examination and enforcement

authority over federal- and state-chartered banks with over $10 billion in assets

Rulemaking authority for those under $10 billion

Examination and enforcement authority over “shadow banks”


One of the CFPB’s important tasks is to integrate the Truth in Lending Act with the Real Estate Settlement Procedures Act

“Know Before You Owe” campaign Important challenge:

Information sharing with state AGs and others


HR 1315 would give the FSOC authority to overrule a CFPB regulation with a majority vote, instead of the 2/3 vote required under current law

Would replace the CFPB Director with a 5-person commission


Merger of the Office of Thrift Supervision into the Office of the Comptroller of the Currency Accomplished on July 21

Federal Reserve assumed authority over savings and loan holding companies Interim final rule establishing

regulations published in August

Highlights of the Dodd-Frank

Risk Retention – in proposed rulemaking stage Credit risk retention for asset-backed

securitizations. Securitizers required to retain at least 5% of credit risk in assets transferred through a securitization, subject to an exception for securitizations backed by “Qualified Residential Mortgages”


Higher Capital Requirements and More Restrictions on What Qualifies as Capital In June, the Federal Reserve, FDIC, and

OCC finalized a rule that creates a “risk-based capital floor” for the largest, internationally active banks

“Collins Amendment” exclusion of trust preferred securities from Tier 1 capital

BASEL III


Caps on Debit Card Interchange Fees Durbin Amendment

New Derivatives Rules New deposit insurance training for

bank employees


“Claw back” rule In July, the FDIC approved a rule that

creates a 2-year recoupment period for any compensation to senior executives that were substantially responsible for the condition of a failed institution. Unlimited recoupment in the event of fraud.


Volcker rule Prohibits certain proprietary trading in

securities, derivatives, and other financial instruments

Use of Credit Ratings Section 939A requires Federal agencies

to remove from their regulations any reference to or requirement of reliance on credit ratings and to develop a substitute standard


Municipal advisor registration Ability-to-repay mortgage proposal New supervisory “guidance”

imposing additional obligations on the operation of overdraft programs Divergence by Federal Reserve, FDIC,

and OCC

Reg Burden Reduction

Communities First Act H.R. 1697 S. 1600 Some provisions:

Increases the threshold number of bank shareholders from 500 to 2,000 that trigger SEC registration.

Extends the 5-year net operating loss (NOL) carryback provision to free up capital

The Future of Banking

Where is the industry headed?

Questions?

[email protected] 800-662-7044

legislative and regulatory changes: a banking perspective

Documents

deeds of trust

natural person trust

lengthy bill

banking law rewrites

state house

members house

prior law

register of deeds