2024 Journal of Community Bank Case Studies

2024 COMMUNITY BANK CASE STUDY COMPETITION

industry and Washington leaders oppose the new regulations, knowing regulators would end up pushing higher capital requirements for large banks onto all banks, regardless of their size. If FCCB were to propose a regulatory modification, it would pertain to either the Bank Secrecy Act or the Consumer Financial Protection Bureau (CFPB), depending on the perspective. Jones would most like to see changes to the Bank Secrecy Act, which mandates banks to report suspicious activities related to potential money laundering, tax evasion, and similar crimes. (US Office of the Comptroller). The act also requires banks to maintain extensive monitoring and compliance programs. According to Jones, the Bank Secrecy Act is very demanding, requiring a skill set that is expensive and difficult for smaller community banks to develop and retain. Additionally, the high compliance costs must inevitably be passed onto customers, reducing the affordability of loans in the communities the bank serves. On the other hand, Black would prefer to see regulatory oversight for the CFPB. According to Black, the CFPB is the agency causing the most controversy within the industry. An example of this controversy is the agency’s proposed Section 1071 Small Business Rule changes, which would expand the number of required data points collected and reported in small business loan applications up to 81 data points, a large increase over the original 13 (Barloon, et al). Black explains that this creates a significant privacy issue for the bank’s small business customers, as their information could potentially become public and be linked back to the original

FCCB’s management expects greater regulatory emphasis on specific areas of bank management following the 2023 bank closures.

applicant. Black would like to see a slower, process-oriented approach to changes like these rather than the flood of rewrites the industry currently faces. Aside from Basel III and Section 1071 regulatory changes, there are several other proposals FCCB is tracking. According to Black, the bank is currently reviewing proposals relative to the new commercial real estate (CRE) rules, credit card fee overhauls, the Access to Credit for our Rural Economy Act of 2023, and the Secure and Fair Enforcement Regulation Banking Act. As an agricultural-focused lender, FCCB is also closely tracking the new Farm Bill. Black explains that the current bill proposal will allow the bank to further help its customers without shouldering additional credit risk, but it may also drive more customers toward the Farm Credit System, one of the FCCB’s biggest competitors in agricultural lending. FCCB has also faced past regulatory challenges. For example, due to its growth over the last decade, FCCB is now operating in many new

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