#2022-17, June 24, 2022

FDIC Proposes Increasing Deposit Insurance Assessments

At the agency’s board meeting this week, the Federal Deposit Insurance Corporation (FDIC) approved a proposed rule to aggressively raise deposit insurance assessment rates.  The proposal, which would begin with a two basis-point increase in the first quarterly assessment period of 2023, would remain effective until the Deposit Insurance Fund (DIF) reserve ratio meets the long-term goal of 2 percent.  The increase amounts to a 54 percent increase in the current average assessment rate.

FDIC staff noted that “for the industry as a whole, staff estimate that the estimated annual increase in assessments would average 1 percent of income, which includes an average of 0.9 percent for small banks and an average of 1% for large and highly complex institutions.”  In 2020 the agency approved a DIF restoration plan to restore the reserve ratio to the statutory minimum of 1.35 percent in 2028.  However, a sustained increase in insured deposits due to the pandemic and major unrealized losses in its securities portfolio caused the reserve ratio to decline to 1.23 percent as of March 31.

MBA is reviewing the proposed rule and we plan to provide comments prior to the August 20 deadline.

To read more, click here.

CFPB Requesting Bank Overdraft Information

The Consumer Financial Protection Bureau (CFPB) recently announced a pilot supervision effort to collect information on overdraft and non-sufficient funds practices from “over 20 institutions” that it has identified as having a higher share of frequent overdraft users or higher average fees.  In a blog post on the Bureau’s website, it indicated that it intends to “use this information for further examination and review” and to “share this information with other regulators.”

Specifically, the agency is asking institutions to provide data on: the total annual dollar amount consumers receive in overdraft coverage compared to the amount of fees charged; the annual dollar amount of overdraft fees charged per active checking account; the annual amount of NSF fees charged per active checking account; the prevalence of frequent users of overdraft; and the share of active checking accounts that are opted into overdraft programs for ATM and one-time debit transactions.

To read more, click here.

MBA Joins State Banking Associations on ESG Letter to Regulatory Agencies

The Association joined 50 state banking trade associations and the American Bankers Association on a letter to the federal financial regulatory agencies this week regarding recent initiatives around environmental, social and governance (or ESG) guidance and disclosures.  The letter states that banks should be free to lend to, invest in, and do business without government interference; and that “There is growing concern from our member banks about the impact those efforts may have on their continued ability to provide critical financial services to the customers and the communities they currently serve.”

The letter notes that disclosures, standards, and guidance related to; environmental, social responsibility and governance factors are “often cast as flexible, non-binding or targeted to certain segments of the market, while allowing for long transitions.  In reality, the individual and cumulative effects of these agency actions have the potential to be acute, widespread and anything but neutral.”

The associations also cautioned policymakers not to use financial institutions as “proxies” to achieve their policy goals on climate change, social issues or other concerns and that ESG-related risks should not be considered as separate from the overall risks that banks already monitor and manage and that disclosure requirements—such as climate risk disclosures proposed by the Securities and Exchange Commission—should “not be decoupled from longstanding concepts of materiality or imposed on banks unnecessarily.”

To read the letter, click here.

FinCEN Issues Advisory on Increasing Threat of Elder Financial Exploitation

The Financial Crimes Enforcement Network (FinCEN) recently issued an advisory alerting financial institutions to the growing trend of elder financial exploitation.  This involves the illegal or improper use of an older adult’s funds, property or assets and is often happening through theft or fraud.

The advisory highlights behavioral and financial red flags to aid banks with identifying, preventing, and reporting suspected abuse.  It notes that financial institutions filed 72,000 suspicious activity reports in 2021 related to elder exploitation, an increase of 10,000 reports from 2020.  The CFPB’s estimate of the value of suspicious transactions linked to elder financial exploitation increased from $2.6 billion in 2019 to $3.4 billion in 2020, the largest annual increase since 2013.

FinCEN also recommends that banks perform additional due diligence where appropriate and remain alert to suspicious activity that could indicate that customers are financial exploitation perpetrators, facilitators, or victims.

To read more, click here.