Digging Deep and Making a Difference This Holiday Season

While many Americans are gearing up for the holiday season, ICBA and community bankers are gearing up for a bustling couple of weeks in Washington. Three top-priority industry initiatives are coming to a head in roughly as many weeks: blocking a backdoor tax hike on Federal Reserve members, modifying a dangerous rewrite of accounting standards, and advancing community bank regulatory relief. We need community bankers nationwide to make their voices heard loud and clear above the din on Capitol Hill.

First off, ICBA is working to ensure that community banks aren’t forced to pay for a federal highway bill that House and Senate lawmakers are in the middle of finalizing. An ICBA-advocated amendment that passed in the House would remove a Senate-passed cut to dividends paid on Federal Reserve Bank stock. The amendment not only drops the $17 billion backdoor charge on community banks, but also removes a provision to extend higher guarantee fees on mortgages sold to Fannie Mae and Freddie Mac. We also want to ensure a separate House-passed amendment that advances several ICBA regulatory relief provisions is included in the final version of the bill.

Meanwhile, ICBA is calling on community bankers to continue leading the charge against a costly accounting revamp that is expected to be finalized by the Financial Accounting Standards Board as soon as next week. The Current Expected Credit Loss model would require banks of all sizes to set aside reserves the day they make a loan or investment, resulting in an increase in loan-loss reserves of up to 50 percent, according to the Office of the Comptroller of the Currency. We’re calling on community bankers nationwide to contact FASB and advocate ICBA’s alternative plan, which would base community bank loan-loss provisions on historical losses. Meanwhile, I encourage community bankers to attend ICBA’s complimentary audio conference on the FASB proposal on Monday, Nov. 30.

Last but not least, ICBA is making a major push to advance our Plan for Prosperity regulatory relief priorities all the way through Congress before lawmakers break in December. Because the House has already passed numerous ICBA-advocated measures, such as relief from new mortgage rules and Basel III, the Senate is the key to getting them over the finish line. Whether it’s using the appropriations process ahead of the Dec. 11 budget deadline or old-fashioned regular order, now is the time for us to pull out all the stops.

The rest of the country might be cleaning out their ovens to cook Thanksgiving dinner, but it’s time for ICBA and community bankers to strike while the iron is hot. Community bankers have sent 15,000 letters to Capitol Hill against the Fed dividend cut and for our regulatory relief proposals, and nearly 5,000 signed ICBA’s petition on FASB’s accounting plan—clearly demonstrating our industry’s ability to rally when it matters most. So while we’re making room for turkey and stuffing, let’s all dig deep and redouble our advocacy efforts. With strong collective action, we can ensure a lasting holiday gift to Main Street communities.

Retailers Fishing for Distractions Amid Data Security Push

800px-US_capitol_domeCongress is an intentionally deliberative body. It was structured by our founders to ensure collective participation in shaping government policy, and sometimes that allows certain factions to disrupt the legislative process purely for their own self-interest. Such is the case with the retail industry sidelining the debate over data security by resuscitating tired and largely settled complaints over the transition to EMV chip technology.

As ICBA recently testified before the House Small Business Committee, community banks are in a good position to help small businesses make the switch to EMV technology. The transition itself has been underway since 2011. And the Oct. 1 liability shift has come and gone with banks and merchants diligently moving toward implementing EMV.

But rather than entering into a substantive dialogue about the limitations of chip technology and collaborating on further improving consumer security in an era of data breaches and cyber-threats, retail industry lobbyists have instead fixated on EMV quibbles and attempted to re-litigate the failed Durbin Amendment debit interchange price controls. To avoid the public spotlight on their own costly security lapses, retailers are serving red herring.

Don’t bite. Here are the facts: EMV is a positive step for consumers, but it is simply not a panacea for payment card fraud. While counterfeit card fraud will be successfully mitigated when a critical mass of card issuers and merchants migrate to EMV, fraudsters will shift to other fraud, such as online card fraud. The financial industry is, however, pioneering multiple layers of security technologies, such as end-to-end encryption and tokenization, to protect cardholder information in transit and online transactions. Meanwhile, Congress can take action now—I mean right now—to address the scourge of massive retailer data breaches affecting consumers and the broader economy.

The Data Security Act (H.R. 2205), introduced by Reps. Randy Neugebauer (R-Texas) and John Carney (D-Del.), would implement uniform national data-security standards in place of the current patchwork of state laws. This national standard for all entities that handle sensitive financial data—including merchants—would require robust data-security processes while at the same time being scalable and flexible to the size and risk profile of covered entities. In other words, the corner mom-and-pop deli won’t have the same level of scrutiny as multichannel retailers with massive databases of consumer information, like Wal-Mart, Target or Home Depot. But consumers themselves will be better protected than ever before.

Lawmaking is a justly deliberative process, but it should not be diverted by misleading and disingenuous arguments. If merchants do not want to meet the same kinds of security standards that have worked well for financial institutions, they should explain why they should not have to. But let’s not stall Congress with red herring distractions when, faced with rampant cyber-crime and data breaches, we have much bigger fish to fry.

Staying True to Our Mission

In an era of seemingly perpetual political gridlock, it’s important to pause on occasion to consider why we community bankers put so much effort into political advocacy. From our continuous and relentless regulatory relief efforts to our persistent support for fair and equitable oversight of credit unions and the Farm Credit System, community bankers certainly have a lot of irons in the fire.

That’s why, when the Washington two-step starts to make my head spin, I go back to the basics. I look to ICBA’s mission to remind myself why we do what we do. Our mission statement is short and sweet, to “create and promote an environment where community banks flourish.”

It’s a brief but powerful statement. In fact, it’s posted on the wall of our Washington office lobby, so ICBA staff can see it when they walk in every morning and walk out at night. To me, the key word is “flourish.” ICBA is here to help community banks grow, thrive, be healthy and vigorous. We combine the strength of each community bank to create an atmosphere that benefits all of them. In turn, community bankers can better serve their local customers and communities, establishing a stronger economy at the ground level.

This system goes to the heart of what we believe as an organization of community bankers. In fact, this philosophy is at the foundation of what we believe as a nation: that we are stronger from the bottom up than from the top down. That we are more powerful collectively when we are empowered individually.

At ICBA we really do have one mission: community banks. It isn’t a slogan. It’s why we’ll keep fighting for additional reforms to the Qualified Mortgage rule and why we’ll hold regulators to their promise of a streamlined call report. It’s why we are not holding anything back from a Congress that has uttered countless words of support for community banks but has yet to deliver tangible regulatory relief this year.

Yes, with so much partisan paralysis, there is a lot of unfinished business as the nights get longer and cooler here in Washington. But by maintaining our focus on a simple statement—to create and promote an environment where community banks flourish—we can clearly see how all of these moving parts fit together in a single, important mission.

Banks: An Eponym of Epic Proportions

When most people want a tissue, they say they need a Kleenex. When you cut your finger, you don’t say you need an adhesive bandage—you need a Band-Aid! When you need to make a photocopy, regardless of the brand of the machine, you make a Xerox copy. Many marketers would consider this a compliment, especially if you work for the company that’s in the common lexicon as both product and brand. But what happens when you are a unique brand that makes superior products that compete with Kleenex, Band-Aid or Xerox? Are you doomed to spend countless marketing dollars simply trying to be recognized?

Similarly, not all banks are created equal, but some in Washington would love for people to believe that all banks are the same, just as some marketers want everyone to believe that all tissues are Kleenex. For example, whether for cover or clout, some would argue there are benefits to blurring the lines between too-big-to-fail Wall Street banks and the nation’s community banks. It’s a brilliant PR move, so thinly veiled it almost sounds genuine. Let’s convince everyone that all banks suffer the same maladies of bad reputations from ill-gotten gains. Perhaps if we say it often enough, and in a convincing, empathetic tone, everyone will simply believe it’s true. After all, a bank IS a bank—a purposefully created, well-disguised eponym. How would your community bank fare as a victim of brand-washing?

This raises a challenge for our industry—the community banking industry. We must not allow the biggest and riskiest financial firms to drag our reputations down with them. We must not allow them to compromise the positive image that community banks have earned. We cannot allow them to dilute our brand.

I’m troubled when some members of the banking industry say banks have a reputation problem. Yes, the mega-banks do have a reputation problem. The too-big-to-fail Wall Street institutions that wrecked our financial system and economy have a reputation problem. But community banks are held in high regard among policymakers and the general public alike. Community banking offers positive associations, such as small-business loans to Main Street businesses, financial literacy lessons for neighborhood schools, and mortgages that help first-time homebuyers experience the American Dream.

My point is that community banks have worked hard to establish our unique position in the financial services industry, and we should not allow our brand to be taken away from us. When someone asks if you’re a banker, stand proud and say, “I’m a community banker.” If someone asks if you work for a bank, proudly say, “I work for a community bank.”

We cannot and should not be lumped together with those mega-banks whose past and continuing actions sully the good name of banking. We must defend and promote the community bank brand proudly because nobody else will do it for us—certainly not Wall Street. At ICBA we give voice to and work for community banks every day, and we will keep doing everything we can possibly do to prevent our brand from being tarnished or taken away from us. We are different; we are unique; we are community banks.