Pub. 15 2018 Issue 4

Issue 4 • 2018-2019 9 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S as numerous fast-growing offshoot businesses is putting our industry in an untenable position. A bank might choose not to serve a marijuana grower or dispensary since cannabis remains illegal under federal law, yet still face significant legal, operational and regulatory risk if it offers services to a customer with a tangential connection to cannabis. We’ve heard many stories, like the bank that was told by its regulator not to lend any more to a local mall owner after it leased space to a cannabis dispensary. This conflict between federal and state law is reaching a tipping point, and we believe Congress and regulators must provide greater legal clarity. Watch for hearings, likely to begin with the House Financial Services Committee, and for the introduction of bills that address banks’ challenges. While ABA is not weighing in on the societal, cultural or moral aspects of this issue, we do want legal protections for banks providing services in states where cannabis is legal. CECL Accounting Standard Understanding the impact that the Financial Accounting Standards Board’s Current Expected Credit Loss accounting standard will have when fully implemented is a significant chal - lenge. But we know that the standard’s upfront loss recognition changes the economics of lending and could force hundreds of banks to raise capital or limit their product offerings. For this reason, ABA is advocating that a thorough quantitative impact study be conducted before allowing the standard take effect. The standard is scheduled to take effect in 2020 for Secu - rities Exchange Commission registrants, 2021 for non-reg- istrant banks with outside equity/debt holders, and 2022 for privately held and mutual banks. Community Reinvestment Act Modernization Regulations implementing the Community Reinvestment Act have not kept pace with changes in banking and technol- ogy, and the Office of the Comptroller of the Currency has taken the lead in modernizing them. The comment period following OCC’s issue of an Advance Notice of Proposed Rulemaking closed in November 2018, with some 300 banks weighing in. That kind of engagement will be needed again in 2019, when we expect the banking agencies to jointly issue a proposed rule. This is a once-in-a-generation opportunity to move CRA into the future, but it will face substantial head- winds from those who fear (wrongly) that modernization will reduce banks’ commitment to their communities. We will be working to allay those fears and make the case for common- sense improvements. Fortunately or unfortunately, banking always has a full pipeline of issues demanding attention. So while those above seem ripe for action in the coming months, ABA will be advo- cating on a host of other, equally important issues, from data security and housing finance reform to flood insurance and student debt concerns. Your continued engagement will be the key to advancing any of these issues, and creating smarter, more effective bank regulation. n We will be working to build bipartisan support for BSA/AML reform, including updated Suspicious Activity Report and Currency Transaction Report thresholds, further modifications to customer due-diligence rules and better communication between banks and law enforcement.