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Georgia on my Mind: Changes in Banking Laws

March 29, 2017

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the-bank-accountOn March 28, 2017, Jonathan and I sat down with Bryan Cave Colleagues Ken Achenbach and Crystal Homa in the latest episode of The Bank Account for a discussion focused on legislative changes in Georgia affecting banks, including modifications to Georgia’s business judgement rule and the Department of Banking & Finance’s Housekeeping Bill.

While the bills we discuss await the Governor’s signature (and subsequent effectiveness – July 1 for the business judgement rule change and 30 days after signature for the housekeeping bill), our team looks forward to the practical effect of these statutory changes.  As banking industry participants, we appreciate the efforts of the legislature to make Georgia an attractive state for banking.

As referenced in the podcast, we also encourage you to check out our prior The Bank Account episode about the role of bank directors post FDIC v. Loudermilk, and Crystal’s earlier post on providing banking services to minors.

You can also follow us on Twitter with Jonathan at @HightowerBanks, Crystal at @CrystalHoma and me at @RobertKlingler.  Ken cannot be followed on Twitter, as Ken’s thoughts cannot be limited to 140 characters.

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Dodd-Frank Act Reforms

March 23, 2017

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Dodd-Frank Act Reforms

March 23, 2017

Authored by: Robert Klingler

Much of the discussion we’re having with our clients and other professionals relates to the prospects for financial regulatory reform.  To that end, and looking at it from the political rather than industry perspective, Bryan Cave’s Public Policy and Government Affairs Team has put together a brief client alert examining the political, legislative and regulatory issues currently under consideration.

In his first weeks in office, President Trump has taken steps to undo or alter major components of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). These include delaying implementation of the “Fiduciary Rule,” which regulates the relationship between investors and their financial advisors, directing the Treasury Secretary to review the Dodd-Frank Act in its entirety, and signing a resolution passed by Congress that repeals a Dodd-Frank regulation on disclosures of overseas activity by energy companies.

Read the rest of this alert on Bryan Cave’s homepage.

We’ve also posted about the impact of the proposed regulatory off-ramp on community banks, recorded a podcast episode on the Financial Choice Act, and discussed some of the causes, including hopes for regulatory relief, of the rise in bank stock prices in our podcast episode on the issues associated with elevated stock prices in bank mergers and acquisitions.

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The Strategic Approach to Vendor Negotiations

March 17, 2017

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the-bank-accountOn March 17, 2017, Jonathan and I sat down with Bryan Cave Partner Sean Christy in the latest episode of The Bank Account for a discussion of the FDIC’s Office of Inspector General’s Report on Technology Service Provider Contracts.  Before diving into the OIG report, Jonathan and I briefly discuss the potential impact on deposits with regard to the Federal Reserve’s latest increase in rates, the OCC’s draft supplement for fintech bank charters (and related BankBryanCave.com blog post), and the change in Federal Reserve policy lessening the examination of certain smaller bank mergers.

Sean is a partner in our Strategic Sourcing group, and has significant experience representing bank and other financial services providers in the negotiation of the their technology contracts.  In this episode, Sean helps us look at the key takeaways from the February 2017 FDIC OIG’s report on Third Party Service Provider Contracts with FDIC-Supervised Institutions.  Sean provides some practice advice for institutions as they approach negotiations with their service providers, and also breaks down some of the common issues identified in the report that he also regularly sees in the contracts he reviews.

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Riding the High Stock Price Wave

March 8, 2017

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the-bank-accountOn March 7, 2017, Jonathan and I recorded lucky episode 13 of The Bank Account where we discussed the implications of stock prices, particularly in connection with bank mergers.  We note that the current levels of stock pricing in the banking sector appears to be driven by expectations for higher interest rates, tax reform, and regulatory relief, in that order of likelihood and importance.  We also note that if these expectations aren’t achieved, bank stock prices are likely to take a hit.

As mentioned on the podcast, Jonathan was recently quoted in an American Banker story on bank merger activity.

“We’re telling buyers to be aggressive and sellers to be thoughtful,” said Jonathan Hightower, a lawyer at Bryan Cave. “The potential for legislative changes, lower corporate taxes, higher rates and reform to Dodd-Frank … are already priced into bank stocks. There could be a pullback if any of those things don’t occur.”

Subsequent to recording, the American Banker also published an excellent look at increasing skepticism for the chances for meaningful regulatory relief.

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Walt Moeling Always Has a Story

March 3, 2017

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The February/March 2017 edition of Banking Exchange contains a lengthy interview between Bank Exchange’s Executive Editor, Steve Cocheo, and our own Walt Moeling.  Framed in the context of seven questions asked of Walt, the interview does a great job illustrating Walt’s use of stories to prove a point.

Talking to banking attorney Walter Moeling about an organization that forbade talk about mergers and acquisitions—because it may make folks unhappy—leads to his gentle scoff: “There’s nobody involved in banking who is not interested in mergers.”

And then, in typical Moeling fashion, a short point brings him to a story. Walt Moeling always has a story—nearly always with a point or moral for the listener to let sink in.

“I was called upon to do a board session, a strategic planning meeting. I told the CEO I was going to talk about mergers. ‘Oh, you don’t need to do that,’ he told me. ‘My board isn’t interested in mergers.’

“I told the CEO, ‘If I’m going to talk about strategy, I’m going to talk about M&A. You can’t plan a strategy without knowing where you are heading.’”

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Selling Your Mission to Shareholders

February 27, 2017

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Selling Your Mission to Shareholders

February 27, 2017

Authored by: Robert Klingler

the-bank-accountOn Friday, February 24, 2017, Jonathan sat down with our colleague, Kevin Strachan, to discuss ideas for banks to highlight community involvement in their shareholder meetings.  As mentioned during the podcast, I had the pleasure of judging the next generation of transactional lawyers at a LawMeets competition hosted by Emory Law School, but I enjoyed consuming this podcast as a listener.

Before diving into shareholder engagement, Jonathan and Kevin also comment briefly on the leaked Hensarling memo on version 2.0 of the Choice Act, and some of the “interesting” banking ideas expressed by Bruce Cahan, adjunct professor at Stanford University, on a recent American Banker podcast episode.

On this episode of The Bank Account, Jonathan and Kevin touch on some excellent examples of shareholder engagement, including:

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BankBryanCave Version 2.0

February 23, 2017

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BankBryanCave Version 2.0

February 23, 2017

Authored by: Robert Klingler

Brickman Cleans Up!Over the last several weeks, we’ve updated the BankBryanCave.com site to a new design, new hosting service and new e-mail subscription service.  The updates have been long overdue, and should help us continue to provide interesting and useful content.  As expected, the site redesign also engendered lots of internal conversation and renewed interest in the platform.  Accordingly, I hope that the next weeks and months will continue to provide new voices and new perspectives on issues affecting community bankers.

As with the industry as a whole, we are eagerly awaiting upcoming regulatory relief and changes.  Although the changes will hopefully reduce the regulatory burden for many, change is never easy, and we intend to address what community banks will need to do to adjust to those changes.  We also expect that the market for de novo banks will continue to add steam.  With several clients looking at filing de novo applications, we hope to share successes (and tidbits to learn from mistakes) with others.

New Mailing Service

One of the items I’m most happy about (yes, I live a strange life) is a new service to handle our e-mail updates from BankBryanCave.  For those already subscribed, you should receive duplicate copies with this blog post, one from webmaster@bankbryancave.com that looks like the old alerts, and a new alert from communications@bankbryancave.com.  We’re then going to be turning off the old e-mail service, so you shouldn’t have to take any action.  I apologize in advance for the duplicate e-mails, but felt that was the best way to ensure that the new system is working before we turn off the old one!  If you run into any problems, please don’t hesitate to e-mail me at Robert.Klingler@bryancave.com.  For those interest in getting e-mail alerts whenever a new post is made, subscribe to the blog. You can select to receive alerts immediately, only once a day, or only once a week (or all three, if you just can’t get enough!).

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Impact of Proposed “Regulatory Off-Ramp” for Community Banks

February 15, 2017

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A key component of the proposed roadmap for Republican efforts to provide regulatory relief is based on reduced regulatory burdens in exchange for holding higher capital levels.  Specifically, Title I of the proposed Financial Choice Act, as modified by Representative Hensarling’s “Choice Act 2.0 Changes” memo of February 7, 2017, proposes to provide significant regulatory relief for institutions that maintain an average leverage ratio of at least 10 percent.

The principal concepts of this “regulatory off-ramp” have, so far, remained relatively constant since first published by the House Financial Services Committee in June of 2016; any institution that elects to maintain elevated capital ratios (set at a 10% leverage ratio) would enjoy exemptions from the need to comply with certain other bank regulatory requirements.

Choice 2.0

In February 2017, Jeb Hensarling, Chairman of the Financial Services Committee, indicated that the “regulatory off-ramp” included in the proposed 2017 legislation would differ in two critical aspects from the 2016 proposed legislation.

First, the regulatory off-ramp would be based solely on the banking organization’s leverage ratio and would not consider the organization’s composite CAMELS rating.  Originally, the legislation limited eligible institutions to those that possessed a composite two CAMELS rating.  This change eliminates a subjective element to the regulatory off-ramp, but may also highlight that banking regulators would retain a wide array of tools to address institutions with substandard CAMELS ratings, regardless of their capital levels.

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Roundtable on the Future of Retail Banking

February 12, 2017

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the-bank-accountOn Friday, February 10, 2017, Jonathan and I sat down with our partners, Jim McAlpin, head of Bryan Cave’s Financial Services practice, and Dan Wheeler, head of Bryan Cave’s Fintech practice, to discuss the impact of financial technology on retail banking.  Like branching strategies, there isn’t necessarily one universally correct strategy with how community banks should address financial technology, but ignoring fintech completely is unlikely to be a viable long-term strategy.

On this episode of The Bank Account, Jonathan, Jim, Dan and I explore some possible approaches for addressing fintech, and relay some of the reactions that we’ve heard from successful community banks.

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Core Principles for Financial Regulation

February 7, 2017

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On February 3, 2017, President Trump issued an executive order setting forth his administration’s core principles for the regulation of the U.S. financial system.  While generally touted as the administration’s first affirmative steps to dismantle the Dodd-Frank Act, the executive order actually does little to implement any immediate change but says a lot about the overall framework by which the Trump Administration intends to approach financial regulation.

In addition to standard executive order boilerplate, the executive order sets forth two specific actions.  First, it establishes the “principles of regulation” that the administration will look at in evaluating regulations.

Section 1. Policy. It shall be the policy of my Administration to regulate the United States financial system in a manner consistent with the following principles of regulation, which shall be known as the Core Principles:

(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(b) prevent taxpayer-funded bailouts;

(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;

(e) advance American interests in international financial regulatory negotiations and meetings;

(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

Notwithstanding partisanship biases, I think most of these principles express ideas that most Americans could support, even if some would say there are additional principles (such as protecting consumers) that might also be relevant.  Even with some “norms” going out the window, I think everyone should be able to get behind the concept that our financial regulations should seek to “prevent taxpayer-funded bailouts.”  If nothing else, the Core Principles reflect generally mainstream Republican views of the goals (and implied limitations) of federal regulations.

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