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DiCom Software Newsletter
January, 2015  

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CQS News
CQS 9.0

CQS 9.0 is available and ready for download from the FTP site for existing clients.  The release includes an option for Active Directory user authentication, as well as the ability to have multiple user types assigned to a single user.  

CQS 9.2

CQS 9.2 will soon be available for download for existing clients.  This release includes improved comment text box functionality, the ability to use the Report Designer for Monitor and Problem Loan reporting, and several other UI improvements.  If you are interested in this release, please contact our technical services team here

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Welcome to the tenth edition of DiCom's e-newsletter!  We use this tool to keep you informed of the latest credit risk and loan review industry updates.  This month we consider the potential for improvement in the governments' approach to banking industry regulation, as newly elected officials take their seats in Washington.

As always, your input on topics for future newsletters, as well as suggestions for enhancements to our suite of credit risk management software solutions is heartily encouraged!

Could this be the Year the Pendulum Starts to Swing Back?

Thomas Curry, Comptroller of the  
Currency, recently spoke to a group of bankers regarding the official effort underway to reduce the regulatory burden on banks. This is a required effort, part of the EGRPRA, or Economic Growth and Regulatory Paperwork Reduction Act, which originated in 1996 and is intended to help the regulatory agencies as a group identify outdated or unnecessary regulations. The assumption is that once they are identified, these regulatory groups can begin the varied processes to have the regulations eliminated, which may be a whole separate can of worms if it requires legislative action. A similar effort in 2006 received little but criticism, as the regulations identified were never eliminated or repealed, and the 'piling on' continued. The pendulum as it were, seemed destined to continue moving to the far side.

One might think that this issue of excessive burden of regulatory requirements is a relatively recent phenomenon, a result of the blooming of regulations that has been the product of DFA, Volcker, Sarbanes-Oxley, etc. That would be incorrect. In fact, even as long ago as 2005, PriceWaterhouseCoopers produced the results of a survey that indicated banks around the country and even in the UK were concerned about regulatory impact on their resources, and a resulting reduction in risk diversification, exactly the opposite result most regulators are hoping to accomplish. Even at that point, FDIC VC John Reich had indicated that the agencies had produced over 800 regulations in the prior 15 years, and he felt that compliance with that amount of rule change was having a significant impact on the viability of community banks.1 By comparison, DFA has already produced over 400 new rules and it is only 50% complete.

Fast forward to 2014, and while the quagmire of legislative ineffectiveness is a common theme, some members of our governing bodies have picked up the baton and appear to be attempting progress. In October, Senator Mike Crappo, the ranking member of the US Senate Committee on Banking, wrote an article in American Banker, highlighting the regulatory burden that is 'crushing' the nations' community banks. Senator Crappo reports there is bipartisan support for change and improvement to this type of regulatory environment.2 Industry leadership welcomed Senator Crappo's remarks, and Jim Nussle, the CEO of the Credit Union National Association even suggested that the Credit Union industry join the much needed effort in 'industry bi-partisanship'.3
Other agency heads appear to be on board as well. Federal Reserve Governor Daniel Tarullo spoke at a conference in November and specifically supported several areas where Congress could affect positive change for the community banking industry, for example changing the threshold for small bank holding companies from $500M to $1B so the cost of capital would be reduced for those organizations and exempting community banks from the Volcker Rule. Tarullo in general urged regulators to avoid applying big bank standards to community banks and to recognize the difference in risk during their oversight efforts with what he has termed 'regulatory tiering'.4

When Curry spoke, he invited bankers to provide suggestions and written comments as part of the process. He already had some ideas that the OCC was actively pursuing, which included those suggested by Tarullo. Bankers were quick to respond at the conference and in writing, and suggestions include addressing the turnaround time on de novo charters, streamlining transfer of examination documents and using electronic formats, decentralizing application approvals from Washington, raising the dollar level for required residential appraisals, and providing simplified guidance on capital requirements.5

Low and behold, on December 10th, during its last week of work for the year, Congress was presented with an opportunity to act in the form of legislation. The House was presented with a Terrorism Risk Insurance Act renewal bill which included an improvement in the clearing of swaps, and the Senate version of the same bill also had a provision that at least one seat on the Federal Reserve Board be filled with a member who has community banking experience. And then, even better news on December 11th, when both houses passed a bill which raised the threshold for a small bank holding company from $500M to $1B, as recommended by Tarullo and Curry, and it was sent to President Obama for his signature.


And then it happened. Actual legislation that improved banking regulations was part of the massive budget bill signed by Obama on December 16, 2014. It was the last act of the current seated government, where Democrats controlled the Senate and Republicans controlled the House. Many have laid the blame for these past years of legislative stalemate on this power split, but in January 2015 that excuse goes away, as newly elected officials will have Republican control of both, so not so easy to point fingers. Let us hope that the momentum of the past few months doesn't falter as this power shift occurs, but that the advocates maintain their eagerness to make improvements so long awaited by the industry. And with any luck, that pendulum will begin to swing back the other way, and bring relief to the industry in 2015 and beyond.


5 http://www.americanbanker.com/news/law-regulation/six-banker-ideas-to-help-relieve-the-crushing-compliance-burden-1071492-1.html


For existing clients who have not already planned an upgrade to CQS 9.0, we encourage you to contact our support area as soon as possible to discuss the upgrade schedule.  For anyone who missed our December webinar, please view it and other recorded webinars here.  



Catherine L. Sterba
DiCom Software
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