We regularly work with financial institutions to navigate the challenges of implementing, maintaining, and using security procedures for commercial customers’ use of treasury management services. Security procedures are an integral part of the relationship between the financial institution and its commercial customers. Financial institutions offer (and frequently require) commercial customers to use the institution’s security procedures, which are agreed to be commercially reasonable, to originate payment orders (e.g., wire transfers and ACH Entries) from the customers’ accounts.

Issues often arise when one or more of a customer’s authorized users is not able to use his standard security procedures to access a financial institution’s physical or electronic payments systems to either originate or confirm a payment order. Due to the COVID-19 outbreak and concern over the implementation of preventative measures, including more companies asking or requiring employees to work remotely, financial institutions should consider which customers may need to update, amend or supplement the ways that its customers can make payments, whether this be through adding authorized users or implementing alternative methods to send payment orders.
Continue Reading Considerations for Financial Institutions Regarding Security Procedures for a Remote Workforce

In response to the recent COVID-19 outbreak, on March 6, 2020, the Federal Financial Institutions Examination Council (FFIEC) issued an Interagency Statement on Pandemic Planning on behalf of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and the State Liaison Committee.

The Statement identifies actions that financial institutions should take to minimize the potential adverse effects of a pandemic and provides specific items that should be addressed in a financial institution’s business continuity plan (BCP).  Due to the wide variety of possible ramifications from a pandemic, BCPs should be updated to provide for a “preventative program, a documented strategy scaled to the stages of pandemic outbreak, a comprehensive framework to ensure the continuance of critical operations, a testing program, and an oversight program to ensure that the plan is reviewed and updated.”
Continue Reading Federal Financial Institutions Examination Council Issues Statement on Pandemic Planning

Like most companies, you are preparing for how COVID-19 might affect your operations. Equally as important:  the conversations you should be having with your borrowers that range across multiple industries and sectors.  How is COVID-19 likely to impact their business? Are they proactively analyzing and implementing protocols to reduce costs, and better ensure continuity of supply?

These conversations, if approached correctly, can provide an opportunity to learn more about your customer’s business, while simultaneously pinpointing concerns that might affect their livelihood. And this crisis presents an opportunity to provide guidance and support to your customers, beyond the typical lender/borrower relationship.
Continue Reading Bankers: Are you having the right conversations with your customers around COVID-19?

You are the local banker. An elderly husband and wife have been long-standing customers of your bank. They have a modest estate and have set up a living trust so they can avoid the costs of probate. If they both sign as co-trustees, can they add their daughter, who lives in another state, as a co-signer to the living trust account?

Another customer was named as the trustee for his parents’ irrevocable trust. He has a full-time job, but his wife has offered to help with the administrative tasks. Can he add his wife as a convenience signer to the trust account?  
Continue Reading It’s the Trustee’s Burden: Can It Be Delegated?

One of the key provisions of the Dodd-Frank Act rollback law signed by President Trump on May 24, 2018, hasn’t met its early promise for U.S. community banks. Recently proposed rules to implement simplified capital requirements have fallen short of the industry’s expectations when the bank deregulation law was enacted in May.

On November 21, 2018, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly announced a proposed rule to simplify capital requirements for qualifying community banking organizations that opt into the community bank leverage ratio framework. The agencies are seeking public comment on a proposal that would simplify regulatory capital requirements for qualifying community banking organizations, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155 regulatory reform bill). 
Continue Reading Community Banks Disappointed with Federal Regulators’ Proposed Community Bank Leverage Ratio

There has been a growing trend among individuals and even estate planners to avoid having to go to the probate court. Even for those people who need wills, a large percentage of their assets will be transferred pursuant to beneficiary designations in account agreements at banks and credit unions, in IRA’s and other qualified retirement plans, and through life insurance policies. Add a trust, and an even wider range of assets can be transferred outside the probate courts. What this non-probate disposition of assets means, of course, is that financial institutions are called upon to help a customer determine what type of account to use and, after death of the customer, review legal documents and carry out the transfer instructions.

In addition, more people are using simplified probate tools to avoid a formal probate. In Texas, small estates affidavit can be used when a person dies without a will and has $75,000 or less in personal assets, not including the homestead. If there is a will and there are no unpaid debts or a need for administration, the will can be admitted to probate under a unique Texas proceeding known as a “muniment of title.” Under these procedures, no representative of the estate is appointed. Banks may be presented with a court certified copy of an affidavit for small estates or an order admitting a will to probate as a muniment of title. The financial institution may be called upon to review the documents and pay the funds in an account. These procedures are currently authorized by statute, but may become more widely used. A task force formed by the Supreme Court of Texas is considering promulgating forms for use by non-lawyers to make it easier for them to take advantage of these simplified procedures.
Continue Reading Avoid Probate Court: Head to Your Bank Instead

We work with many regional financial institution clients on a daily basis, and they regularly send us out-of-state garnishments, liens, levies, and other legal processes with one question—“Do I have to answer this?” The first question we ask is whether the foreign state can exercise jurisdiction over the regional financial institution—in other words, whether the financial institution is doing business in that state. Our clients are often quick to respond that they don’t have any branches or employees in other states, and so do not believe that they are doing business in those states.

But for the most part, the days of only “brick and mortar” banking are long gone. With the competition of internet banks and increase of technology, financial institutions are trying to become more appealing and accessible to their customers. To do that, they have increased their presence on the Internet. One result of this increased presence has been increased opportunity to market other products (such as CDs, car loans, or mortgage loans) outside of their home state. 
Continue Reading Online Banking: Are Financial Institutions Subjecting Themselves to Other Jurisdictions Without Knowing?

July 13, 2018, marks the comment deadline for the federal bank agencies’ proposed capital rules amendments to grant all banks the option to elect a three-year phase-in of the “day 1” regulatory capital effects from adopting the new and burdensome FASB Current Expected Credit Losses (CECL) methodology under GAAP (scheduled to become effective for the first group of banking organizations in their first fiscal year beginning after December 15, 2019). Critically, the election to use the three-year phase-in approach would be required to be made by the end of the first regulatory reporting period in which the banking organization applies CECL, otherwise it is forfeited. The proposed three-year phase in period affords community banks with much-needed time to plan and test for CECL implementation thereby easing some of the CECL anxiety community bankers are experiencing.
Continue Reading Federal Bank Agencies Set to Grant Community Banks Temporary Reprieve from FASB’s Burdensome Credit Losses Rule

Coauthored by Dykema Summer Associate Shaun Sullivan-Towler.

For financial institutions interested in banking state-legal marijuana businesses, 2018 has been a rollercoaster. In January, Attorney General Jeff Sessions rescinded the Obama-era policy of lenient federal enforcement, creating new confusion for banks and credit unions about the future of marijuana-related banking. Many feared that the Financial Crimes Enforcement Network (FinCEN) would withdraw or amend its guidance as well, thereby eliminating the only federal guidance directed to financial institutions on banking marijuana businesses. But FinCEN has since been clear that its guidance remains in place and announced that, as of March 31, 2018, a total of 411 banks and credit unions now provide services to marijuana-related businesses, up from 365 a year ago.
Continue Reading The STATES Act, Rooted in Federalism, Would Address Systemic Risk in Cannabis-Related Banking

2018 has a tough act to follow, after a 2017 full of momentous developments—starting with a new Administration and wrapping up with a showdown over the right to serve as Acting Director of the Consumer Financial Protection Bureau (CFPB) (a fight that continues as of this writing, as discussed below).

But 2018 is unlikely to be a quiet year. In addition to developments in the CFPB leadership battle and other litigation, the year is expected to bring developments such as effective and compliance dates for major regulations on data protection, Bank Secrecy Act/anti-money-laundering (BSA/AML), mortgage servicing, and other topics, and could bring changes in supervisory focus at multiple federal agencies. 
Continue Reading Fasten Your Seatbelts: Are You Ready for Another Eventful Year?