Page 5 - October 24, 2024 Bulletin

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of the Inflation Reduction Act. The additional funds will provide “In short, where the financial regulatory framework can provide
assistance to approximately 4,650 distressed direct and guaranteed for parity of treatment, it should do so,” she said. “The regulatory
farm loan borrowers. This includes approximately $235 million in framework should not knowingly distort competition, or effectively
assistance for an estimated 4,485 delinquent direct and guaranteed impose a regulatory allocation of credit.”
borrowers who have not received prior IRA 22006 assistance, and At the same time, one of the greatest challenges facing community
approximately $15 million in assistance for an estimated 165 direct banks is not managing any particular risk but rather how to address
and guaranteed borrowers with Shared Appreciation Agreements.
all of the risks they face, and how to prioritize the approach to
Farm loan borrowers in bankruptcy might also be eligible for this tackling those risks, Bowman said. Regulators have sometimes
assistance. If you have a farm loan borrower you may want to exacerbated these challenges through policy choices, she added.
discuss this program with them and if you a dealing with a borrower “Both regulators and banks should be working toward a common
who is in bankruptcy make sure your attorney communicates with goal – a banking system that supports economic activity throughout
the borrower’s bankruptcy attorney about this assistance program. the country, in which banks operate in a safe and sound manner and
Lenders who have FSA guaranteed loans should file an up-to-date in compliance with consumer laws and regulations,” she said.
default status report for any guaranteed loan that was in default as Read more: https://www.federalreserve.gov/newsevents/speech/
of September 30, 2024. Guaranteed loans that were 30 days past bowman20241011a.htm
due as of September 30, 2024, will be eligible for a payment on the
past due amount. Letters will be going out from the FSA starting FDIC Deposit Insurance Fund
October 31, 2024, so lenders should file the default status reports
before that date. Questions should be directed to the local or state Reserve Ratio Grew in First Half
FSA office. of 2024
Read more: https://www.fsa.usda.gov/news-events/news/10-07-
2024/usda-announces-additional-250-million-financial-assistance- The Deposit Insurance Fund balance was $129.2 billion at the end
distressed of the second quarter of 2024, up $7.5 billion since the end of last
year, the FDIC said in the second of its semiannual updates on the
Credit Unions, Nonbanks Should DIF restoration plan. The DIF reserve ratio increased from 1.15% to
1.21%. The agency projects that the reserve ratio remains on track to
Be Subject to Same Regulatory reach the statutory minimum of 1.35% by 2026.

Expectations as Banks The FDIC established the restoration plan in 2020 to return the
DIF reserve ratio to its statutory minimum by 2028. The balance at
Credit unions and other nonbanks should be subject to the same the end of Q2 exceeded its previous peak of $128.2 billion in Q4
regulatory and supervisory expectations as banks if they are engaged 2022, just before the failure of Silicon Valley Bank and two other
in the same activities, Federal Reserve Governor Michelle Bowman regional banks in 2023, according to the agency. The increase in the
said. Speaking at the Community Bankers Symposium in Chicago, DIF balance was primarily driven by assessments earned. Growth in
Bowman outlined several challenges facing community banks, the DIF balance and slower-than-average insured deposit growth in
including competition from nonbanks. She also criticized regulators the first half of 2024 resulted in an increase in the reserve ratio of six
for exacerbating some of the risk management challenges facing basis points to 1.21%.
banks.
Read more: https://www.fdic.gov/board/memorandum-restoration-
A core concept in financial regulation is to impose the same plan-semiannual-update-october-17-2024
regulation on entities that are engaged in the same activities,
Bowman said. She suggested policymakers expand that principle to NDBA Joins Letter Expressing
include the same regulation, guidance and supervisory expectations.
Community banks often face disadvantages when competing with Concerns on Expected
nonbank revivals, which may not be subject to taxes or regulations Changes to FHLBs’ Credit Risk
such as the Community Reinvestment Act, Bowman said. “[Banks] Management Frameworks
are also subject to a broader range of restrictions imposed by
regulatory requirements or the ‘soft’ power of supervision. In all of In a letter to FHFA Director Sandra Thompson, the ABA and 51
these cases, the disparity in the legal framework can have a distortive state bankers associations shared concerns with the expected changes
effect on competition. to the FHLBs’ Credit Risk Management Frameworks, which “may
restrict individual FHLB members’ access to funding, especially
during times of financial stress.”

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