Pub. 9 2018 Issue 2

www.wvbankers.org 14 West Virginia Banker Breathing a Sigh of Regulatory Relief: Community Banks Benefit from Partial Rollback of Dodd-Frank By Sandra Murphy and Amy Tawney, Bowles Rice LLP I n May, community banks received welcomed relief from the regulatory burden imposed by the Dodd Frank Act when Congress passed the Eco- nomic Growth, Regulatory Relief and Consumer Protection Act (the “Act”), the most significant rewrite of finan- cial industry regulations in a decade. Despite conflicting views as to whether dismantling Dodd Frank will once again set the country on the path to anoth- er financial crisis, the Act passed with strong bipartisan support as Congress sought to ease the stringent regulatory environment for community banks. The following is a summary of the key provisions applicable to community banks with less than $10 billion in assets: Qualified Mortgages: The Act des- ignates mortgages held in portfolio as Qualified Mortgages (QM) for banks with less than $10 billion in assets sub- ject to some documentation and prod- uct limitations. This safe harbor will also apply when a mortgage is transferred to a wholly-owned subsidiary where the mortgage loan is considered an asset of the bank for regulatory accounting purposes. Exemption from the Volcker Rule: Banks with less than $10 billion in assets are exempt from Volcker Rule require- ments. Leverage Ratio: The Act simplifies capi- tal calculations for community banks with less than $10 billion in assets. Federal banking agencies are required to estab- lish a community bank leverage ratio of tangible equity to average consolidated assets of not less than 8% and not more than 10%. Banks with less than $10 billion in total consolidated assets that maintain tangible equity in an amount that ex- ceeds the community bank leverage ratio will be deemed to be well-capitalized and in compliance with risk-based capital and leverage requirements. TILA Escrow: The Act provides an ex- emption to TILA escrow requirements for banks with less than $10 billion in assets that have originated 1,000 or fewer loans secured by a first lien on a principal dwell- ing during the preceding calendar year. Other types of regulatory relief include: HMDA Disclosure Relief: The Act ex- empts small volume originators (less than