With a flurry of executive orders being rolled out by the presidential administration, the international banking and finance industry waits to see if any established policies will be impacted.
There’s quite a confusion as some of the changes as executive orders with potential rule changes continue to take hold, said David Schwartz, president and CEO of the Financial & International Business Association, a nonprofit trade association dedicated to fostering the growth of international banking through education, advocacy, and networking.
“For example, the much-talked-about Corporate Transparency Act, which has been a concern, particularly for smaller companies, since its inception is now apparently going to be dialed back and no longer apply to US corporations, but only to foreign corporations doing business in the US,” he said.
“As an industry,” he added, “we were still waiting for the final rule to come out, which would have clarified what a bank’s obligations were under the Corporate Transparency Act. We don’t know if that will still occur, so we’ve been advising banks to continue to do what you do, continue to do your due diligence as you did before, until the dust clears, so to speak.”
There’s also a call for what’s called a debanking rule. Florida already has what’s called a Fair Access Rule, which basically was passed over the last couple of years in two sections, Mr. Schwartz continued. One was House Bill 3 two years ago, and then House Bill 989 last year, which set up a standard for customers who feel they were wrongly denied service.
“Denial of service can mean the closing of an account, failure to open an account, or denial of a loan that sets up a complaint process with the state regulator, which a bank would have to respond to,” Mr. Schwartz said. “Florida is the poster child for these types of laws, and I think we probably have the most stringent one, but this is something that at the federal level has been talked about.”
In fact, a similar bill that had been introduced in Congress but never went anywhere now has been reintroduced, he added, “and what we’re waiting to see is if this final bill gets through Congress and signed by the president and passes. We will need to learn what are the criteria that have to be applied, and what are the potential responsibilities and penalties that could be imposed on banks, and that’s an important one because it would almost classify banks as utilities. Everybody has a right to electricity and water, so now it’s framed in a way that maybe everybody has a right to a bank account, regardless of the risk involved and the various risk appetites of the banks.”
A call for the streamlining of the regulatory agencies is also echoing in several of the federal agencies, including reductions in the workforce. The unknown is how that will impact the examination process going forward and how it will affect what the role of a bank supervisor is right now.
“Banks, depending upon their charter, are supervised by the Federal Reserve, the OCC or the FDIC, plus the state regulator,” Mr. Schwartz said. “What will this mean going forward? If there is consolidation, will there be one regulator at the federal level? And how will that impact the state regulatory agencies? What will their purpose be going forward? Banks will comply with whatever they’re supposed to comply with. However, we need to be clear on exactly how we do that.”
Another concern the international banking industry is keeping an eye on is the evolution of sanctions.
“Sanction programs are changing,” Mr. Schwartz said. “We have seen an executive order come out which now designates drug cartels as terrorist organizations. How is that going to work? We don’t have the implementation yet. Given that these cartels are located in Latin America, Central and South America, how does this impact correspondent banking relationships between US banks and their counterparts there in the region?
“Now, I think it’s pretty clear to everyone, whether it’s a sanctioned organization as a drug cartel or it’s a terrorist organization, banks are not going to want to deal with them, and they’re going to emphasize that to their counterparts,” he continued. “We’ve seen the executive orders. We understand what they say, but now it’s up to the various agencies within the Treasury Department to implement these executive orders, and that’s the clarity that we’re waiting to see.”
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