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Efficiency ratios worsen for 3rd straight quarter as expenses spike

The US banking industry's aggregate efficiency ratio worsened for the third consecutive quarter and at an accelerated pace as non-interest income fell again and non-interest expense shot up.



US banks posted an aggregate efficiency ratio of 65.8% in the 2023 fourth quarter, up 10.2 percentage points from the previous quarter and 10.9 percentage points from the year-ago quarter, according to S&P Global Market Intelligence data. The metric falls as banks become more efficient, calculated by dividing non-interest expenses by net interest income and non-interest revenue.

The latest sequential increase in the industry's efficiency ratio was a product of a sharp increase in non-interest expense and the third consecutive quarter of decline for the industry's non-interest income. Net interest income also fell slightly during the quarter but has remained relatively steady since the fourth quarter of 2022.

Source: S&P Global Market Intelligence

Court grants injunction of CRA final rule

A federal judge has granted an injunction against federal banking regulators’ Community Reinvestment Act final rule, as requested by ICBA and other groups in a legal challenge.

The U.S. District Court for the Northern District of Texas granted the injunction to extend the CRA final rule’s effective date—April 1—along with all other implementation dates. The effective dates will be extended for each day the injunction remains in place, pending the resolution of the lawsuit.

The lawsuit, filed in February, asked the court to vacate the final rule and grant a preliminary injunction while the court decides the merits of the case.

The complaint says regulators exceeded their statutory authority with the CRA final rule, in violation of the Administrative Procedure Act, and explains how the rule will limit future bank lending.

In a national news release after filing the suit, ICBA President and CEO Rebeca Romero Rainey said the unnecessarily complex evaluation could force banks to close branches or reduce product offerings. She said in a separate message to community bankers that the final rule ignores many community bank concerns, which is why ICBA must continue the fight.

Released in October 2023, the CRA final rule was scheduled to take effect today while requiring bank compliance by Jan. 1, 2026. In a news release responding to the final rule in October, ICBA said the rule does not sufficiently differentiate between community banks and the nation’s largest institutions.

Source: ICBA

Consumer complaints focus on credit bureaus

Consumer complaints about credit or consumer reporting continued to increase in 2023, according to the Consumer Financial Protection Bureau’s latest annual report.

In the report, the CFPB said:

• Of the more than 1.6 million complaints the CFPB received in 2023, it sent 81% to companies for review and response, referred 6% to other regulatory agencies, and found 13% to be not actionable.
• More than 1 million of the complaints went to the three nationwide consumer reporting companies: Equifax, Experian, and TransUnion.
• Consumers also raised issues about fraudulent activity in nearly every product category, including credit or consumer reporting, debt collection, checking or savings accounts, and credit cards.

Source: ICBA; CFPB

Fee proposal another abuse of authority

ICBA urged the Consumer Financial Protection Bureau to stop misusing its authority over unfair, deceptive, or abusive acts or practices to undermine federal disclosure rules.

ICBA submitted comments on a CFPB proposed rule to bar financial institutions from charging fees, such as non-sufficient-funds fees, when consumers initiate payment transactions that are instantaneously declined.

In its comment letter, ICBA said:

• While most community banks do not charge NSF fees for instantly declined transactions, the proposal is an example of the CFPB improperly expanding its UDAAP authority, which has also applied to overdraft rules and determinations of discrimination.
• The CFPB should not use its UDAAP authority to curtail practices that it disagrees with when those practices are contractually consented to by the consumer and do not meet the statutory definition of abusive.
• The CFPB’s overly broad use of its UDAAP authority to curtail what it erroneously describes as “junk fees” consistently underestimates the intelligence and agency of consumers and dismisses their ability to understand written disclosures.
• The CFPB should withdraw the proposal.

Source: ICBA

Congressional challenge to credit card late fee rule

ICBA expressed support for Rep. Andy Barr’s (R-Ky.) introduction of a resolution to nullify the Consumer Financial Protection Bureau’s final rule to cut credit card late fees.

If passed by Congress, the Congressional Review Act resolution would express congressional disapproval of the rule and nullify its implementation. Senate Banking Committee Ranking Member Tim Scott (R-S.C.) has also said he would fight the rule via the Congressional Review Act.

In a letter to Barr, ICBA said the rule, which includes an exemption for community banks, is part of a broader effort to mischaracterize legitimate practices as “junk fees” and would carry unintended consequences for American consumers.

The CFPB rule:

• Cuts the credit card late fee safe harbor under the CARD Act from the current levels of $30 for the first violation and $41 for subsequent violations to $8, without inflation adjustments.
• Applies to issuers with 1 million or more open accounts, which allows the CFPB to avoid analyzing the rule under the Small Business Regulatory Enforcement Fairness Act.
• Allows covered issuers to charge fees above the threshold as long as they can prove the higher fee is necessary to cover their collection costs.



In a national news release after the rule’s release, ICBA said the rule sends the wrong message that punctual credit card payments are not a significant priority, which will harm consumers by leading to more late payments and additional interest charges.

Source: ICBA

IRS warns of phishing and smishing scams

The IRS kicked off its annual Dirty Dozen list with a warning for taxpayers to be aware of evolving phishing and smishing scams designed to steal sensitive taxpayer information.

The IRS warned individuals and businesses to remain vigilant against attacks from fraudsters and identity thieves that attempt to trick the recipient into clicking a suspicious link, filling out personal and financial information, or downloading a malware file.

Started in 2002, the IRS's annual Dirty Dozen campaign lists 12 scams and schemes that put taxpayers, businesses, and the tax professional community at risk.

Source: IRS

Problem bank list grows

The number of weak US banks has increased by 18% a year after the failure of Silicon Valley Bank, the Financial Times reported, citing a Federal Deposit Insurance Corp. report.

The number of banks and total assets on the Federal Deposit Insurance Corp.'s "problem bank list" increased again in the 2023 fourth quarter. There were 52 banks on the list for a total of $66.3 billion in assets at Dec. 31, 2023, compared with 44 banks for a total of $53.5 billion in assets in the linked quarter.

Source: S&P Global Market Intelligence; Financial Times; FDIC 

Uniform Bank Performance Report changes

The Federal Financial Institutions Examination Council’s member agencies announced several changes to the Uniform Bank Performance Report.

The FFIEC said the changes are required by the current expected credit losses methodology nomenclature changes to the March 2024 call reports and by Accounting Standards Update 2022–02 on credit losses.

Source: FFIEC

2023 HMDA data

Federal regulators released 2023 Home Mortgage Disclosure Act Modified Loan Application Register data for approximately 5,089 HMDA filers.



The published data contain loan-level information filed by financial institutions and modified to protect consumer privacy.

Later this year, the 2023 HMDA data will be available in other forms, including nationwide loan-level datasets with all publicly available data for all HMDA reporters as well as aggregate and disclosure reports with summary information by geography and lender.

Source: FFIEC