Trump’s Financial Regulatory Changes: Impact on Financial HR

1. NOON-TIME FORUM2018 HUMAN RESOURCE (HR) FINANCIAL FORUM Trump’s Financial Regulatory Changes – Impact on Financial Presenter: Ray Stanford The Noon-Time Forum tackles legal challenges faced by workplace professionals. For this reason, the Forum’s comments and discussion are not intended to be legal advice or counsel. As with all legal matters, participants should look to licensed counsel to deal with a specific matter.

2. Noon Welcome & Introduction 12:05 Purpose of Today’s NTF – 12:10 Core Lessons 12:15 CFPB Diminished 12:20 Fintech 12:25 Vision 2020 12:30 FHFA – Private Mortgage Backed Securities 12:35 Big Bank Branch Closings 12:40 Marijuana (and other external altering phenomena) 12:45 Gig Economy 12:55 Other Regulatory Changes I:00 Adjourn Trump’s Financial Regulatory Changes –Impact on Financial

3. HR must become more responsive to change. • HR must collaborate. • HR must re-prioritize compliance focus. • HR must integrate technology even faster. • HR must create new recruiting, training, and compensation strategies for new areas of banking. • HR must learn new banking markets. Banking Regulatory Impact on HRLessons for HR

4. In November 2017, White House appointed his budget director, Mick Mulvaney, to be CFPB’s acting director. • White House issued 2019 Budget Plan Monday, Feb 12, 2018. • Last item in 289 page Plan was “RESTRUCTURE THE CONSUMER FINANCIAL PROTECTION BUREAU” • “To allow for an efficient transition, the Budget proposes a two-year restructuring period with reforms fully effectuated by 2021.” • Budget Proposal would reduce funding by $147 million in 2019, and $610 million in 2020. Current Bureau budget is $630 million. Banking Regulatory Impact on HRCFPB Diminished

5. Mulvaney, “We have committed to fulfill the Bureau’s statutory responsibilities, but go no further.” • CFPB will act “with humility and moderation.” • New CFPB leader has taken steps to change Bureau including • Ending lawsuits and pausing investigations into payday lenders; • Rumors of backing off Equifax investigation into a massive data breach that exposed sensitive data about 145 million people. Banking Regulatory Impact on HRCFPB Diminished

6. CFBP issues RFI about everything • Jan 26 – civil investigate demands. • Jan 31 – administrative adjudication process v litigation • Feb __- 3rd RFI re: enforcement process Banking Regulatory Impact on HRCFPB Diminished

7. DC Court of Appeals found CFPB’s single-director structure to be constitutional. • Prior independent agencies have been found constitutional. • Next legal steps will be interesting given Trump Administration’s strategy to defund CFPB. Banking Regulatory Impact on HRCFPB Diminished

8. HR must prioritize compliance requirements. • Even if SCOTUS affirms Ct Appeals, Trump Admin will curb CFPB’s promulgation of new legal mandates. As already occurred, new director will withdraw many of CFPB’s directives issued under Obama administration. • Reduced budget will restrict CFPB. • Obama’s over regulation resulted in HR not having time or direction to comply. • HR must reprioritize most important regulations. Banking Regulatory Impact on HRLessons for HR

9. What is fintech? • “The integration of computer programs and other technology to support or enable banking and financial services” Banking Regulatory Impact on HRFintech

10. Hearing before House Financial Services Committee, Financial Institutions and Consumer Credit Subcommittee, “Examining Opportunities and Challenges in the Financial Technology (“Fintech”) Marketplace”; • Purpose: “examine regulatory landscape for Fintech … that would allow financial services entities to use Fintech to deliver new products and services to consumers.” Banking Regulatory Impact on HRFintech

11. Financial laws were written in an earlier era. Must update regulatory regime “consistent with modern world …” • Fintech can help traditional banks serve their customers better by serving customers they would not otherwise offer, and to diversify risk in a way they would not otherwise be able to. • ABA study - $100 billion pool of profits for community banks in Fintech space. Banking Regulatory Impact on HRFintech

12. HR must learn and understand Fintech. • To recruit, train, compensate and measure Fintech needs, HR must understand Fintech. • While Fintech skills will exist inside the bank, the recruitment, training, and compensation of Fintech expertise remains HR function. • Collaboration with in-house and contract Fintech experts. Banking Regulatory Impact on HRLessons for HR

13. Vision 2020 for Fintech and Non-Bank Regulation • Vision 2020 is a series of initiatives from the Conference of State Bank Supervisors (CSBS) to modernize state regulation of non-banks, including financial technology firms. By 2020, state regulators will adopt an integrated, 50-state licensing and supervisory system, leveraging technology and smart regulatory policy to transform the interaction between industry, regulators and consumers. Banking Regulatory Impact on HRVision 2020

14. Fintech companies –“firms that leverages technology to create new business models, new delivery channels, automated decisions, and partnerships with traditional banks - perform an important role in financial services. Operating industries such as mortgages, money transmission, debt, and consumer finance, Fintech firms have piqued the interest of consumers and attracted a wide range of investors.” • *Support Innovation and Startups • *Enable National Scale • *Strengthen the Financial System • *Uphold Important Consumer Protections Banking Regulatory Impact on HRVision 2020

15. CSBS Pursuing Multi-State Licensing for New MSB Applicants • Recently announced a multi-state framework for state regulators to process an application by a person to become a licensed money services business (“MSB”) Banking Regulatory Impact on HRVision 2020

16. Terms of the interagency Agreement for MSB Licensing, initially dated January 9, 2018 (the “Agreement”) • Expedited licensing process (the “Protocol”). • Initial Signatory States were Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington. Banking Regulatory Impact on HRVision 2020

17. The Protocol provides for: • Assignment to one of the Signatory States for review of each MSB application from an applicant that opts in to use the Protocol. • “Phase One Review” of MSB application assigned to a Signatory State within 25 business days after the Phase One application is complete, and issuance of a Phase One Certification or denial. • Reliance by each Signatory State on a Phase One Certification issued by another Signatory State to “the greatest extent possible under law.” • Automation of the Protocol and sharing of information through (Nationwide Multistate Licensing System (NMLS) Banking Regulatory Impact on HRVision 2020

18. The Protocol provides for: • Key elements of a money transmitter application― • IT, • cybersecurity, • business plan, • background check, and • compliance with the federal Bank Secrecy Act. Banking Regulatory Impact on HRVision 2020

19. HR must adapt to change. • HR must learn and understand Fintech. • To recruit, train, compensate and measure Fintech needs, HR must understand Fintech. • HR must learn new compliance structure; this time a state driven structure. • While Fintech skills will exist inside the bank, the recruitment, training, and compensation of Fintech expertise remains HR function. • Collaboration with in-house and contract Fintech experts. Banking Regulatory Impact on HRLessons for HR

20. Federal Housing Finance Agency (FHFA) issued housing finance reform • Conservatorship of Fannie Mae and Freddie Mac “is not sustainable and needs to end.” • Will preserve 30-year fixed-rate, pre-payable mortgage; • Increase infusion of private capital through “robust equity capital requirements and credit risk transfer … participation.” • Provide “single government-guaranteed mortgage-backed security”. Banking Regulatory Impact on HRFHFA – Mortgage-Backed Securities

21. “[I]t is the prerogative and responsibility of Congress, not FHFA, to decide on housing finance reform,” • The administration will enforce & interpret law, not make it. Banking Regulatory Impact on HRFHFA – Mortgage-Backed Securities

22. Requires recruitment of new legal, banking and market understanding. Requires quick HR response – recruiting (sources); training; compensation; Relationship: either bench, hire experts, contract until ready to employ. • Allow Secondary Market provide incentive and oversight. FHFA would create Mortgage Insurance Fund (MIF) to cover “catastrophic losses on mortgage-backed securities ahead of remote losses covered by the government guarantee Banking Regulatory Impact on HRLessons for HR

23. Banks shuttered 1700 branches between July 2016 and June 2017. Fastest decline in history. (wsj report). Branches continued to drop in 2017. • Many of closings in big cities and suburbs. In rural areas, large lenders withdrew completely. E.g. SunTrust cut 22% of branches from mid-2012 to mid-2017. Banking Regulatory Impact on HRBig Bank Branch Closings

24. Why Closing? Not profitable, not profitable enough, too competitive, too regulated, … • Where do customers go? • Where do employees go? Banking Regulatory Impact on HRBig Bank Branch Closings

25. HR must become more responsive to change. • HR must integrate technology even faster. • HR must create new recruiting, training, and compensation strategies. • New recruiting source? Big bank culture? Source of innovation? (Chief Innovation Officer) Banking Regulatory Impact on HRLessons for HR

26. Federal Reserve Bank of Kansas City approved credit union to serve marijuana-linked businesses. • Credit union will focus on individuals and companies that support legalized marijuana including vendors e.g. accountants and landlords. • In prior month, Trump declared gov’t would toughen stance on marijuana. Obama declared Fed would police marijuana industry only in cases tied to other criminal activities, e.g. distribution to minors, firearm violence, trafficking in other drugs. Although legal in some states, still illegal at federal level. Banking Regulatory Impact on HRMarijuana (Plus) Banking

27. HR must re-prioritize compliance focus. • Substance abuse legal or illegal • Legalization of medical and recreational use of controlled substances will continue. The legalization of marijuana is a sample of future integration of external influences on human thought and conduct. Other phenomena include biological, machine, and virtual causation Banking Regulatory Impact on HRLessons for HR

28. 1 in 5 jobs in America is held by a worker under contract. • The Contract Workforce Skews Young and Male Under 45 45 or older • All Workers 59% 41% • Contract 62% 38% Men Women • All Workers 53% 47% • Contract 65% 35% Source: NPR/Marist poll of 1,267 adults conducted Dec. 4-7, 2017. “Workers” includes 794 adults who are employed full or part time or are self-employed. The margin of error is +/- 3.5 percentage points. Credit: Hilary Fung/NPR Banking Regulatory Impact on HRGig Economy (Contract Work)

29. ________________________ • ________________________ • ________________________ • ________________________ • ________________________ Banking Regulatory Impact on HRLessons for HR

30. Tax policy changes – e.g. “Tax Cut & Jobs Act” • Portable benefits rules – e.g. portable Workers Comp Coverage • General Data Protection Regulations (GDPR) in the European Union – Affects GLB and risk management. • The Affordable Care Act – Individual Mandate penalty = $0, but filing requirements remain. • Paid sick leave and minimum wage policies at local and state levels Banking Regulatory Impact on HROther Regulatory Changes

31. ________________________ • ________________________ • ________________________ • ________________________ • ________________________ Banking Regulatory Impact on HRLessons for HR

32. HR must re-prioritize compliance focus. • CFPB diminished • Multi-state licensing • HR must integrate technology even faster • Fintech • Multi-state licensing • GDPR • GLB Banking Regulatory Impact on HRLessons for HR

33. HR must create new recruiting, training, and compensation strategies for new areas of banking • Branch closings; • Fintech, • Mortgage-backed securities • HR must learn new banking markets • Fintech • Mortgage-backed securities; • Marijuana + Banking Regulatory Impact on HRLessons for HR

34. HR must become more responsive to change. • Collaboration with in-house and contract Fintech experts. Banking Regulatory Impact on HRLessons for HR

35. QUESTIONS? ? Trump’s Financial Regulatory Changes –IMPACT

36. Ray Stanford Founding Attorney SIO Law Group Atlanta, GA rstanford@siolaw.com (404) 991 - 7301 Presenter

37. THANK YOU FOR PARTICIPATING!