Tackling public collateral, elder financial exploitation, and more

By Amy Heaslet, Executive Vice President/General Counsel, Tennessee Bankers Association

Although COVID-19 continues to factor into virtually everything we do, it will not hamper our ability to represent the banking industry during the second session of the 112th General Assembly. With full access granted to all lobbyists for office visits and committee hearings—last year began with several restrictions—and the return of in-person Days on the Hill, I expect the Capitol will feel much like pre-COVID times.

This will enable our team to successfully push several legislative issues that our government relations committee and board of directors support, including collateral pledging for public deposits, trust law enhancements, LIBOR’s phase out, and new tools to combat elder financial exploitation.

At the forefront of our agenda is providing additional relief for banks when pledging collateral against public deposits. In October, we supported legislation brought during a special session to reduce the pledge level to 90% for Collateral Pool members currently pledged at 100% and add cash as collateral for all banks accepting public deposits. However, cash is a short-term solution given the unusually high level of deposits banks are seeing because of federal stimulus efforts, but that won’t last forever. A more permanent solution we will push is to provide greater flexibility for out-of-state bonds that can be pledged by reducing their rating to A-, A3 or a higher rating and removing the requirement that they be bank qualified.

With the input from our trust members and some of the most respected trust attorneys in the state, we will again this year push legislation to further strengthen Tennessee’s trust laws. Our efforts to continually improve the trust laws over the years have resulted in Tennessee being recognized recently as a top tier trust jurisdiction. This has been a direct benefit to all Tennessee trust companies and banks with trust powers, as the Department of Financial Institutions reported that Tennessee’s trust assets under management have increased from $25 billion to $200 billion.

As you are likely aware, some tenors of LIBOR, as of December 31, 2021, are no longer being published and the remaining tenors will cease to published on March 31, 2022. Federal regulators stated that banks should stop using LIBOR as a reference rate for new contracts as of December 31, but that still leaves trillions of dollars in legacy contracts that refer only to LIBOR. TBA is working with a national group promoting uniform legislation to address the LIBOR phase out by providing a “commercially reasonable” replacement rate (the Secured Overnight Financing Rate) that, if passed, would protect banks from litigation risks.

We will also continue advocating for legislation to address elder financial exploitation. One bill that will carry over from last year would expand the scope of cases that Adult Protective Services can investigate by broadening the definition of “exploitation.” This would be welcome news to banks that oftentimes report suspected elder financial exploitation to APS, only to be told the situation does not fall within their authority, which is limited to only cases involving exploitation by a caregiver of governmental funds.

From speaking with bankers across the state about financial elder exploitation, we’ve also conveyed to several agencies one of your “wish list” items: A single phone number you could call in the event exploitation is suspected. The TBI is now working on creating a 1-800 hotline bankers could call to report suspected financial exploitation. The TBI would field the calls and refer the case to the appropriate district attorney or law enforcement agency. This would not replace the call you must make to APS, but it would allow bankers to make one additional call to an agency that has the means to ensure the situation is appropriately investigated.

As always, your input is critical to our advocacy. The best way to stay informed is to read the legislative updates in our weekly newsletter, This Week, and participate in our bi-weekly conference calls, which are held every other Friday during session. If you would like to participate in these calls, please email me at aheaslet@TNBankers.org.

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