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Envisioning the Future Model of Banking; Capital Debate Continues

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The Future Model of Banking: Susan Ochs, former Treasury Department advisor and senior fellow at the Aspen Institute, kicked off BankThink's ongoing series by positing that future models of banking will require a Hippocratic oath-level of trust. Some readers thought this model would be difficult to achieve, since trust in the banking industry remains low. "There are four million or so Americans (or former customers) who will never really trust the banks, ever," one reader commented. Another reader objected, "relating banking to healthcare is probably not the best thing to do right now … With the pay-per-service attitude, I would not say my relationship with my doctor is that great." Other readers thought the trust model had potential. "There is opportunity for smaller banks to strike first and secure their markets," one commenter wrote. Also in the series, Lauren Pollak, the financial services practice leader at Jump Associates, argued that banking would ultimately operate more like TiVo for your finances: "a service that assembles and manages a portfolio of accounts from a single portal." "Monetary Future" columnist Jon Matonis warned that banks have one last mulligan before alternative currencies revolutionize payments. "Bitcoin, like other technologies around payments innovation … have been born out of need to transact faster and across multiple geographies without arbitrary constraints that are designed to protect incumbents," one reader commented. "I don't expect banks to embrace this change though. I think we simply prove it works and when it gets enough momentum, then if you want to keep value, you have to participate." JP Nicols, CEO of Clientific, addressed how banks can escape the fate of "dumb pipes" (Answer: partner with innovative startups) and Dave Martina longtime contributor and retail banking maven, took on evolving branch networks. "More customers than ever will choose their banks based on the availability of a branch that they don't plan to use all that much," he wrote. "But it will be there with live bankers if and when they need it."

Capital Debate Continues: Risk consultant Mayra Rodríguez Valladares outlined why Basel's latest leverage ratio is better in the second post in her ongoing "Busy Summer in Basel" series. Consultant J.V. Rizzi argued that big banks' warnings about the U.S.'s enhanced leverage ratio didn't pass the smell test and Mark Olson, co-chair of Treliant Risk Advisors LLC, suggested the industry was overly focused on capital. "The ideal capital position (also known as the optimal economic capital position) is one that provides an appropriate buffer against losses, but allows for an acceptable market return on the institution's invested capital," Olson wrote. Not too low, but not too high either, in other words.

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