What a Bank Is Worth: Can banks satisfy investors' thirst for returns? Consultant J.V. Rizzi has his doubts. He argues that most financial institutions have clung to expensive, branch-based business models to the detriment of their ability to produce attractive returns on equity. "To fix the problem, banks have to embrace change," he writes, citing Wells Fargo's successful focus on mortgage, auto lending and credit cards as one example worth emulating.
Does Big Data Discriminate? Picture a world in which lenders use Facebook's patented technology to evaluate potential borrowers based on their social-media ties. To big-data backers, this sounds like utopia; for fair-lending advocates, it's more like a disparate-impact lawsuit waiting to happen. Mathematician Cathy O'Neil maps out a way for the two sides to better communicate about lending discrimination and big data. "All parties need to distinguish between the goals of the lender and the goals of the general public," she writes. "The lender's main goals are accurate data and profit. The public's goal is to have a financial system that does not exacerbate current inequalities or send people into debt spirals." Both sides need to acknowledge these objectives in order to have a productive conversation, she says. At least one commenter is cheering lenders on as they experiment with big data's potential to transform underwriting: "Banking is changing dramatically and this is a great opportunity for trial and error," writes Didimo Arreola on Facebook.
Also on the blog: Bank boards should embrace the opportunity to take charge of corporate culture, according to consultants Robert Sloan and Dr. Leo Flanagan.
If mortgage lenders want to get millennial talent on board, they need to offer scheduling flexibility and help young people to feel that they're making a difference in their broader communities, according to Cultural Outreach Solutions founder Kristin Messerli.
PennyMac chief Stanford Kurland argues that the best way to reform the government-sponsored enterprises and ward off future bailouts is to shift much of the credit risk to the private market via Fannie Mae and Freddie Mac's risk-sharing bonds.
The Federal Deposit Insurance Corp.'s plan to change the way it assesses small banks for deposit insurance coverage has a big wrinkle, according to Community Development Bankers Association head Jeannine Jacokes. The proposed formula would force community development financial institutions that rely on reciprocal deposits to pay higher premiums, which could hamper their ability to make loans to low-income communities.
A sneaky patron in possession of an Apple Watch could be the downfall of a bank's cybersecurity system, according to U.S. Bank enterprise chief privacy officer Dan Burks. He explains how financial institutions can stop hackers from using smartphone cameras and other technology to snap pictures of confidential information in bank branches.
Got an informed opinion on the business of banking? Submit to BankThink. Full submissions guidelines are available here.
