Too Big to Kill? Cornelius Hurley, director of Boston University's Center for Finance, Law & Policy, sounds the call for ending too big to fail. The Financial Stability Oversight Council has conflated its mandate to eliminate market perceptions of government subsidies with a self-appointed mission to reduce or offset those perceptions, he writes. "The regulators' posture is one of peaceful coexistence with TBTF, where the very thing that should be erased is dressed up to look more presentable." Hurley says the best way to deal TBTF a death blow is to force banks to build up capital until they opt to downsize. This suggestion alarmed reader "gsutton," who asked, "Can a bank that is small enough to fail adequately meet the needs of the largest businesses and compete with large banks based in other nations?" Commenter "TxTim" argued that such needs could be addressed by consortiums of smaller banks as well as investment banks. The larger priority should be deciding whether to "treat [TBTF] banks and their management as a special class and support their existence into perpetuity," he writes.
Know Your Snapchat: Most bank chiefs are inadequately versed in the ways of Facebook, smartphone apps and Netflix. Liberty Bank marketing executive Kevin Tynan warns that unless CEOs take a personal interest in learning the ways of the digital age, they'll wind up hurting their banks' bottom lines. Financial institutions need to be familiar with a range of high-tech options in order to make informed strategic choices "and avoid responses that spring from an antiquated set of values," he writes. Commenters were on board with Tynan's thinking. "Today's personal relationship is digital and CEOs delegate all knowledge at your own risk," writes Gary Lewis Evans.
Also on the blog: Banks haven't historically been among Sen. Elizabeth Warren's most avid supporters, but U.K.-based author Carl Packman thinks they should reconsider. Warren's push for a two-tiered regulatory structure would benefit community banks and improve the financial system as a whole, he writes, and her debt-relief policies would likely boost mortgage and small business lending.
The Consumer Financial Protection Bureau's new "Safe Student Banking" initiative will likely pressure banks to offer student accounts that follow the agency's preferred model. That may be the intention, but it's also likely to limit student access to new features and innovative technologies, according to the American Bankers Association's Wayne A. Abernathy.
"When we turn every interaction with a potential customer into a tone-deaf, shameless sales pitch, the dynamic becomes one of predator and prey," warns retail banking maven Dave Martin. In more effective sale cultures, branch staffers find ways to connect with their customers as people rather than walking dollar signs.
Former Bank of America executive Richard J. Parsons argues that Banco Santander's stock market plunge serves as a lesson for the banking industry on the cost of capital raises. "Let us hope that there is growing recognition among bank directors that the interests of investors cannot remain on the back burner if the industry is to be an engine of growth for the U.S. economy," he writes.
Regulators should increase the ceiling on minority-stake investments in banks and bank holding companies in order to open the gates to capital from private equity groups and other institutional investors, according to Dechert LLP's Thomas P. Vartanian and David L. Ansell.
Colorado's payday loan reforms offer a useful blueprint for the CFPB as it weighs new regulations for the industry, according to Nick Bourke of The Pew Charitable Trusts.
Banks that are targeted by loan fraud and other crimes sometimes hesitate to surrender control over the investigation by cooperating with federal authorities. But doing so can give them a better shot at restitution, write Arnold & Porter lawyers Marcus A. Asner, Anne Brooksher-Yen and Gillian Thompson.
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