Bold Banking Predictions for 2014
January 9, 2014 7:30 AM
Fearless forecasts from BankThink's stable of industry veterans, experts and critics.
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Don't Bet on Volcker
"The Volcker Rule changes nothing. The Congressional-Financial Complex has won again. The Megabank Casino remains open for business." - J.V. Rizzi, banking industry consultant and investor
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GAO and the 'Too Big to Fail' Banks
"The General Accountability Office will deliver its report in 2014 estimating the subsidy that the six [too big to fail banks] receive for the implicit government (taxpayer) guarantee of their funding elements. GAO's 'goldilocks' estimate will either be: too high (prompting more purchased analyses by the TBTFs' lobbyists countering its findings); too low (questioning the GAO's credibility); or, just right (raising the question: How can we use that subsidy to right size these banks that threaten the entire financial system?). The TBTFs cling to their subsidy and the GAO's report will prompt the first serious debate over these banks' quasi-GSE status." - Cornelius Hurley, director of the Boston University Center for Finance, Law & Policy
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The End of Payday Lending
"The payday lending industry will continue to hemorrhage, dying a slow death by a thousand cuts. Both tech innovators and banks will introduce new credit products to replace soon-to-be-discontinued deposit advance loans, and the [Consumer Financial Protection Bureau]'s forthcoming regulations of payday lending will further push the industry away from two-week balloon payments as the standard loan term for nonprime small-dollar loan customers." - Jennifer Tescher, chief executive of the Center for Financial Services Innovation
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New Guidelines for Bank Examiners
"Now that many U.S. Basel III Rules and the Volcker Rule are finalized, the 2014 focus for bank regulators will be releasing guidelines for bank examiners tasked with monitoring if banks are in compliance." - Mayra Rodríguez Valladares, managing principal at MRV Associates
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Big Tech Banking
"With increased competition, regulation, and balance sheet pressures, 2014 will see a marked increase in the ongoing contraction of the financial services ecosystem - our current environment doesn't seem sustainable. Hundreds (thousands, long term) of banks and credit unions will consider selling; even more fintech players will be acquired or fail (there are over 900 payment startups alone.) Big tech will more visibly enter the primary battle for banking's future by better delivering better customer experiences around financial and payment data; namely Amazon, Apple, Facebook, Google - and especially PayPal." - Bradley Leimer, digital strategy lead for the Mechanics Bank in Richmond, Calif.
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A Shift in Housing Reform Focus
"I expect to see a dramatic shift in the [Federal Housing Finance Agency]'s focus next year with new leadership at the agency that reinvigorates mortgage assistance programs. Efforts to build infrastructure for a post-GSE secondary market will ease somewhat as priorities change. The GSEs will remain in a holding pattern in 2014 with modest efforts by the agency taken to adjust guarantee fees in light of expected upward pressure on mortgage rates." - Clifford Rossi, Professor-of-the-Practice at the Robert H. Smith School of Business
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Nonbank Crackdown
"2014 is the make-or-break year for U.S. systemic regulation. Increasingly fearful of a restructuring of financial markets to the 'shadows,' the [Federal Reserve] and Treasury will focus not just on all the unfinished Dodd-Frank rules, but also on using their power under that law to designate specific activities and practices as systemic risks. With this power, they will try to regulate activities like repos across the financial industry, covering not just banks, but also hedge funds, asset managers, and other big players." - Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc.
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The Talent Gap Widens
"Anemic job growth and a tarnished reputation will hurt the industry's ability to attract the best talent. Experienced baby boomers will retire. The resulting talent gap will widen. The percentage of women on bank boards will increase." - Noma Bruton, chief human resources officer of Pacific Mercantile Bank in Costa Mesa, Calif.
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A Reprieve for Community Banks
"Building on the strong base of their own research, findings and experience, regulators will increasingly design rules and regulations adjusted to the diversity in charter, business model, size and geography of the banking industry. Moreover, they will take specific steps to help turn around the decline in community banking, by chartering new banks and removing unproductive mandates. But, unless policymakers labor mightily, these efforts will only slow, but not arrest, the unhappy reduction in the overall number of banks in 2014." - Wayne A. Abernathy, executive vice president for financial institutions policy and regulatory affairs at the American Bankers Association
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Innovation in the Mortgage Market
"2014 will be the year we will finally have a realistic discussion on a national housing policy and the role government will play in financing the American Dream. New home financing products will begin to sprout, because consumers want and deserve a variety of home financing options and will not accept only vanilla and one-size-fits-all mortgage loans. Mortgage loans should not be like the Ford Model T, available in only in one color." - Richard Booth, a certified mortgage banker and industry consultant
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