Regulator Sees More Focus On Community FIs

MONTEREY, Calif.–The federal bailout of large banks may be having an unforeseen consequence: creating new commonalities between community banks and credit unions. William Haraf, deputy commissioner with California’s Department of Financial Institutions, said 155 of the 210 banks the DFI supervises applied for TARP funds. Of those, half were approved and handed off to Treasury, and off those only half actually received funds. In all, California banks have received about $1.2 billion in the federal bailout effort. "What I found out in the course of this project is the standards community banks were held to in order to access TARP funds wer much different than large financial institutions," Haraf said. "There are many more affinities between the community banks we supervise and the credit unions we supervise than there are between the community banks and the large banks."
Haraf also ventured that he’d like to see some changes made in the size of financial institutions regulators now have to oversee. "I think that not only were the Citibanks and the others too big to fail, they were too big to manage, too big for their boards to govern, and too big for regulators to supervise," he said. "That’s not healthy overall, and not healthy for California. One benefit I think is people will see the advantage of relationships with local organizations."
Haraf offered his comments during the California/Nevada League’s Big Valley Conference.