It's Worse Up Close
Turns out American Banker's March 10 article on the record number of enforcement actions against banks wasn't the last word on the subject. It included not just formal actions, but informal actions, which are not made public and often go untracked. Still, it "only scratched the surface as to what the data mean," according to feedback from Jeanine Catalano, a special adviser with Promontory Financial Group. "In our in-depth monitoring of regulatory trends at banks, we have learned that more than half of the actions issued in 2009 specifically directed financial institutions to take concrete actions to improve their health."
She continued, "more often than not, these directives required specific actions with respect to capital, management, asset quality, earnings, and/or liquidity. Our study indicates that the percentage of formal actions that required strengthening of management, the board or improving oversight, has climbed from close to 70% in the first quarter of 2008 to over 85% in the last quarter of 2009. And of the formal actions that included specific improvement directives, the percentage that directed an institution to increase capital, usually as a percent of assets, as a dollar amount or in a plan to raise capital, has consistently risen in the past eight quarters from just over 70% in the first quarter of 2008 to approximately 95% in the fourth quarter of 2009."
Don't Blame Us
At least one community banker is unimpressed with Federal Reserve Chairman Ben Bernanke's defense of the central bank's oversight of holding companies and state banks. A bill sponsored by Senate Banking Committee Chairman Chris Dodd would strip the Fed of oversee of companies with less than $50 billion in of assets, but Bernanke told lawmakers last week that the Fed's oversight of smaller institutions is vital, not just for monetary policy, but for the stability of the system itself.
"Just reading the article, and found it interesting," Tony Feraro, chief executive of Concord Bank in St. Louis, wrote in feedback submitted on the Web site. "Let me see if I understand; Wall Street and the banks too big to fail are the major cause of the collapse, and Bernanke believes smaller banks need further oversight? Do I have that right?"
BankThink is a blog about ideas and trends in financial services.