Bankers, regulators and investors identify the biggest risks facing the industry a year after the financial crisis erupted. Edited excerpts of our interviews follow.

"There are two major risks that stand above all others: high unemployment rates continuing to lead to the erosion of credit quality and concentrations in commercial real estate that are threatening to become the next wave of losses during this financial crisis."

Office of Thrift Supervision
John Bowman, acting director

"The biggest risk is not establishing a procedure to deal with too-big-to-fail and systemically risky companies. We need to establish a way to identify clearly all of the new risks — credit swaps, derivatives, SIVs, CDOs, counterparty risks — for which the largest financial houses have not been assessed. We need to determine the appropriate level of capital and liquidity so the American taxpayer will never again be called upon to save the largest institutions of the land."

Easton Bank and Trust Co.
R. Michael Menzies, president and CEO, and chairman of the Independent Community Bankers Association

"I'm very concerned about the proposed new consumer financial protection agency. While protecting consumers is a cause I agree with, the legislation appears to be largely aimed at the wrong target — banks, which are already very heavily regulated. By the administration's own numbers, 94% of the highly risky mortgages were made not by banks but by companies that aren't regulated by banking regulators. The proposal doesn't do anything about enforcement against the shadow banking industry, and lack of enforcement was the problem before."

United Bank of Michigan
Arthur C. Johnson, chairman and CEO, and chairman-elect of the American Bankers Association

"Accounting rules are a major issue. The ivory tower accountants are trying to move further on mark-to-market, which is exactly against what was discussed six months ago. It is outrageous, and the banking industry should be fighting this vigorously. Those rules will only keep banks from getting capital to the economy."

Stieven Capital Advisors LP
Joseph Stieven, president and founder

"It seems as though there is no consensus as to when the Fed will begin tightening. Should it happen abruptly, that could cause a significant reduction in net interest margins, and it could have an impact on the economic recovery."

California Department of Financial Institutions
William Haraf, commissioner

"The clear and present danger to the banking industry, particularly the community banking industry, is that Congress and the administration will overreact to the financial crisis with new regulations and regulators will cripple those of us who didn't cause the meltdown."

CountryBank USA
Terry J. Jorde, president and CEO

"In a word, the risk is the economy — the length and duration of this economic contraction, which is severe by historic standards."

Atlantic Capital Bank
Douglas L. Williams, president and CEO

"The risk is that responsible lenders, who before and during this credit crisis supported this economy with sound lending, will be thrown in with the irresponsible lenders that created the mess. The pendulum is government action. We just have to be careful that the Hill reaction is something that will not stifle the flow of credit that Treasury and the Fed have worked hard to achieve."

Federal Home Loan Bank of New York
Al DelliBovi, president

"The longer this cycle wears on, I think banker and board fatigue is going to become a major risk, particularly in our part of the world. The energy that is going to be required to lead banks into the recovery diminishes. I think this is going to accelerate consolidation."

State Bank and Trust Co.
Joe Evans, chairman and CEO

"One of the major risks is the kind of havoc that inflation can cause. The risk of inflation is being discussed a lot, given all the government spending, and I don't know if a lot of banks are prepared to handle what could occur if rates rise rapidly."

StoneCastle Partners LLC
Joshua Siegel, managing principal

"Smaller banks are faced with a possible future of a single bank regulator, versus the dual system of federal banks and state banks that we have today. If I was a small-bank president, I would be concerned that I was being regulated out of Washington rather than in my own world. I would be worried that the regulators would be regulating to the needs of the larger banks at the cost of the smaller banks. What does Citibank have in common with a small bank in Joliet? I think that is a view likely held by all state regulators. We need to lobby as much as we can to keep the dual banking system intact."

Illinois Dept. of Financial and Professional Regulation
Jorge A. Solis, director of the banking division

"The FDIC premium burden is just overwhelming. It probably equals occupancy expense on a lot of banks' income statements. And the actions of the FDIC, and spending much more to close banks than it would cost to give them some Tarp money or a similar program that would save them, it just doesn't make any sense at all."

Columbia Bancorp Inc.
Terry Cochran, president and CEO

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