WASHINGTON — The Consumer Financial Protection Bureau was created to ensure that banks treat customers fairly, but Facebook and Twitter are even more effective at keeping banks honest, argues Fifth Third Bancorp (FITB) Chief Executive Kevin Kabat.

In a speech that largely focused on the regulatory response to the crisis, Kabat said social media is now taking a central role in helping banks assess their standing among customers and shareholders. Banks don't really need new guidelines and mandates from regulators, he said, since every action — from the introduction of a new product to new disclosures on checking accounts — can be censured in real time.

"While we embrace our regulatory compliance responsibilities with respect to all we do, the court of public opinion and market needs drive our decisions to provide attractive and fairly priced products," Kabat said Monday in a keynote address for American Banker's 3rd Annual Regulatory Symposium.

For example, if the Cincinnati bank releases an updated mobile banking application for the iPhone or Droid in the morning, reviews will be available for all to see on social media sites by early afternoon. Pricing and policy changes are dissected as well, and if customers do not approve of them, they will document their reasons "in painstaking detail."

"The whole world is watching, and it takes a long time for those comments to fade into obscurity," Kabat said.

Kabat addressed the audience on the fifth anniversary of the day then-Treasury Secretary Henry Paulson testified before the Senate Banking Committee on the turmoil in the credit markets. A week earlier, Lehman Bros. had filed for bankruptcy and Merrill Lynch had been sold to Bank of America. Days after Paulson's appearance on Capitol Hill, Washington Mutual became the largest bank in U.S. history to fail.

With that history as backdrop, Kabat spent most of his speech discussing both the regulations that have followed the crisis and what banks are doing independent of regulatory intervention to prevent the next one.

In his view, the regulatory response has been a mixed bag. While he praised some key provisions of the Dodd-Frank Act, particularly the higher capital requirements for larger banks, Kabat remains concerned that new mortgage requirements could shut out many potential borrowers.

He also argued that the CFPB has been too focused on regulating banks and not enough on supervising nonbank mortgage brokers, and he wondered how the agency would deal with technology firms that are playing an increasingly larger role in the payments system.

"There is a very real likelihood of the Amazons, Apples, Verizons, eBays and Googles of the world functioning as intermediaries to varying degrees," he said. "Who will be looking at the consumer financial protections associated with your PayPal or iTunes account? As yet, it is still unclear if the CFPB will cover them."

Pointing to successes among the regulatory reforms, Kabat said Dodd-Frank's emphasis on systemic risk has been "a very good thing." He said the real estate bust proved that most banks did not have adequate capital to withstand a major economic downturn and that higher capital thresholds have to be viewed "as a fundamentally good requirement from a safety and soundness standpoint."

He also commended Dodd-Frank for addressing counterparty risk and generally agreed with regulators that large banks should conduct stress tests, even though the stress-testing process itself has significantly added to banks' compliance costs. Kabat noted that the $121 billion-asset Fifth Third now has nearly 350 employees focusing on risk management, compared to roughly a dozen 10 years ago.

"I would have a difficult time saying that … the greater degree of risk analysis is unwarranted," he said. "These are valuable tools and their inclusion in the new regulatory prescription is another positive outcome of the new regulations."

Kabat said there has been less success on the consumer protection front, noting the uncertainty surrounding a slew of mortgage rules set to take effect in January. Chief among them is the "qualified mortgage" rule, which would define which ultra-safe mortgages comply with CFPB benchmarks for meeting a borrower's "ability to repay." Lenders are pressing the CFPB to delay the start date of the QM rule so they can have more time to prepare for the changes.

"We seem to get new news on this front week to week," Kabat said. "There are legitimate voices expressing concerns that the new measures will in fact unreasonably limit mortgage availability, damaging the very consumers we are striving to protect."

Kabat said he believes regulation works best when the industry and regulators collaborate on the rulemaking.

For example, on the issue of "deposit advance" loans — which Fifth Third offers but for which the bank has received criticism — Kabat said the industry and regulators need to work together to come up with a solution that would benefit customers and satisfy critics. The worst outcome, he said, would be for regulators to force banks out of the business entirely.

"We get the largest amount of complaints when we ask customers to take a timeout" from using the bank's deposit advance product, Kabat said. "There's clearly a consumer demand and we have to figure out a way" to meet it.

He noted other examples where collaboration between banks and regulators has already had benefits. For instance, the new rules on foreign remittances were written with significant input from banks, he said.

Kabat said he also believes the CFPB's customer complaint database has been good for the industry because it provides a certain transparency that will only improve banks' service.

Still, Kabat said that banks should not need any prompting from regulators to do right by customers. Fifth Third, for example, started a program last year in which it provides job training to customers who have lost their jobs and are in danger of defaulting on loans. The program has been so well received — 40% of those who participated in a pilot program found work within six months — that other banks are looking to follow suit, Kabat said.

"It is this type of fresh approach that can make a difference," he said.

Kabat said he believes the marketplace will ultimately reward those banks that treat customers fairly and punish those that don't, and that social media is playing a crucial role in helping consumers decide where to bank.

"In an increasingly transparent and online world, banks are adopting customer-centric practices and making advances, with or without regulatory pushes, in order to remain competitive," he said. "Customers are voting online and the winners are acknowledged and emerging."