The Weekly Adviser has received a letter from Jerry Haldent verson, president of Wesbanco Bank of Parkersburg, W. Va., that should strike a sympathetic chord with many a community banker. The letter concerns mandatory publication of call reports.
As Jerry explains, the cost per item is small, but the items sure add up.
This is a portion of the letter he sent to the Federal Financial Institutions Examination Council on the topic:
"A major problem with regulations are that they become perpetual. It is time to examine and delete unnecessary rules that have no benefit.
"Section 9 of the Federal Reserve Act requires banks to publish their reports of condition in a newspaper published in the place where the bank is located or in a newspaper from an adjoining area. While this regulation doesn't impact state non-member banks, I'm sure most states require similar publication.
Of Little Use to Public
"I believe there are very few individuals, other than bankers, who have much of an idea what a report of condition is saying.
"Here in Parkersburg, Wood County, there are five commercial banks with assets exceeding $1 billion that publish their quarterly reports of condition in the local paper.
"Earlier this year, a Charleston-based bank with five Parkersburg locations acquired five branches of another (defunct) Charleston savings bank from the RTC. These facilities now have deposits exceeding $160 million (unofficial), representing the second-largest concentration of bank resources in this market, and they don't publish a local report of condition.
"During March of this year there were at least 15 mortgage companies, credit unions, finance companies, government agencies, and out-of-the-area banks who made over 109 mortgage loans in Wood County.
"During May there were more than 49 other banks, credit unions, and captive finance companies who made over 198 new automobile loans in Wood County. Many of these companies also accept deposits. Most importantly, none of them are required to publish reports of condition.
"Look at the costs attributable to banks. The Sentinel charges $112.75 for each of four quarterly publications, which is equal to $451 per year. Let's assume ours is average. Multiply $451 times the number of banks required to publish, and you have over $5 million in hard dollar costs and that still doesn't account for typing and preparation of the form."
We look in the window of a restaurant and decide if it will be good or not. We walk into a hotel lobby, and if it is seedy we turn elsewhere. What makes bankers think that the public does not have the same attitude toward the first impression the bank offers?
A recent visit to a local bank may serve as a case in point.
The lobby had several torn chairs on one side, a floor that looked grungy, and several desks on the platform that were empty and obviously had been empty for a while. In sum, the bank looked like it was ready for a |going out of business sale.'
Suggestion: If depositors see torn upholstery, they are likely to wonder. "are they also shabby in handling my money?"
Many community bankers may find the following story also applies to their banks, and with embarrassing results.
A bank in Pennsylvania started a consumer loan department. In short order, it had had to repossess a car. On the day the bank repossessed it, a manager told Gridley, a guard, "Gridley, stay late because the former owner of the car may be in to get his personal belongings out of the auto."
Happy with the overtime pay, Gridley obliged.
Three years later, an internal audit found Gridley was still staying late every night--collecting overtime--although by this time consumer credit and auto loans had become a giant operation with its own night staff in a building apart from where Gridley worked.
No one had told Gridley to stop staying late every night, and Gridley sure wasn't complaining.