Here are some fearless forecasts for bank regulation and reform in 2012 from our stable of BankThink bloggers and columnists:
"The 2012 elections will usher in a government that is laser-focused on economic growth and improving America's competitive standing in the world. Dodd-Frank will be flushed in 2013, replaced with smarter, more effective regulation. The U.S. will end its love affair with lowest common denominator international regulatory accords. A less complicated regulatory regime will be established to prevent the extinction of community banks. Megabanks will simplify their business models and shrink their balance sheets."
William M. Isaac, FTI Consulting
New Sheriff in Town
"Benjamin Lawsky will ascend to national prominence by turning a formerly moribund New York State Banking and Insurance commission into a powerful force for consumer 'good' as director of the re-branded New York State Dept of Financial Services. As newly anointed 'Sheriff of Wall Street,' his picture will replace Gretchen Morgenson's on dartboards hanging prominently in many Mega-Banking boardrooms. "
Joel Sucher, Pacific Street Films
"The Durbin Amendment to Dodd-Frank will be substantially amended in 2012, and Senator Durbin will be a co-author.
"Explanation: Nothing has yet emerged from passage of Dodd-Frank that has had as many unanticipated consequences as the Durbin amendment. The amendment was billed as pro-consumer and since enactment has been anything but. It has been a short term windfall for retailers with no measurable benefit for consumers. Look for Senator Durbin to remove the formulaic price mechanism of the bill and replace it with a requirement for mediated agreements between debit card issuers and merchants."
Mark W. Olson, Treliant Risk Advisors
Morning in America
"The efforts at strengthening U.S. banking from balance sheet and risk management perspectives will be shown to bear fruit, as it becomes clearer that U.S. banking is poised to retake global leadership.
"A much more workable and somewhat simplified version of the Volcker Rule regulations will emerge.
"Consumer compliance issues will continue to emerge as an area of intense focus from a regulatory perspective with some notable enforcement actions brought."
Eugene A. Ludwig, Promontory Financial Group
"In 2011, we saw the end of the beginning of the Basel III capital, resolution and liquidity rules – now, the battle isn't over what's in them, but rather how they will be implemented in the U.S. In 2012, a new issue will be added to the already-formidable mix of industry challenges: the beginning of the end of highly-integrated, inter-connected and diversified holding companies. Regulators will now move on to ring-fence different business lines, essentially corralling traditional banking in fields far from more innovative activities like investment advice and wholesale financial services. This will undermine the operational, funding and capital efficiencies that are predicate strategic assumptions in diversified financial firms, and regulators can force this structural rewrite under current rules. Thus, Congressional confusion in 2012 is no impediment to far-reaching regulatory demand."
Karen Shaw Petrou, Federal Financial Analytics
Mortgage Mea Culpa
"Those elected officials who ignored the warning signs during the last decade will admit that their policies led to the near collapse of the U. S. housing market… A new non-government-backed secondary mortgage market will take root from its ashes."
Richard Booth, America's First Funding Group
Editor's note: Read more in "Bold Predictions, Part II — Merkel Makes Mayhem" (Risk Management) and "Bold Predictions, Part III – Wells Fargo Becomes the Consumer Advocates' Darling" (Consumer Finance).