Sizing Up Shelby: Mayra Rodríguez Valladares weighed in on the regulatory relief bill backed by Sen. Richard Shelby, arguing that his proposal to increase the asset threshold at which banks are classified as systemically important financial institutions to $500 billion could endanger the financial system. Commenter Wayne Abernathy pointed out that banks under $500 billion could still be designated as SIFIs under Shelby's plan, but that the classification would no longer be automatic. Rodriguez responded that asset size needn't be the sole factor in assessing the level of risk posed by a bank, but argued that SIFI designation should incorporate the implicit subsidy that big banks receive as well as their opacity, cross-border activities, interconnectedness and complexity. Boston University banking law professor Cornelius Hurley chimed in to voice his support for including the implicit subsidy in SIFI determinations: "Bottom line, it's the market's perception that really matters."

What Banks Can Learn from Baltimore: The recent unrest in Baltimore exposes the need for more economic opportunity in low-income black neighborhoods throughout the U.S., according to John Hope Bryant, founder and chief executive of the nonprofit organization Operation Hope. "The poverty of these vastly underserved communities, combined with the strangling sense of lost hope among its young people, provide the perfect ignitable embers to spark both emotional and physical blazes," he writes. Bryant recommends that banks help people in poor communities gain financial empowerment by partnering with community groups and nonprofits to offer financial education, entrepreneurial training and other services. Not all commenters agreed with Bryant's analysis of the roots of the Baltimore riots. But Ed Walker agreed with Bryant's suggestions and added that markets alone can't be counted upon to address all socioeconomic issues. "Markets don't do things," he writes. "People with good sense take advice like this and do it."

Skin in the Game, Bond Ratings Edition: Neil Baron, a veteran of Standard & Poor's and Fitch, suggested that the best way to reform ratings agencies would be for investors to start their own. Such an organization would value accuracy of ratings more than revenue, since the costs of a bad call would come out of the owners' hide. Reader Bob Newton lauded the idea but wondered why investors haven't done so already. "If the answer to that is a barrier to entry created by government regulations," he commented, "that would not be a surprise but certainly would be a disappointment."

Also on the blog: The Consumer Financial Protection Bureau can help community banks boost homeownership in rural and underserved areas by tweaking the ability-to-repay rule for small mortgage lenders, according to risk advisor Ivan Garces.

Valladares offered some ideas about how financial reformers can ensure that banks serve the best interests of society, inspired by the opinions offered by Sen. Elizabeth Warren, International Monetary Fund head Christine Lagarde and other women speakers at the Institute for New Economic Thinking's recent conference in Washington.

Risk management is an important part of banking, but it shouldn't be the sole function of financial institutions, according to consultant Gren Blackall. He recommends that regulators and policymakers stop nudging banks toward a safe-yet-boring approach to financial services and start encouraging innovation.

The rise of artificial intelligence may help banks gain an edge over startups, according to wealth marketing expert April Rudin. That's because banks have access to a vast array of financial data that can help AI applications better serve customers.

Community banks are bogged down in compliance costs related to Bank Secrecy Act requirements, but there is a way out, according to Daniel Alter, former general counsel to the New York State Department of Financial Services. He recommends that federal and state bank supervisors start helping small banks hook up with BSA compliance vendors that have the resources to handle stringent regulations.

Banks tend to stack the deck in their favor during pilot programs, which defeats the purpose of testing out new products and services, according to Bain & Company partners Peter Stumbles and Richard Fleming. They recommend that financial institutions instead embrace hothouse testing, which relies on "average processes, average customers and average locations."

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