FDA-Style Product Vetting for the Financial Industry? BankThink's latest Discussion post asked readers what they thought of law professor Saule T. Omarova's proposal to require regulatory preapproval for complex financial instruments, such as asset-backed securities and derivatives. Some readers applauded Omarova's out-of-the-box thinking. "I would favor any proposal which tends toward defining the banking business. Banking innovation' isn't innovation at all. It is too often just shady deal-making," one commenter wrote. "In return, I propose protecting banks from competition and guaranteeing banks as we used to a modest profit." But others believed the move was overstepping and unnecessary. "Bad food can kill you. Bad drugs can kill you," Slumminon30A argued in a series of tweets. "No one's died from a credit card ... right?" "Wrong, unfortunately," Twitter user Andrew Jakabovics countered, offering stats from the Center for Disease Control and Prevention and this study from the Federal Reserve Bank of San Francisco as evidence.
Opining on Overdrafts: The Consumer Financial Protection Bureau's report on bank overdraft policies jumpstarted a lively debate on American Banker's Facebook page. Some readers balked at the idea that the CFPB should institute reforms or take enforcement actions after discovering consumers were still paying high fees for the service. "An overdraft is a risk to the bank," Christian Glupker wrote. "The bank has the right to be compensated for that risk. The level of compensation should be decided upon by the bank. Not some third party that has no exposure to the risk." But others argued that consumers were being unduly penalized. "Fees are typically $35 now and people do make mistakes," Dennis Murphy argued in a series of comments. "Fees hit those hardest who have the least money and tend to run closer to a zero balance the problem is people cannot really consent' when the system is gamed against them." In a separate op-ed, BankThink Deputy Editor Jeanine Skowronski argued overdraft problems require more than enforcement actions from the CFPB. "Enforcement actions may force a particular bank to change what has been deemed a misleading marketing practice," she wrote. "But they're unlikely to create industrywide uniformity of overdraft services. Until the inconsistencies and intricacies are dealt with, consumers will have a hard time deciphering what is their best overdraft option, and average annual overdraft charges per customer will remain high."
From Our Risk Management Experts: With bankers lobbying the CFTC to slow down and give foreign regulators time to catch up with it on derivatives rulemaking, consultant Mayra Rodríguez Valladares argued that waiting for uniform international rules is a losing proposition. If we have learned anything" from the experience of Basel capital rules, she wrote, it is that "countries' differing cultural traditions, legal frameworks, and points in the economic cycle make it impossible for everyone to craft, implement, and supervise a uniform regulatory framework simultaneously." Elsewhere, Risk Doctor columnist Cliff Rossi warned that the Financial Stability Oversight Council is giving cyberattacks short shrift, while risk management expert Richard J. Parsons had some tough questions for the St. Louis Fed about its recent study of successful community banks. Among them, "Is the Fed researcher right when he says that the great bankers he interviewed could run a bank successfully anywhere, anytime?" Feel free to share your answer in the comments below.
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