Not many bank presidents have nice things to say about banking regulation. New compliance requirements have piled up as regulators implement rules mandated by the Dodd-Frank Act as well as other sweeping changes designed to prevent another financial crisis. It's understandable that bankers should voice their opinions on problems with the real-world implementation of these rules before the ink is totally dry.
But bankers should consider how the communities they serve will interpret their resistance to regulations. Members of the public have been told that banks helped bring about the Great Recession, and all they hear from bankers is a barrage of complaints about compliance burdens. Customers could easily think these complaints suggest that bankers have failed to take responsibility for their actions or that they don't even understand what they did wrong in the first place. It doesn't matter if these interpretations are accurate: perception is reality.
Bankers need to temper their criticism of regulation with some support for reform. Otherwise, bankers' negativity could further erode public trust in the industry. It's time to take a break from rancor and remind the American public that bankers actually do stand behind the country's efforts to create a safer financial system.
Here's my offer to bank presidents: an open letter from a fictional bank leader that pledges commitment to broad reform while explaining the reasoning behind regulatory complaints. My hope is that it will help other bankers formulate the message they want to send to their customers.
As president of XYZ Bank, I declare that I and our board of directors support the government's work on regulations for the financial industry.
For those who have not followed the flurry of laws and regulatory requirements recently issued by the government, there have been a lot changes in the years since the financial crisis. I am writing this letter to show my support for those changes and to explain why you might have heard bankers complaining about them.
Because the financial system is important to the stability of our country, we need appropriate rules in place. I believe we need to be sure that all finance-related businesses (not just banks) play by the same rules. Most of the latest regulations are directed at non-banks and extremely large banks, but they require plenty of work from smaller banks too. I am accountable for one bank, and therefore I will do my part with the professionalism and commitment that is expected from my office.
If you wonder why so many bankers are complaining about this current wave of regulation including me it is because we are in a period in which criticism is necessary. That's how the system works; regulators come up with rules and regulations and give bankers a chance to weigh in. Regulators don't ask us what we like about the rules. They ask if the rules will accomplish their designated goals or if we foresee the rules creating unanticipated problems.
Sometimes government agencies modify regulation because of our comments, and sometimes they don't. Either way, bankers have an obligation to inform the government of our response. I have a duty to advocate for the policies I think are best for our bank and our region. I must also follow to the letter any final rules, even if I don't agree with some of them.
Please don't interpret our critiques of regulation as a sign that we're out of touch with the big picture. I know how hard the last recession hit Americans, because it hit my family, our employees' families and all of your families. I don't want a crisis to happen again.
Like all of you, I love this country. Loving it means I do my part to make the work of government meaningful, which occasionally requires criticizing it. It also means that I believe all of us including government officials, even the ones I didn't vote for can work together to create an even stronger financial system.
Thank you for reading.