<strong>PREDICTION</strong>: Shadow Banking Comes into the Light
Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc.
OUTCOME: U.S. authorities' efforts to curb shadow banking haven't yet led them to categorize specific activities as systemic risks, but that may change soon. The Financial Stability Oversight Council toyed with the idea this year and then appeared to back away. Industry observers will be paying close attention to the FSOC's meeting Thursday to see if there's any further movement in this direction.
<strong>PREDICTION</strong>: The Dawn of Tiered Regulation
OUTCOME: The Federal Deposit Insurance Corp. moved to ease the process of applying for new bank charters in November. But many in the industry continue to feel that smaller banks face regulatory burdens disproportionate to their business models and the amount of risk they pose to the financial system. In December 2014, the number of federally insured institutions in the U.S. fell to 6,546, down from 6,812 at the end of 2013, according to FDIC data.
<strong>PREDICTION</strong>: Too-Big-to-Fail Reckoning
OUTCOME: The GAO report, released in July, estimated that the size of big banks' implicit subsidy had fallen or even dipped into the negative in the years since the financial crisis. True to Hurley's prediction, the report led to a heated debate over whether the too big to fail problem has really been solved.
<strong>PREDICTION</strong>: Payday Lenders Go Splat
OUTCOME: The CFPB, led by Richard Cordray (pictured), has pushed back the release of its-highly anticipated payday lending rules, with the proposal now slated to come out within the first seven months of 2015. The year 2014 also failed to produce a slew of new small-dollar loan products from banks and tech companies. However, the payday lending industry has continued to shift toward installment loans, perhaps in anticipation of the forthcoming CFPB regulations.
<strong>PREDICTION</strong>: Big Tech Out to Eat Banks' Lunch
OUTCOME: Bank M&A did pick up in in 2014, with notable deals including CIT Group's proposed acquisition of the holding company for OneWest Bank and a number of high-profile community bank deals such as Susquehanna Bancshares's sale to BB&T, AmericanWest Bank's sale to Banner Corp. and Hudson Valley Holding's sale to Sterling Bancorp. While there was no obvious uptick in fintech acquisitions or failures, the industry did see some banks join forces with startups. BBVA, for example, snapped up tech companies including big data firm Madiva Soluciones and online banking company Simple. Meanwhile, the debut of Apple Pay this fall made major waves in the financial industry, inciting much discussion about whether the mobile wallet constitutes a threat to banks.
<strong>PREDICTION</strong>: The FHFA Turns a New Page
OUTCOME: The FHFA did shift focus under new director Mel Watt, who emphasized increasing Americans' access to homeownership. The agency's biggest move toward that goal came with the introduction of the GSE's new 3% down payment loans in December. Post-GSE secondary infrastructure efforts advanced slightly with the FHFA taking early formative steps toward the creation of a common securitization platform, which would issue uniform securities for Fannie and Freddie. Efforts to reform the GSEs effectively died in the Senate in May, although some parties are optimistic that Congress will tackle the issue again in the new term. While mortgage lenders have been pushing Fannie and Freddie to lower guarantee fees, a change has yet to materialize; mortgage rates also failed to increase as expected.
<strong>PREDICTION</strong>: The Next Generation of Home Loans
OUTCOME: The year did bring a few new home financing loan options, of which Fannie and Freddie's new 3% down payment loans were the most prominent. Another noteworthy product that entered the market this year was the Wealth Building Home Loan, a 15-year mortgage designed to help low- and moderate-income homeowners build equity more quickly.