2015 Predictions Revisited: What the Seers Got Right and Wrong

Prediction: More Black Marks

"Don't mistake growth in market share by the nation's largest banks for astute management. On top of the record-breaking $120 billion they've paid in penalties since 2008, look for new assessments in 2015. They'll also show a complete lack of self-awareness by committing another PR blunder similar to charging for debit transactions or inviting millennials to send nasty messages to their executives. Maybe they'll reveal how their lobbyists actually write the laws that weaken Dodd-Frank. Oops, they've already done that. Draw up a chair and wait for new fireworks in 2015."

 Kevin Tynan, senior vice president of marketing at Liberty Bank for Savings in Chicago

Outcome: Although the year did not include embarrassments of the magnitude of past scandals, there were still plenty of negative headlines. Six large global banks including Citi, JPM and B of A agreed to pay nearly $6 billion over alleged rigging of foreign-currency markets, with JPMorgan Chase saying it pleaded guilty to a related antitrust charge. There were more enforcement actions over the Bank Secrecy Act, including the first for a digital currency firm, Ripple Labs. Meanwhile, the Consumer Financial Protection Bureau continued its steady stream of enforcement, ranging from a $25 million fine for PayPal to a penalty against Regions Financial for overdraft fees to settlements with indirect auto lenders over discretionary pricing.

Prediction: Financial Innovation Meets Financial Inclusion

"The creative work of visionary entrepreneurs will begin to percolate and demonstrate the potential for innovative financial products, services and infrastructure to reach scale. We'll see more affordable ways for a wide range of consumers to access small loans. We'll see broader deployment of technology that removes friction from the systems that enable the movement of money. And we'll approach a more shared understanding what it means to be financially healthy."

 Lisa Servon, professor at the New School's Milano School of International Affairs, Management and Urban Policy

Outcome: Banks continued to show relatively little interest in small-dollar loans. Some bankers even pulled back on some small loan programs over concerns about an upcoming Consumer Financial Protection Bureau payday lending rule, while some advocates called for greater involvement by nonbanks such as the U.S. Postal Service in providing small-dollar credit. Yet floodgates of innovation opened in other areas, as growth of online lenders accelerated, support for a faster payments system gained momentum and the banking industry embraced ledger technology.

Prediction: A Kick in the Pants

"Shareholder activism will accelerate as many banks are unable or unwilling to adapt to a changed industry environment. The changes are structural, not cyclical. Survival alone is no longer sufficient. Banks must find ways to close performance gaps between their returns on equity and their costs of equity before someone else does it for them."

 J.V. Rizzi, banking industry consultant and investor

Outcome: The voice of the activist shareholder grew louder in 2015, as activists had influence on board appointments and in some cases pushed banks to sell. During the year banks facing proxy battles that agreed to sell included Fairmount Bancorp in Maryland, Naugatuck Valley Financial in Connecticut and Metro Bancorp in Pennsylvania.

Prediction: Big Breaches, Big Disruptions

"2014 saw major [security] incidents impacting various banks. 2015 will see this trend continue, with the prospect of a massive incursion incident visited on one or several of the global banking entities. Banks will need to rethink how they counter this threat by deploying tools that can be deployed on and against data from social media and other mobile apps to protect their network at all its weakest points.

"Traditional banking models will come under even greater threat in 2015. Two examples that come to mind are in customer lending, with Lending Club's gaining greater momentum and traditional credit card payment and fulfillment processes under threat from mobile phone apps. Banks will need to identify ways to partner with new mobile technology and apps that will enable them to stay at the top of this new wave of innovation in the industry as well as maintain their core customer relationships."

 Andrew Waxman, consultant in IBM Global Business Services' financial markets risk and compliance practice

Outcome: Cyberattacks and internal security problems raged on in 2015. The American Bankers Association and Experian were among those with major security incidents. Morgan Stanley said a rogue employee stole account records for 350,000 of its clients. On the disruption side, banks forged ahead in forming alliances with nonbanks, particularly in lending area. JPMorgan Chase joined BBVA Compass in partnering with OnDeck Capital, for instance. Regions Financial inked an agreement with Fundation Group.

Prediction: The Bank as Personal Assistant

"2015 will see banks move beyond their traditional role as product providers to play a deeper role in the everyday lives of their customers. With digital technologies, banks will help customers reach decisions about what to buy, and where and when to buy it whether it's a home, car or even a restaurant meal. Banks will also offer new services such as personal financial management tools. Some financial institutions are already heading down this 'everyday bank' path."

 Dave Edmondson, senior managing director and head of Accenture's banking practice in North America

Outcome: Monitise, a mobile vendor trying to sell banks on deploying the shopping assistant concept, struggled in 2015. But a handful of banks have been exploring how to have a greater presence in their mobile customers' everyday lives. USAA, for instance, launched an app to motivate consumers, especially millennials, to start saving every few days if not daily. Some mobile apps, which try to drive similar customer outcomes, also inked bank partnerships. Qapital and Digit, for instance, aim to take the work out of the tedious task of moving small amounts into savings accounts.

Prediction: Stricter Capital Standards, Weakened Volcker Rule

"[Global systemically important banks] should be on the lookout for stricter standards for how they calculate capital under the advanced internal ratings-based approach. The Basel Committee for Bank Supervision is likely to reduce the flexibility that large banks have in calculating risk weighted-assets. This will impose additional data and compliance burdens on banks. The Basel committee will also continue to demand transparency from banks into their inputs and models for how they calculate RWAs. In the U.S., I expect that the Volcker Rule compliance date will be extended for large banks and certainly for smaller banks. Expect a full year of large banks trying to weaken the Volcker Rule. Given how poorly they are doing at implementing it, this should be no surprise."

 Mayra Rodriguez Valladares, principal at MRV Associates

Outcome: While the Basel Committee unveiled requirements for global systemically important banks to be more transparent in 2016, the committee has not released guidelines dealing with flexibility of risk weights. But large U.S. banks faced tougher capital requirements at home as the Federal Reserve Board finalized its capital surcharge plan on the largest and most complex banks and proposed minimum levels of "total loss absorbing capacity."

Prediction: Continued Inaction on GSE Reform

"The prospect for reform of Fannie Mae and Freddie Mac will be like it has been each of the last six years since the conservatorships began: full of potential, but like an open bottle of champagne after a New Year's celebration, [it] will eventually lose its fizz due to political intransigence and ideology."

 Cliff Rossi, professor at the Robert H. Smith School of Business at the University of Maryland

Outcome: There were incremental reform efforts that mostly fizzled as predicted. The most significant was in Senate Banking Committee Richard Shelby's regulatory relief bill, which tried to advance less controversial reforms, but it failed to advance. There were rumors the administration would move the needle itself through a "recapitalization and release" of the GSEs, but those rumors were quashed. The only measure that made headway was part of the "Jumpstart GSE Reform" bill and would prevent Treasury's sale of GSE stock until at least 2018. Though the provision was meant to delay administrative action until Congress debates a more comprehensive GSE package, the measure was seen as suggesting lawmakers do want to revive a GSE reform debate.

Prediction: Lending Party Relaunch

"Real estate prices, both residential and commercial, will continue to increase, while the Fed continues artificially low interest rates, and banks will succumb to the eternal real estate temptation once again. Credit standards for real estate will be loosened, along with more political pressure from the lame-duck Obama administration for more risky residential mortgage lending. The real estate risk concentration of the banking system, already very high, will rise further."

 Alex Pollock, resident fellow at American Enterprise Institute

Outcome: As the Federal Reserve waited until December to raise rates, regulators complained about loosened standards and poor underwriting multiple times during the year. But with mortgage underwriting rules from the Consumer Financial Protection Bureau in full effect, the loosening applied to categories other than residential mortgages. Commercial real estate and business credit such as large leveraged loans drew the most attention.