'Examiners Want a Trophy to Hang': Comments of the Week
August 1, 2014 7:30 AM
American Banker readers share their views on the most pressing banking topics of the week. Comments are excerpted from reader response sections of AmericanBanker.com articles and from our social media platforms.
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On the argument that new regulations stymie banks' ability to grow:
"The Dodd-Frank Act, like the Basel Committee, never considered that John Augustus Shedd's [line] 'A ship in harbor is safe, but that is not what ships are for' goes for banks too."
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On the Federal Deposit Insurance Corp. retracting its list of high-risk merchants that it said required extra scrutiny from banks:
"Those industries are no longer on an 'official' list but you can bet they are still on a list. This statement is simply spin."
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On the FDIC's admission that its list of high-risk merchants had prompted some banks to end relationships with legal businesses:
"The first step in correcting a problem is admitting you have one. Good on FDIC for owning up to the fact that legitimate businesses are being harmed by their nonsense 'high-risk' designation.
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On the theory that bank examiners are cracking down on smaller banks to further their careers:
"Another death knell for smaller community banks who face a no-win scenario between overzealous [Bank Secrecy Act], fair lending and compliance examiners who simply want a trophy to hang."
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On the argument that measurements of big banks' subsidies should include the additional regulatory costs introduced by Dodd-Frank:
"To discount the TBTF subsidy by the cost of their regulation is to give them a credit for the dangerous business model they have chosen. Give credit where credit is due but not to firms that threaten the financial system."
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On the claim that the community banking model is a poor fit for contemporary needs:
"If you were designing a new banking system in the U.S. from the ground up today, there is no way you would have the number of smaller (sub-$1 billion asset) banks that we have
You would never build that complexity and friction into the system you would seek to have strong regional hubs, strong community involvement in the model (transparency), but you would have shared costs on branching, IT, etc. so that distribution could rapidly evolve across mobile/tablet with a core of supporting branch network."
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On the unnecessary complexity of bank processes:
"Files upon spreadsheets upon binders upon archived files."
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On the argument that today's payment networks are vulnerable to upstarts:
"Today's technology makes change possible but the payment network oligopoly, with layers of middlemen, [has] no motivation to change from the high-cost system. AOL and CompuServe were replaced by competition. Competition will work for payments."
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On the argument that banks' familiarity with regulations will help them triumph over nonbank startups in payments:
"Yes, government regulations will protect us (banks) just the same ironclad way that they are protecting taxi companies from Uber
This said, I think the author's suggestion to partner with startups is good advice."
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On how the Fed's decision to shrink its balance sheet will affect banks' deposits:
"If the Fed materially shrinks its balance sheet and raises the fed funds rate, the effect on deposits will be far greater than what this article proposes. People forget that there is a price to be paid for monetary laxity there is no free lunch."
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