'Let's Not Add Another High-Fee Consultant': Comments of the Week
July 31, 2015 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.
On a proposal to make bank consultants criminally liable for misrepresentations and require them to designate their reports as "qualified" or "unqualified," as auditors do:
"Sounds like a wish list for regulators. The real world has a substantial cost for an unqualified opinion. Maybe the regulator ought to know the bank inner workings better and consult with the outside auditor on his concerns. Let's not add another high fee consultant to the already overburdened compliance people."
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On a proposal to make bank consultants criminally liable for misrepresentations:
"If we keep going down the path of subjecting every report, statement, comment or action to criminal and/or financial penalties, pretty soon the only consultants available to a bank will be criminal defense law firms."
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On a proposal to make bank consultants criminally liable for misrepresentations:
"True, there are notable instances where the conflict of interest has resulted in overly zealous shading of the truth by consultants [but] it should be the regulator's job to assess the quality and veracity of the consultant's work. Regulators typically have the ability to approve the choice of a consultant. Consultants found to assist an institution in providing false information to the regulators should be barred from receiving such approval in other cases. Imposing a duty on the consultant to be fully accountable to the regulators abdicates the regulator's oversight role to the consultant and accordingly poses the risk of negatively impacting the relationship between the consultant and the institution in all cases."
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Questioning banks' very use of independent consultants:
"Hiring an outside consultant to lie to a banking regulator on your behalf should be grounds for losing a license. If a medical doctor hired an 'independent' counsel to prepare a report about a botched operation for the courts, and the report cleared him of responsibility, would we simply accept it? Not if it was our loved one who lost their life. Disallow 'independent' reports and require the banks to generate their own testimony. If they lie to the regulators, as when they lie to a judge in a court of law, they should be held in contempt, charged with perjury and face losing their charter. Learn to play by the rules or go broke."
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On the Federal Trade Commission accusing LifeLock of failing to protect customers' personal information:
"Truth is the consumer practically never carries dollar losses arising from identity fraud. Visa, [MasterCard], Amex, [and] U.S. banks have a near perfect tradition of assuming the economic liability. The [only cost to the] consumer is the time and hassle to remedy. When fear-based products fail on a dimension they boast to protect, adding to the risk out of indifference, I would expect regulators to be especially punitive."
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Defending the value of identity protection services such as LifeLock:
"Use of identities for false health care claims, for example, can cause as much financial damage as any attempt to open a credit card in another's name. And yes, preventing those claims from being paid, and affecting a person's receiving bills for healthcare copayments, changing deductibles, coverage, and coverage limits- that is possible."
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Reacting to a court ruling that a bank's authority to charge an interest rate that exceeds state caps does not transfer to the buyer of the debt:
"When I was a child growing up in the 1960s and 1970s, the state I grew up in defined usury as being any lending rate above 1% per month. There were stories told about people who would lend at 2% per month to those who couldn't qualify at a bank, but they were mobsters and if you didn't pay them, it was said that they would break your knee caps. In the inflationary 1970s these rules were loosened.
When inflation subsided, the state legislatures forgot to lower the usury limits down. Over the past 27 years, I've always taken the position as CEO of our bank that rates of 27% or 35%, when inflation is low like it has been for decades, were inherently immoral. We've never engaged in that kind of lending activity and I believe that the people who peddle them have lost their moral compass."
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On the new interest in aircraft financing at some banks:
"Asset-liability mismatches in federally insured deposit organizations. What could go wrong?
[Mortgage backed-securities] are more predictable and more liquid in 2ndary mkt. And collateral rarely flies away." (via Twitter )
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On the controversy over Bank of America's choice to put its human resources chief, Andrea Smith, in charge of the company's stress tests:
"To be fair, stress testing is such an administrative nightmare that it's possible said HR exec could be a good fit." (via Twitter )
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On the downside for banks of higher interest rates:
"Higher rates pose a serious capital and liquidity threat for community banks with high concentrations in real estate. As rates rise, higher mortgage rates could curtail demand, at the same time that non-maturity deposits would be seeking higher yields, putting added pressure on net interest income."
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