'These Aren't 500-Year Floods': Comments of the Week
June 13, 2014 7:30 AM
American Banker readers share their views on the most pressing banking topics of the week. As excerpted from the comments sections of AmericanBanker.com articles and from our social media platforms.
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On the need for banks to increase loan-loss reserves to prepare for future economic downturns:
"These aren't '500 year floods.' Economic cycles are regular and inevitable. Unless forward-looking reserving models are adopted, the industry will continue to careen from under-reserved to over-reserved to under-reserved."
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On American Express's appeal to payday lenders and check cashers to lower the cost of their products:
"We find it fairly disingenuous for Dan Schulman to stand in front of the CFSI Emerge conference and call for check cashers and small balance lenders to reduce the cost of their products as a 'significant boost to the financial health of the underbanked' when American Express merchant discount rates and card fees are the highest in the payments industry."
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On how bank customer-service strategies can backfire:
"Seems like banks are pursuing self-fulfilling strategies that wind up shooting themselves in the foot. They pull functionality and utility out of branches and then wonder why depositors don't use branches. They disempower staff to make basic decisions and wonder why depositors contact [customer service representatives] in call centers."
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On the need to tread carefully when regulating consumer lending:
"I agree the residential subprime lending got out of hand, leading to artificial [home prices]. But 'salting the earth' in the subprime space adversely affects overall growth to our economy."
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On the consequences of failing to prosecute bank employees accused of breaking the law:
"Allowing employees to evade any legal action for their illicit trades leaves them free to apply their dubious skills elsewhere."
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On community banks that blame falling profits on external factors:
"If [reality television host] Jon Taffer was advising banks, he would say, 'the fact is, somebody is making money in this "rising regulatory, technological and staffing costs" environment, so why not you?'"
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On the reasons some community banks are struggling:
"Nothing against small community banks, especially those that service more rural or remote communities that would not otherwise have a bank. But I would imagine that most will continue to sell out or fail. The cost of technology and compliance is hurting; however, poor management will be the primary reason for the <$150 million banks to close."
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On the Consumer Financial Protection Bureau's investigation into how mobile banking affects consumers:
"While one might admire the CFPB's initiative to push into another area of the financial services industry where consumers may need protection, it's worrisome that the Bureau is not directing that energy and enthusiasm towards addressing the embarrassing backlog of missed rule-making deadlines set 4 years ago in its enabling legislation."
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On CFPB Director Richard Cordray's remarks about the brilliance of smartphones:
"'Look around any room and you will find that the single most knowledgeable thing in that room is no longer a human being but any one of the smartphones in their pockets.' I think Mr. Cordray needs to get out of the CFPB offices a little more often."
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On the importance of keeping loan-loss reserves as high as possible:
"Although [BankThink contributor Ken] Thomas discounts the remarks by regulatory veterans that, 'whatever it (the reserve) is, it is never high enough'
any study of history during financial disruptions would support the regulator's comment.
Capital adequacy must simply be large enough to support market contingencies."
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On the costs of mobile banking:
"While the transaction costs on mobile may be lower, the costs of implementing secure technology and staying current on the latest apps and platforms are significant, especially for smaller organizations. And we don't charge for that or our mobile service. So Cordray should stay out of the business of deciding what cost savings we can or should be passing on to customers."
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