Best Banking Reads of 2014

What a year it’s been for the banking industry! From threats from outside the industry by Apple and Wal-Mart, to questions on whether Colorado and Washington banks should work with legal marijuana businesses, to regulatory shenanigans at the New York Fed, 2014 has been memorable. As the holidays approach and I think back on the year that was, I thought I’d take a few minutes to share some of the banking-related stories I enjoyed in 2014.

Regulations

  • Banks given the go-ahead on working with marijuana businesses: Marijuana may be legal in some states, but that doesn’t mean banks are ready to work with marijuana businesses.
  • How to Punish a Bank: This is from National Public Radio’s Planet Money, so it’s more of a listen than a read, but delves into the problems of effectively punishing the big banks.
  • Bank of America Adds a Mortgage Settlement to Its Collection: Bloomberg’s Matt Levine (also cited in the NPR segment) provides the data on (at the time) Bank of America’s $68 billion in mortgage settlements, and asks how effective these penalties and fines are when they become business-as-usual.
  • Inside the Emerald City: Jack Milligan, editor of Bank Director, delved into the culture of the NY Fed following concerns that regulators got just a bit too cozy with the big banks they oversee.

NonBank Competition

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Decline in Branch Banking, or an Evolution?

treesroadunsplashSeveral news outlets have picked up on recent data from Bankrate.com revealing that 30 percent of Americans haven’t visited a branch in at least six months, among them Time.com, which called it the one stat big bank CEOs are freaking out about.

Half of Americans visited a branch at least within the last month, 64 percent within the last six months and 73 percent in the last year. A request to Bankrate.com for past data on branch visits was not answered.

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Is a stricter set of regulatory expectations for risk governance long overdue?

The Bank Spot

The Comptroller of the Currency recently issued a proposed set of minimum standards for the risk management practices of national banks, and I think they provide the most definitive statement on the regulatory expectation for bank boards in the risk governance process that I have ever seen.

The proposed requirements were originally mandated by the Dodd-Frank Act of 2010, and would apply only to national banks with $50 billion in assets or greater that are supervised by the OCC – which is to say those institutions that pose the greatest systemic risk to the banking system and to the economy. But I think that smaller banks – certainly down to the $10 billion asset level, and perhaps even lower — should pay close attention to whatever rule is eventually issued because a slimmed down version could eventually apply to them as well.

Make no mistake, the OCC expects the board…

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Are the big banks lost?

“Have corporations lost whatever ethical compass they once had?”

Camden Fine, ICBA President, on Twitter

Yesterday, from The Financial Times: “The ethics of banking are broken.”

I can’t help but wonder if the “ethics” problem in banking today is as much a problem of largesse. Forget Too Big to Fail – are the JP Morgans and Barclays of the world too big to manage?

This was suggested during the JP Morgan earnings call Friday, with banking analyst Mike Mayo asking if JPM was “too big to succeed” – and promptly scoffed at by CEO Jamie Dimon, who commented that JPM’s size is its strength. But is might right? Ethical issues don’t come from just nowhere – sure, you hire the occasional bad egg, but the big issues are often a result of systemic failure – a lack of oversight, a culture of “looking the other way”.

Today just five U.S. banks hold over half of banking industry assets. Is it time to break up the big banks? An April article on BankDirector.com, reported that analysts from Keefe, Bruyette & Woods warned that investors should be prepared for the eventual break-up of the big banks, including JPM, and that, as a result of increased regulation and size inefficiencies, the ten largest banks will “shrink or break up”.

Whatever the case, community banks are taking the fighting back – suing the big guys of essentially being mobsters by violating the racketeering act and working together keep interest rates artificially low.