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Week of Jan. 30 |
From the chairman
By Jane Haskin
OBA Chairman
As community bankers, we have been described with Wall Street investment bankers by everyone from the press to the president during the financial crisis. Even though we keep reminding the public we are not the same, many don't understand the differences.
With that thought in mind, I would suggest you spend a couple of hours watching the 2010 Academy Award-winning best documentary film, Insider Job. The film was released in 2010 and gives a history of what director Charles Ferguson believes led to the financial crisis in 2008. The documentary is narrated by Matt Damon and is comprised of interviews and news clips to develop the story.
After you see the film, I think you will understand why our campaign to distinguish ourselves from investment bankers is so important.
OBA endorses governor's request to help with chapel at Camp Gruber
The Board of Directors of the OBA has unanimously agreed to endorse Gov. Mary Fallin's request for financial assistance in connection with the construction of a new chapel at Camp Gruber, Oklahoma. The Thunderbird Chapel will be funded by private donations and a fund has been formed in partnership with the Communities Foundation of Oklahoma.
“Our goal is to raise $50,000 from the banking industry,” said OBA President Roger Beverage. “Banks that agree to help the governor's effort will be individually recognized but we're asking that contributions be made through the Oklahoma Bankers Foundation. In addition, the Association will donate $1,000 to this worthwhile cause.”
Camp Gruber was established in early 1942 as a military mobilization training post and is located in Muskogee and Cherokee counties. Historically Camp Gruber has provided training for infantry, artillery and tank destroyer units that fought in Europe during World War II.
Deactivated in 1947, the Camp was reactivated in 1977 for the purpose of training Oklahoma National Guard units and preparing the troops before they deploy to fight in battle. Currently there are some 3,200 Oklahoma National Guard troops fighting on the ground in Afghanistan.
On a recent tour of the facility, Gov. Fallin noted there was no chapel on the post where young men and women could seek spiritual refuge and guidance, and this effort to construct the new chapel was born out of this realization. The Chapel will feature a sanctuary and facilities to accommodate services for some 200 soldiers, in addition to offices for clergy and counseling and areas to conduct seminars, Bible studies and other gatherings for soldiers and their families.
Here's where you come in: after hearing about this project, our Board of Directors is asking each member bank to help with the completion of this chapel. We're asking each of our member banks to make a donation of $250 or more. The goal is to complete this project before Oklahoma's 45th Infantry National Guard soldiers return from Afghanistan in April 2012.
Checks can be made payable to the Oklahoma Bankers Foundation and do qualify as a charitable contribution. The Foundation will send you a letter acknowledging your gift. Please call Roger Beverage at the Association if you have questions about the Board's action or this request for contributions toward the Thunderbird Chapel at Camp Gruber.
Should coverage for noninterest bearing transaction accounts be continued?
Unlimited FDIC insurance for noninterest bearing transaction accounts expires at the end of this year. Extending such coverage would literally require an act of Congress and the full support of the Federal Deposit Insurance Corporation. We're asking banks to give some thought to this concept and we'll be sending out a survey shortly asking bankers to give us valuable feedback on what position the OBA should take with respect to this matter.
The Transaction Account Guarantee (TAG) program was first introduced by the FDIC in August 2008. The program was designed to strengthen confidence in the system at a very precipitous time, and to encourage liquidity in the banking system when the financial crisis was in its initial stages.
The program was voluntary, with participants paying 10 basis points on all deposits over the standard coverage level. It was extended twice by the FDIC and changed to a risk-based pricing mechanism in recognition that weaker banks would be more likely than healthier banks to elect to participate in the program. The system became compulsory under the Dodd-Frank Act and the FDIC decided to cover the added deposits as part of the regular assessments with no added pricing.
Since the end of the third quarter of 2008, insured deposits are estimated to have increased by approximately 49 percent, from $4.5 trillion to $6.8 trillion. This includes the increase in the insured amount as well as the deposits in the TAG system.
Already $1.2 trillion exceed the basic account coverage amount of $250,000 yet are fully insured through the end of 2012. This represents a 21 percent increase in FDIC exposure.
Banks under $1 billion in assets hold $41 billion of the $1.2 trillion in assets, or 3.4 percent.
Deposits with temporary excess coverage funded 4 percent of assets at banks with less than $10 billion in total assets, and 10.1 percent of assets at banks with more than $10 billion.
Since Dodd-Frank replaced the TAG in December 2010, the median deposit growth rate for banks under $1 billion was 2.8 percent; for banks between $ 1 billion-$10 billion it was 3.3 percent; for banks between $10 billion-$100 billion it was 7 percent; and for banks more than $100 billion it was 14.3 percent.
Things to think about:
- Is the program still needed to maintain liquidity?
- Is the program still needed to meet customer demand for safety? If so, is the need temporary or permanent?
- If the program ends, would you expect to see a significant run-off of deposits in your bank?
- What about alternative funding sources? Are they adequate?
- Would these deposits leave the bank quickly as rates rise?
- If so, what does that mean for interest rate risk?
- Are the benefits worth the costs? Note: bank failure costs were about 3.7 percent higher because the FDIC must pay out more insured deposit claims while receiving lower premiums from acquirers for all deposits.
- What about the moral hazard which may force deposits to flow to weaker institutions?
- Do healthy banks subsidize these risks?
Here's the ultimate question: Do you support an extension of the coverage on these noninterest bearing transaction accounts? Please be on the lookout for our brief survey after you've had a chance to think about some of these important issues.
Should smaller banks be exempted from some CFPB rules?
The Consumer Financial Protection Bureau is looking at the possibility of exempting smaller banks from some of its rules, according to testimony by CFPB Director Richard Cordray last week. Cordray told a House Oversight and Government Reform subcommittee the bureau may consider setting a minimum asset size to exclude community banks from new rules. He added that the agency also will analyze how its rules would affect banks with fewer than $10 billion in assets.
As we look at the general issue of the disparity with which rules and proposed regulations impact smaller banks, it looks like the best approach is to encourage regulators to be as flexible and graduated as possible when it comes to supervisory issues. Such a system would recognize a wider range of sizes, charters and business models before finalizing its rules, and take into consideration states like Oklahoma where the median sized bank is only $95 million in total assets.
Read Cordray's prepared testimony before the House subcommittee by clicking here.
OBA, EverFi hosting free financial literacy webinar next week
Financial literacy education has historically focused on increasing students' financial knowledge, but what role does an individual's attitudes, motivation and behavior play in their financial decisions? The Oklahoma Bankers Association and its new financial literacy partner, EverFi, will host a webinar at noon on Feb. 9 to examine breakthrough findings from a study of 30,000 teenagers across the U.S. The study focused on attitudes and behaviors toward credit cards, debt, savings, and loans. This no-cost Webinar will highlight ways that banks can use this data to engage with young people and potential customers in a more effective way.
You can reserve your webinar seat now at
https://www3.gotomeeting.com/register/114517942.
OBA education corner ...
Education events are taking place as we speak – take the time to join one and invest in your professional knowledge. Some important ones to keep in mind:
- Advanced Analyzing Financial Statements, Feb. 16-17, Oklahoma City — This two-day seminar is designed for those bankers who have extensive knowledge of accounting and financial statement analysis or have completed the three-day seminar, Analyzing Financial Statements, Level I.
- OBA Commercial Lending School, March 4-9, Oklahoma City — The OBA Commercial Lending School is an intensive, one-week functional school designed for bankers with a basic understanding of credit and financial analysis. The school will demonstrate how to apply this knowledge in profitable commercial lending situations.
Another education program to be aware of is the OBA Intern Program. The Intern Program will again be active in 2012 and we're looking for participating banks! For more information on this IMPORTANT program – important not only to aspiring students, but also to participating banks – contact the OBA Education Department at (405) 424-5252!