At some point recently, you’ve probably asked yourself, “What’s next for banking?”
I know I’ve asked that question many times as the run-up to the 2020 elections gets more crowded.
The political turmoil coming out of Washington dominates the daily headlines and makes up most of the lead stories on the evening n
ews. But one thing I have noticed is most of the Democratic presidential candidates are not talking about you and your business any more.
And that’s what gets my imagination going, sometimes in circles. It happens whether I’m in a group setting, or driving to or from the next meeting on my calendar or just sitting on the back porch watching birds and squirrels do their thing.
I wish I knew for certain what that “next thing” was, but it’s a moving target and changes frequently. We hear about “Green New Deals,” “increasing taxes” for the very wealthy, “Medicare for all,” “free college tuition” and more. Presidential candidates seem to take turns throwing out ideas to spend more of your money and otherwise equalize outcomes.
Following my heart attack which occurred just before my birthday, I was told to just chill out. Well, I’ve kind of done that and, frankly, it’s pretty boring. But while chilling out, I inevitably got to thinking about what might be around the corner for our member banks.
For those of you who don’t know, I suffered a major heart attack on April 10, and I’ve been slowly re-engaging in Washington’s war on traditional banks since I’ve been laid up. Oh, and make no mistake – it is a war. I’m back now and doing well, all things considered.
One of the first things the new chairman of the House Committee on Financial Services, Rep. Maxine Waters (D-Calif.), did was to create a separate Subcommittee on Diversity and Inclusion. The good news is Oklahoma’s Rep. Frank Lucas serves on the Subcommittee.
I’ve also listened to or read some of the chairman’s speeches and many other articles about this general subject. In my opinion, the diversity and inclusion issue is likely to be the next major issue traditional community banks might face. It’s probably not going to impact your bottom line, but it will impact your compliance requirements.
Not that diversity and inclusion are bad things – they’re not. But I do worry about the reality of some traditional community bank markets, particularly in rural areas, and throughout a shrinking non-urban population base.
Some states, like California, already have laws that mandate more gender diversity on corporate boards doing business in that state. When that mandate begins to be enforced, we’re talking about hundreds of corporate board seats that will shift from men to women over the next two years, including banks. Note that this shift has nothing to do with competence, or knowledge or ability. Just gender.
The American Bankers Association has recently established a “dashboard’’ that shows the gender, ethnic and generational breakdown of its employees. In large cities and densely populated urban areas, this issue (diversity and inclusion) is a reality today. The ABA is smart to have recognized its importance as it continues to be the leading spokesperson for the banking industry.
Among the largest banks, a push is underway to create the kind of diverse, equitable and inclusive workplace that attracts and retains the best talent. I understand all that, and particularly with respect to CRA revisions.
Here’s my question: What if the area from which to draw employees isn’t so diverse? What will bank examiners do to “encourage” traditional (non-urban) community banks to have a more diversified employee roster? What will they be looking for? How will revisions to the CRA impact these banks and their customer base?
In this part of the world, there isn’t a lot of diversity in rural areas. Yes, I understand 43 percent of millennials – the nation’s largest generation – are not white. I understand that by 2055, it’s projected no one race or ethnic group will make up a majority of U.S. citizens. That’s not my point.
My point is this: How are the regulators going to enforce this new directive when the population base a bank serves is itself not diverse?
I grew up in a town that was all white. There were no minorities in Plattsmouth, Nebraska. Seventy-plus years later, there still are no minorities living in my hometown. Even if I missed counting a few families who are Hispanic or African-American living there, there aren’t very many minorities.
What happens to a bank that happens to be located in a town like that, and there is no (or at least not much of a) diverse population in its market area? I don’t know the answer to the question, but in today’s world, I think it’s important for traditional community banks to at least have a policy in place that will cover them on this point.
This is my primary issue of concern, for all non-metropolitan banks. It’s that “unconscious bias” we all have and, of which, we’re not generally aware, which can trip you up with examiners and Justice Department officials. Gender, of course, is critical to such a goal, but other elements are equally worth considering – like sexual orientation, disabilities and religion.
How much of these kinds of issues come into your daily thinking process? What kind of training have you provided for your staff? Do you have policies in place that clarify your bank is aware of the necessity to have a workforce (and customer base) made up of people who are different from you in some way? Do you openly discuss this issue with your board members and document you did so?
As our new fiscal year begins this month and the OBA Convention takes place, the OBA’s officers and board of directors are very much attuned to the need for more training generally on this subject. Look for more of these opportunities to become available for you and your management team.
And watch for indicators from banking regulators that diversity and inclusion are key issues on which your bank will be evaluated, regardless of the underlying population in your community and market area.