Forget About Size: The best way to give deserving banks regulatory relief without walking back necessary aspects of Dodd-Frank is to ease rules for institutions that keep their businesses simple, according to Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig. That means staying away from most derivatives and maintaining an equity-to-assets ratio of at least 10%, among other suggested qualifications. A lot of small and regional banks would qualify for regulatory relief under this plan, but bigger banks that avoided attempts to merge investment and commercial banking would also be eligible. Readers were generally supportive of Hoenig's plan, although "countrybanker" added that big banks would likely succeed in shutting it down. "The 'too big to fail' banks do not want to be on an island by themselves," he writes. "They need the goodwill of community banks to hide behind." Meanwhile, Boston University finance professor Edward Kane added several additional proposals aimed at fixing TBTF. "The fundamental remedy is to establish in law that megabank managers owe fiduciary duties directly to taxpayers," he writes. "The way it is now, managers defend their actions by claiming that they have a formal duty to maximize value for shareholders. But if they are 'too big to fail,' that norm actually entails a duty to steal value from taxpayers."
Small Banks Stay in the Picture: Congress shouldn't get so focused on dealing with big banks that they neglect to help out their struggling, smaller counterparts, according to industry expert Richard J. Parsons. "Every day, community bank presidents are forced to decide whether to devote limited resources to growing the bank and thus the nation's economy or meeting the escalating regulatory and compliance demands designed and signed off by Washington lawmakers," he writes. Commenter "ahump" agreed, criticizing politicians for appearing unsympathetic to the plight of community banks. But reader Ed Walker argued that community banks have themselves to blame for siding with big banks while Dodd-Frank was being written rather than fighting for their own interests. "Who is on their side now?" he asks. "The big banks don't care about them. Liberals think they suck because they screwed homeowners for the sole benefit of the big banks. They have no friends, and it's their fault."
Also on the blog: Apple Pay was smart to put off launching its own loyalty program, according to PaymentsSource reporter Evan Schuman. He says it makes more sense to get retailers on the mobile wallet's side by supporting their loyalty cards first.
The Federal Deposit Insurance Corp.'s plan to implement risk-based premiums for small banks doesn't go far enough, according to bank consultant and economist Kenneth Thomas. He says big banks should have risk-based assessments too, since this would help offset their competitive advantage.
Broker-dealers don't necessarily break their fiduciary duty to clients by recommending more expensive options, according to attorney Melanie Fein. That's because good investment advice means taking a wide variety of factors into consideration, including economic conditions, the possible impact of inflation or deflation, clients' need for liquidity and their risk preferences.
Thaya Brook Knight of the Cato Institute says that disclosure requirements go too far when they have more to do with social movements than sound business. "Securities regulation, especially regulation aimed at all federally registered companies, should not be larded with ideologically motivated requirements," she writes.
Good customer service depends in large part on collecting customer feedback and data and making it accessible to all employees, according to Victor Liu and Robert Schiff.
Congress should make haste in extending the Mortgage Debt Forgiveness Relief Act to avoid burdening homeowners with hefty tax bills for foreclosures and loan modifications, according to housing advocate Lou Tisler.
Check out our new weekly roundup of news about women in the financial industry. This week: Rep. Maxine Waters' crusade for more diversity in banks, and International Monetary Fund head Christine Christine Lagarde's attempt to broker a dialogue about the possibility of a Greek exit from the European Union.
