'Build Up Capital Until It Hurts': Comments of the Week
September 12, 2014 1:02 PM
American Banker readers share their views on the most pressing banking topics of the week. Comments are excerpted from reader response sections of AmericanBanker.com articles and from our social media platforms.
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On regulators' refusal to provide specific guidance for banking relationships with money transmitters serving Somali-Americans:
"The plain-English translation goes like this: 'We're not going to give you any type of concrete standards or guidelines because we want to be able to criticize whatever you're doing no matter how much time, effort and diligence you put into it.'"
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On the average consumer's lack of interest in mobile wallets:
"Until we convince the public there is no need for cash or carrying a driver's license with you it seems the physical wallet will always be with the consumer and their habit is to use the physical card because it is just as easy to use as the mobile payment. Can the industry get rid of cash and the need to have a physical license on your person? Not any time soon."
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On how the security benefits of Apple Pay compare to EMV chip-and-PIN technology:
"We all know -- and credit card companies are frequently admitting -- that PayPass and other contactless payments over the existing networks are an abject failure. American Express has admitted as much and then went on to state that swiping a credit card is something that consumers do not find bothersome. Where you are trying to portray Apple Pay as valuable is in regards to security. That remains to be seen. If Home Depot et al. had been accepting only EMV, their data breach would have been a non-issue. EMV is much more secure and doesn't cost me $949 [the off-contract price of an iPhone 6]."
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On the Office of the Comptroller of the Currency's newly released risk management guidelines for big banks:
"[OCC Comptroller Thomas] Curry's announcement of new 'heightened expectations' for risk management of national banks evokes images of mythical Faber College Dean Vernon Wormer announcing 'Super Secret Probation' in an effort to expel the entire Delta Tau Chi fraternity in the 1978 movie classic Animal House. Given the serial scandals that continue at national banks, Mr. Curry appears to share Dean Wormer's lack of success. But his efforts are far less entertaining."
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On the suggestion that regulators stabilize the repo market by requiring broker-dealers to use Treasury securities as collateral:
"Generally ... the authors' central point makes a lot of sense. It makes two assumptions, however, that may not be as reliable as today they seem: first, that there will always be an adequate supply of short-term Treasuries, and second, that they will always be of high quality."
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On a 15-year mortgage product that aims to make homeownership affordable for low- and middle-income borrowers:
"The interesting question will be whether, if these loans perform as well as they should ... banks might think about permanently dropping the interest rate on 15-year loans made to borrowers who don't meet today's tight credit standards, and opening that credit box without subsidy."
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On an alternative way to determine the appropriate capital level for the nation's biggest banks:
"A capital surcharge for the [eight] largest systemically important banks is a good idea. But let's admit it, any number that [Federal Reserve Governor Daniel] Tarullo & Co. pick will be an arbitrary one. Moreover, the number they pick will act as a ceiling, not a floor, on capital. How about ditching the hubris of setting a capital target and, in its place, have a dynamic capital model. Let those [eight] firms, which will never, ever have enough capital to internalize their negative effects on the system, continue to accrete capital indefinitely...until it hurts! Then and only then can they set about the business of adjusting their business model (size, complexity, etc.) so that we all need not live in fear of their failure."
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On the argument for including municipal securities in the liquidity coverage ratio:
"The exclusion of municipal securities from the definition of high quality liquid assets is a glaring error in the [liquidity coverage ratio] rule and will need to be addressed. As Senator [Charles] Schumer correctly points out, a broader pool of quality assets will be needed to address an increase in demand during periods of financial stress."
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On the news that banks are pushing business customers to expand their relationships beyond loans:
"Cross-selling is a whole lot easier now that the Fed has abandoned its enforcement responsibilities for the anti-tying provisions of the Bank Holding Company Act. Talk about 'dead letter law?'"
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On a New York City law that requires banks that hold the city's deposits to withstand evaluation on their investments in low-income communities:
"Banks, especially bigger banks, expend enormous energy to secure municipal deposits, but frequently fail to show the same energy in the social responsibility activities to qualify for those deposits. The fact that many state and local governments do not require such quid pro quo in placing their deposits only emboldens banks to take the money and use it for their own purposes, rather than demonstrating their responsibilities to the taxpayers who are the ultimate source of those deposits."
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(Image: Bloomberg News)
