Banker Panel Uses FDIC Forum to Push Back Against Congress

A panel of bank executives pleaded to federal regulators Thursday to join them in convincing lawmakers to ease the regulatory burden on small banks.

"I would ask the regulators to join forces with banks and go to the legislators and say, 'this stuff you guys are proposing is ridiculous,'" said Rob Hansen, the president and chief executive at Liberty Trust & Savings Bank in Durant, Iowa, drawing rousing applause from attendees of the Federal Deposit Insurance Corp.'s first "future of community banking" conference.

Hansen, along with three other panelists, spoke on the challenges and opportunities facing smaller financial institutions. Addressing rising compliance costs while keeping up with technology and making money were among the key issues covered with Sandra Thompson, the FDIC's director of the division of risk management supervision and the panel's moderator.

"The cost of funds today is as low as I've ever seen in my tenure and probably most of those in this room," Hansen said. Costs add up; Hansen said Liberty Trust is spending $50,000 to replace two automated teller machines in the next month to make them compliant with new Americans With Disabilities Act rules effective March 15.

Kelly King, the chairman and chief executive of BB&T Corp., added that the Winston-Salem, N.C., regional banking company is getting ready to spend $100 million on its ATMs. While BB&T already has mobile banking, King said it has been difficult to stay advanced while continuing to meet the demands of traditional branch banking.

"What has been an interesting challenge for a while, and maybe forever, is we have to run parallel distribution systems," King said. "We have to prioritize. You cannot do everything."

The other panelists agreed with King's assessment, though many community banks are just beginning to add mobile banking.

"You have to draw from the lessons from the past but you also have to look to the future at the rapidly changing consumer" demographics, said Dorothy Savarese, the president and chief executive officer at The Cape Cod Five Cents Savings Bank in Harwich Port, Mass., which is set to launch mobile banking next month. "You have to look at what it is that they want and how it is that they want it."

Bankers said that providing technological enhancements to consumers, particularly mobile banking, is critical. At the same hand, complying with consumer-related regulation will be a challenge.

Hansen said increased regulation has even made it difficult to retain and develop banking successors. "I feel it has been very difficult to attract and retain talent in rural communities," he said. "We had a position for operations open three times in the last 10 years and it took a year to fill the position each time."

Hansen also conveyed a response from another banker he surveyed before the conference who said more than half of their officers would leave the banking industry if they could. "In every answer they said the mounting regulation was slowly sucking the life and joy out of their work and they honestly don't know how much longer they can keep it up," he said.

Attendees questioned panelists about how to improve the examination process. Many panelists complimented the process but recommended making improvements to consistency, clarity and return time.

Savarese cautioned regulators about correlating macro situations to small bank situations. "We have to be careful about drawing false conclusions about causality from correlation," she said.

Savarese said she invites examiners to her board meetings, which has helped the directors understand what's expected in the examination.

"I don't have a problem with knowing what is expected," King added. "I do sometimes have a problem with what is expected."

For those curious as to why King, who runs a $175 billion-asset company, was on the panel, Thompson told attendees that the veteran executive was once a small banker. King chimed in, describing the process of reorganizing the company in the late 1980s when they wanted to avoid being looked as a big bank.

"To me, community banks are really great because they are client focused and community focused," King said. "The big banks tend to be product and earnings focused."

While a larger part of the conference discussed regulatory burdens, the banker panel refused to blame regulators on all their pains. In fact, many thanked the FDIC for encouraging a dialogue by offering the conference.

"It's not the regulators. It's more the legislators," said William Loving Jr., the president and chief executive at Pendleton Community Bank Inc. in Franklin, W. Va. He encouraged regulators to look at a tiered regulatory system for new items such as the escrow rule for mortgages. He recalled one community bank that exited mortgage lending because it couldn't comply with the new rule.

"This causes the community to lose opportunities for growth," Loving said. "Tiered legislation helps us manage the day to day."