Editor's Note: New York Community Bancorp and the Nature of SIFIness

Though I'll strongly defend the right of big banks to exist, I agree that they need to be held up to greater scrutiny and higher safety standards than small institutions. If 2008 taught us anything, it's that there is a societal cost when banks with outsize influence need rescuing, and this ought to be reflected in capital requirements and other deterrents to a domino-effect disaster.

But what does it say about the line we've drawn between large and small now that New York Community Bancorp is on the verge of being classified by federal regulators as a systemically important financial institution?

As reported in the May 6 issue of our daily newspaper, New York Community, with $47.6 billion in assets and an appetite for continued growth, is close to crossing the SIFI threshold of $50 billion in assets. Aside from expressing strong interest in protecting the company's generous payout to shareholders — dividends in 2013 equaled 94% of earnings, a ratio that surely would put SIFI supervisors on high alert — New York Community's CEO, Joseph Ficalora, sounds relatively unconcerned about the regulatory implications of his company's growth path.

So is Ficalora the bravest banker on the planet? The most naive? Or plain reckless?

Naive or reckless would be pretty unfair descriptors for Ficalora, and for his bank. As CEO, he has built an impressively durable company that has shown little interest in straying from its deep expertise in multifamily lending in the New York area. As American Banker's Robert Barba notes, "such loans have made up roughly 70% of New York Community's loan portfolio for decades."

But you have to wonder why any banker in the current environment would willingly put himself in the path of more regulation, bigger compliance headaches and the reputational risk of being lumped in with the likes of Citigroup and JPMorgan Chase.

A more vexing question, of course, is whether anyone in Washington actually believes New York Community is on the cusp of carrying systemic importance. All due respect to Ficalora and his company, but in imagining a failure scenario — in my opinion not a bad way to assess an institution's true SIFIness — the loss of New York Community looks like a twig falling off a small tree in the woods.

If we accept that any bank crossing the $50 billion threshold deserves special oversight, then maybe all we have here is a nomenclature problem. Instead of SIFIs, perhaps we should refer to these institutions as F-BOM banks, for having Fifty Billion Or More in assets.

Ok, that's silly. But so is thinking that $50 billion in assets automatically signifies systemic importance. If that's our M.O. now, then I fear we've really lost sight of the risk factors and regulatory gaps that made the last crisis so costly.

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This month, we have a cover story that a bank of any size might relate to.

Across the country, a dropoff in branch transaction volume is giving rise to a new kind of banker, represented on our cover by Aaron Warnecke. He worked on a teller line before joining a PNC Bank pilot branch in Malvern, Pa., where he still handles teller transactions but also talks to customers about loans, trains them on mobile banking apps and new ATM functions, and helps with their small-business needs. He's what is known as a universal banker, at a branch where the teller line is ancient history.

Is this the model of the future for branches? Let us know what you think.

Heather Landy
Editor in Chief
heather.landy@sourcemedia.com