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Are you pushing back when you think examiners go too far? How's that working? One Ohio banker tried it, and instead of retribution he got relief.
August 17
Jeff Gerrish, a lawyer in Memphis who spends a lot of his time advocating on behalf of community banks to federal regulators, sees a thawing in banker-regulator relations, but says it is one born of fatigue rather than enlightenment.
He tells the story of a client with too little capital and too many nonperforming loans that recently had a showdown with regulators from multiple agencies. "The meeting was actually productive," and the bank is getting some time to attempt a turnaround, Gerrish says.
"Everyone is tired and they realize table pounding isn't going to help," he says.
Bob Clarke, branded "the regulator from hell" in the early 1990s when he led the Office of the Comptroller of the Currency, says he too is seeing some increased flexibility, especially in how real estate concentration limits are applied.
"We've been able to go back with some success and appeal to the regulators to let the concentration number move up a little bit when the bank is trying to take care of long-term customers," he says.
Clarke, now a lawyer in Houston representing community banks, says he is even seeing fewer enforcement actions.
"I do think that the [congressional] hearings that have been held … asking regulators to explain why they do what they do, I think that has had a little bit of a positive effect," Clarke says.
Another of these hearings was held Tuesday outside Atlanta by a House Financial Services subcommittee on the "mixed messages" Washington may be sending community bankers.
Nonetheless, Clarke says, plenty of problems remain.
"They are still being very tough and insisting on these extraordinarily high capital levels," he says. "And a lot of the banks are just scared because they don't know what the ultimate capital number is going to be."
Community bankers are fine with high capital levels; most of them have always held more than the required minimums. And they aren't asking examiners to ignore nonperforming loans; they know they have big credit quality problems.
But they want consistency on capital and they want the time and freedom to work with borrowers they believe will be able to repay.
That's why we have community banks — lenders close enough to local borrowers to know which ones are most likely to repay. Will they get it right every time? No. But are those mistakes worth the benefit of credit that creates jobs and feeds economic growth? Yes.
"The talent and commitment of a borrower can fill in a lot of the blanks on a loan application," says Mike Van Buskirk, president and CEO of the Ohio Bankers League. "Community banks have a vested interest in the economic and social health of a defined area. They can say yes to a loan application that Jamie Dimon would have to turn down, because they know more. They are able to measure the intangibles."
