I enjoyed your column "
• A timeframe would have been helpful in conjunction with your statement that the number of banks has already been cut in half, to roughly 7,000. In trying to establish a timeframe of the decline, the furthest I could go back using FDIC's quarterly banking profile was to December 31, 1994. On that call reporting date, there were 10,452 commercial banks in the country. At September 30, 2010, the most recent call reporting date for which industry information is available, there were 6,622. Applying the average annual decline in bank charters over those sixteen or so years to locate the point in time where there were twice the current number of charters would put us in 1983. A lot of math, but my point is that "already" as you used it could equate to 27 years. I hope that community bankers will not feel they are out of step with some rush to sell their banking franchise.
• Rather than moving to a different basis for supervision of banks with less than $1 billion in assets, I would hope that bank examinations by all regulators could be conducted in a risk-focused manner. In rural areas, one of the most pressing concerns of the bankers I interact with is their ability to continue offering home loans in light of newly announced and pending federal regulations regarding the origination and servicing of those loans. If a community bank is not going to sell any of its mortgage loans into the secondary market, having not only "skin" in the transaction but holding and servicing the entire loan amount, the risks which played out over the past few years in mortgage securitization are not present. Broad application of the new regulations will provide few options for people in rural areas wanting to purchase homes.
• Your article referenced comments of community bankers that their federal examiners are now concerned with defending their performance to supervisors in Washington. Although I am far outside the Beltway and far from the sand states, I have observed federal regulators we work with being allowed less leeway in risk-focusing examinations and, when necessary, enforcement actions. I feel that federal regulators, regardless of where they are located, work under the specter of the OIG reports issued by each federal agency following a bank failure of a prescribed size, the common theme being that the regulator did not move quickly enough.
• A concerning peripheral issue in the discussion of declining bank numbers is comments attributed by some community bankers to federal regulators to the effect that, if a bank doesn't grow to some particular asset size, it will not be a survivor. As a regulator who supervises many banks which hold less than $100 million in assets, I see the survival factor being one of shareholder expectations rather than inability to compete.
John Munn
Director
Nebraska Department of Banking and Finance
