Who Speaks for the Big Banks? It's Not Always Clear

WASHINGTON — In the wake of the financial crisis and decades of industry consolidation, there are undoubtedly fewer large financial institutions.

But the same is not true for industry trade groups representing large banks.

While community banks are represented in Washington by just two trade associations — the Independent Community Bankers of America and the American Bankers Association — there are more than a half dozen different groups speaking for large banks.

Some argue that's the natural result of the distinct, and sometimes competing, issues larges companies care about, but others said the surfeit of groups may confuse the message.

"There is potential concern that you might have a lack of clarity," said Arthur Wilmarth, a banking law professor at George Washington University. The situation "might be more clear if you just had one."

At first glance, four different groups represent large commercial banking companies, while large banks also belong to product-specific associations, as well as U.S.-based groups representing internationally-active institutions.

Each group says it carves out unique space, and many agree the multiple associations have improved coordination. Yet the differences between them at times seem subtle. Some said community banks' voice is more focused because they lack lobbying arms to craft a tailored message.

"To some extent the big bank holding companies are just so big that they don't always have interests that run exactly the same way," said one banking attorney who does work for some banking trade groups and asked not to be identified. "Each of them has their own significant Washington operation."

As a result, some industry players argue that large banks have too many voices to be truly effective, because each trade group representing their interests emphasizes different things. "One of the reasons that the ICBA was so effective in the financial reform debate is that we were a single unified voice for community banks and the large banks had a fractured voice," said Camden Fine, the president of ICBA. "They weren't always in harmony, which then limited their effectiveness on Capitol Hill."

Of the groups representing big banks, the ABA is both the largest and the most divided. It is the only group that claims to speak for the entire banking industry, regardless of size, a position that can be tricky when it comes to certain issues.

The Financial Services Roundtable, meanwhile, has traditionally represented the interests of the 100 largest financial services companies, but since its members include banks and nonbanks, it, too, must balance competing interests.

Two additional associations speak for the biggest companies. The Clearing House, which has provided payment and clearing services since the 1800s, has emerged as a major voice on bank regulatory issues on behalf of top executives at the roughly 20 largest U.S. commercial banks.

The Financial Services Forum provides a venue for chief executive officers at the 20 largest financial services companies, including some nonbanks, to meet and formulate policy positions, and address economic issues not directly tied to financial services but that affect the industry.

"One could speculate that each of the bank trade associations would like to have the entire playing field to themselves, but they can't, because there are several different very effective ones," said L. Richard Fischer, a partner at Morrison & Foerster.

The list does not end there but the others largely focus on specific segments within the financial services industry. For example, the Consumer Bankers Association includes members of both large- and medium-sized retail banking operations. The Mortgage Bankers Association and the Securities Industry and Financial Markets Association also count the biggest companies among their members.

Some trade group executives said their goal is to speak for just part of a big bank, not necessarily the entire institution.

"We represent a certain segment of a bank, not the entire bank," said Richard Hunt, the president of the Consumer Bankers Association.

For example, whereas a group like the CBA may stay clear of other large-bank issues like the ban in the Dodd-Frank Act on banks' proprietary trading, it would be more vocal on retail-oriented topics such as the creation of the Consumer Financial Protection Bureau, Hunt said.

"The CFPB affects our members and our mission more than any other trade association. … CFPB will touch every aspect of our business," he said.

Large banks also participate in various groups specializing in international banking and finance issues, and general business-focused groups such as the Chamber of Commerce have also fought on issues which impact the biggest banks.

"I suspect what we're seeing is in a way an artifact of the tremendous growth and proliferation in financial services, particularly the largest institutions, during the boom," said Wilmarth. "But I also wonder whether the leaders of the largest institutions see some benefit in not only having one channel."

The abundance of groups stems to a large degree from changing policies allowing for more diversified and distinct companies. The passage of the Gramm-Leach-Bliley Act in 1999 removed obstacles that prevented a banking company from offering investment and insurance services — and vice versa. As a result, the predecessor to the Roundtable expanded to include providers of an array of services. Today, many of its members do not specialize in traditional banking.

"We have a broad voice among whom we represent. We represent the industry," said Scott Talbott, the roundtable's senior vice president of government affairs.

"There are very few areas where we disagree," Talbott said of the multiple associations. "Ninety percent of the time all the trade associations agree. Having multiple trades weigh in on an issue is beneficial."

But some said the Roundtable's expansion to include many different kinds of firms led to a need for a voice focusing just on large commercial bank issues.

"They're all big, but they're not all banks," said Fischer. "Their focus is on issues primarily dealing with the very largest companies but in a broader context. For example, systemically important companies is not just a bank issue. It can be much broader."

On issues more directly relevant to just the big banks, such as deposit insurance premiums, the Clearing House has taken more of a lead with efforts such as submitting comment letters or analyzing how regulatory policy will affect the industry.

"The Clearing House has created a whole new model of leadership in the commercial bank space. They are bringing data driven research to their analysis of legislative and regulatory proposals. They've really established themselves as a thought leader," said a source at a big bank, who spoke on the condition of anonymity. "The Clearing House has stepped in to fill a void and done a really impressive job. It is a much more focused industry association."

Fischer agreed.

"When the Clearing House gets involved in an issue, they ordinarily take the lead," he said. "The reason for that is very simple: it is made up of the very biggest banks and the participation in the Clearing House is from the most senior people at those banks."

But if a certain group is leading the charge on a matter relevant to large companies, it also must coordinate among other groups that also care about the issue, especially in the heightened regulatory atmosphere following the crisis and the passage of the Dodd-Frank Act.

"Will there be issues that are so important that they will overlap various trade groups, and various trade groups will address them individually? Absolutely," said Rob Nichols, the president and chief executive officer of the Financial Services Forum. "A great example of that are the aspects of Dodd-Frank having to do with enhanced prudential supervision of large financial institutions."

Karen Shaw Petrou, the managing partner for Federal Financial Analytics Inc. said while the groups grew out of histories that each "makes sense on its own, the question is: How do they all come together?

"The history is essentially irrelevant under the kinds of intense stress the industry is under right now," Petrou said.

She added that the groups of late have sought to avoid conflict in favor of coordination. "Both on the Hill and in the regulatory arena, … the trades are coordinating far better than I can ever recall them doing," she said.

Fischer said there are instances where different trade groups will fight over leading the advocacy for certain issues, but that is not the norm.

"In some cases it's which association identifies the issue first and then whether another trade association feels strongly enough about that particular issue to try to take control," he said. "Sometimes it doesn't go well. But most of the time the associations and their membership recognize that cooperation is essential. It's human nature to want to run things. Cooperation is how you avoid being your own worst enemy."

The trade groups themselves say they each offers something specific.

Due to its size, the ABA maintains several subgroups to address the discrete activities lying within a large financial services company, from credit cards to securities to insurance. But since the vast majority of ABA members are community banks, which often come down on a different side of an issue than large institutions, the group must at times not take a strong position.

"The American Bankers Association on some things reflects the views of their small and midsized members. But on issues like deposit insurance assessments, they've been conflicted," Wilmarth said. "On issues where there is a conflict between big and small banks the ABA has some difficulty and struggles. They can't speak as clearly as the ICBA certainly, but they also can't speak as clearly for the big banks as the Roundtable or The Clearing House."

But Jeffrey Owen, the ABA's chief of staff, said its role as a voice for the entire banking industry also adds critical weight to its message.

"We have a responsibility to our members to be a group that promotes unity and pulls people together," he said. "We have aligned ourselves with all the business segments within institutions large and small to make sure that we're not only CEO-focused, but those that do those lines of business day-to-day and have a policy focus are involved. … There isn't any group other than the ABA that can bring all of this together. It doesn't mean that we tell them what to do. This is more of a network than a zero sum game."

Some groups also said their role is significantly different. For example, Nichols said the Financial Services Forum provides a unique setting for CEOs to meet and take a specialized interest in broader economic topics, particularly international issues, that the other trade groups don't tackle.

"Obviously there's a focus on capital markets and the financial sector, but we are also focused on a whole arc of issues outside of the parochial bottom-line interests of the industry: trade agreements, making globalization work for all Americans and improving conditions for the American worker," he said.