Dos and Don'ts for Small Banks
October 9, 2013 8:00 AM
Think twice about buying a far-away bank. Consider getting into equipment leasing. Trust your instincts in credit decisions. Those are among the insights from a slew of research papers on community banks presented at a Federal Reserve conference last week.
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Unintended Consequences
The Dodd-Frank act's effort to help consumers by standardizing loan terms actually stymies the availability of credit to needy borrowers, a team or researchers concluded.
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Peril of Long-Distance M&A
The performance of bank acquisitions deteriorates as the geographical distance between buyer and seller increases , another team found.
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Volcker Rule Fallout
Community banks that use derivatives have better financial results . As a result, researchers questioned a belief that the Volcker Rule would be neutral for smaller institutions.
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Failures Harm Communities
A bank's failure can harm the economic performance of the community it serves, a Fed researcher determined.
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Valuing Transparency
Community banks' ability to assess the creditworthiness of a small business increased the borrower's access to credit , according to a pair of FDIC researchers who quantified the effect.
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Intangibles Matter
Statistics support the value of bankers' use of subjective knowledge , or soft information, to lend to small businesses, a similar study found.
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Learning About Leasing
Banks that focus on equipment leasing perform better than those that avoid it, another study found.
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Betting on the Jockey
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Looking at Bank Comebacks
A study of improved Camels ratings reached a similar conclusion about leadership. A majority of the banks with significant Camels improvement had changes in ownership or management.
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Regulatory Consistency
Data debunk the notion that regulators have been inconsistent in assigning Camels ratings, although supervisors were "somewhat tighter" with banks in the early 1990s and 2008, research concluded.
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Easy Math
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Another Call for Simplicity
Dodd-Frank is "an ineffectual remedy " and "will not work unless simplified and codified quickly," according to the controversial findings of one research team.
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