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The Examiner

The only reason they come to see me is that I know that life is great, and they know I know it.

- Clark Gable, actor, born this day in 1902


In This Issue...


House Members Ask White House to Nominate State Supervisor to FDIC Board

A bipartisan group of House members raised alarm at the potential nominees to the FDIC Board, noting that there is no indication so far of a nominee with state regulatory experience as required by law.

The letter, signed by 15 Congressional Representatives, highlighted the critical role of state supervisors in the nation's dual-banking system and emphasized that at least one FDIC board member must have state bank supervisory experience.

"As you know, the federal government and the states share responsibility for overseeing of the nation's dual banking system, and the FDIC plays a considerable role in that process," reads the letter. "State banking regulators also have many significant responsibilities in our nation's dual banking regulatory structure, as nearly 80 percent of our nation's banks are state-chartered."

"Recent news reports have indicated that the administration is considering two potential nominees to fill the vacancies on the FDIC board. While we certainly acknowledge that these individuals have expertise in federal banking regulation... we are concerned that there still would not be an independent director with state bank regulatory experience on the FDIC Board as required by law."

CSBS has strongly advocated for the White House to nominate to the FDIC Board a state bank supervisor. In December 2018, CSBS President and CEO John Ryan wrote about the legal requirement. In early January, CSBS Senior Vice and Deputy General President Margaret Liu explained the intent of Congress when amending the FDI Act to include a state bank supervisor on the board. And, earlier this week, CSBS also sent a letter to the White House.

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Report: Community Banks Forecast Change in Competitive Landscape

Community banks historically see comparably sized banks as their biggest competitor for a number of lending products, but fintech is changing this outlook, concludes research by two noted economists.

Community banks overall tend to compete with other small banks in the lending business, as reflected in the recent CSBS 2018 Community Banking Survey. Nearly 55 percent of the respondents viewed other small banks as their primary competitor for small business, while 21 percent said the same of residential and nearly 28 percent said small banks were their competition for consumer lending.

However, the outlook for future competition is far different. Only 38 percent of the banks expected small banks to be their primary competition for small business lending, while the percent of community banks that saw residential lending as a competitor dropped to 16 percent and to 20 percent for consumer lending.

The emergence of fintech firms as a loan competitor can be attributed to the change, concludes the paper by Temple University professors William C. Dunkelberg and Jonathon A. Scott. The paper is one of a series that takes an in-depth look at the results of the CSBS annual survey, which this year included 521 community banks from 37 states.

While less than one percent of the surveyed banks currently view fintech as a competitor for small business loans, 7 percent do so in the future. A similar shift is apparent with the other two sectors: 4 percent of the banks currently see fintech as a competitor for residential loans, but that number rose to 13 percent when they forecast future competition. And while 2 percent of community banks currently see fintech as a competitor for consumer loans, 15 percent see then as future competition.  

                                                                     Source: CSBS 2018 Community Bank Survey

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Research Conference Call for Papers Now Open

The call for papers is now open for the seventh annual Community Banking in the 21st Century research and policy conference, sponsored by the Federal Reserve, the Conference of State Bank Supervisors and the Federal Deposit Insurance Corp. The conference will be held Oct. 1-2, 2019, at the Federal Reserve Bank of St. Louis. The deadline to submit papers this year will be May 31, 2019. Authors of accepted papers will be notified by July 19, 2019. Topics of interest for the conference include, but are not limited to:

  • the role of community banks in the U.S. financial system,
  • advantages and disadvantages of the community bank business model,
  • the effects of government policy on community banks,
  • significant challenges faced by community banks, and
  • new opportunities for community banks.

For more information, see the conference website.

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Conference Survey Analysis Shows Competitive Advantage of Relationship Lending

In a recent paper by Temple University professors William C. Dunkelberg and Jonathon A. Scott, the authors show how relationship lending provides a competitive advantage for community banks. The paper examined the CSBS 2018 Community Banking Survey and compared its findings with recent studies by the FDIC and National Federal of Independent Business. While all banks rely on roughly the same hard data, only small banks are better suited to incorporate relationship information in the credit decision process.

"Community Banks and Small Business Lending" is part of a series of papers sponsored by CSBS that takes an in-depth look at the results of the CSBS annual survey.

Read the current paper (listed above):
Community Banks Forecast Change in Competitive Landscape

Read the previous papers:
Community Banks and Small Business Lending
Financial Regulations Are a "Regressive Tax" on Small Banks
Banks' Size Impacts Their Technology Offering

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In the Media

FDIC nominations
The two vacancies on the FDIC board are getting noticed, with American Banker and Politico Pro reporting that 15 House members sent a letter to the White House about prospective contenders lacking the state bank supervisory experience required by statute. “We believe you have a unique opportunity with these two appointments to ensure that the state banking system is represented at the FDIC, and we hope the administration will nominate at least one individual who has such experience," Politico Pro wrote in reporting on the letter contents. 

More Fed nominations pending
The Wall Street Journal, Bloomberg and others reported that President Trump is considering Herman Cain, the former pizza magnate and presidential candidate, for a seat on the Federal Reserve Board. 

Small-dollar lending rule change
The American Banker cited CSBS’s comment letter to the FDIC on regulating small-dollar loans, quoting John Ryan as saying, “State regulators oppose any federal agency action that fails to respect the ability of states to control interest rates and impose additional consumer protections for small-dollar credit products.”

GSE privatization 
Senate Banking Committee Chairman Mike Crapo (R-Idaho) released an outline to transition Fannie Mae and Freddie Mac away from full government control. Reuters and the Washington Examiner cover Sen. Crapo’s plan while this article from Bloomberg puts the emphasis on a push from the White House to see the GSEs reformed. Key details per Reuters: “Crapo’s plan would privatize Fannie and Freddie, and…plac[e] limits on how many mortgages any one entity can guarantee. Banks would not be permitted to be direct competitors…[The GSEs] would still be overseen by the Federal Housing Finance Agency.” Further, Politico Pro reported that “Ginnie Mae would operate the platform to turn mortgages into securities and provide a catastrophic government guarantee,” while GSE multifamily businesses would be sold.

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