Elon Musk accepted Venezuelan President Nicolás Maduro's challenge to fight, the conflict between Israel and Hamas took a turn for the worse, and Russia agreed to free imprisoned Americans Evan Gershkovich and Paul Whelan in a multicountry prisoner exchange. Here's what else you might want to read this week:
"'Hot Money' That Surged At Banks Gets Tougher Treatment Under FDIC Proposal"
During a jam-packed board meeting, the FDIC advanced policy initiatives on brokered deposits, industrial loan companies, resolution plans, uninsured deposits, and outside ownership and control of banks, aiming to unwind deregulation from the Trump administration. How much of this can be finalized before the departure of FDIC Chair Martin Gruenberg is unclear, but expect a lot of debate and pushback on all of these plans over the next few months.
"Is There a Future for Community Banks?"
I'm not a fan of question headlines particularly when the answer appears to be self-evident. Yes, of course, there's a future for community banks and it's frankly a little weird that my former employer is using this headline as relatively blatant clickbait. That aside, reporter Jim Dobbs (who didn't write the headline) does a good job examining the declining number of community banks, which have fallen from 14,000, 40 years ago to less than 5,000 now. One well-known issue is that de novos used to be plentiful, with 100 on average opening each year prior to the financial crisis. But fewer than 100 de novos have been approved since.
To regain momentum, industry players say community banks have to get better at niche banking and embrace new technologies, including artificial intelligence. Read how community banks can differentiate themselves in today's marketplace and overcome various unique challenges.
"Fed Poised to Cut Rates, Ignoring Trump and GOP Lawmakers"
The Fed appears ready to lower rates in September, despite former President Trump's and GOP lawmakers' accusations of political bias. If it does, it would be the first time the central bank has cut rates this close to a presidential election since 2008, just after the fall of Lehman Brothers. Chair Jerome Powell seems stuck between a rock and a hard place, given that keeping rates steady next month-as it did after this week's policy meeting-would also expose the Fed to criticism.
"Managing the Challenges of Fintech-Driven Loan Portfolios"
During the pandemic (and immediately after it), many community banks relied on fintech partnerships to expand their portfolios of unsecured consumer loans. Now, inflation and elevated interest rates are straining consumers and causing cracks in unsecured credit. This article offers suggestions for community banks who may have strayed too far into high-delinquency markets.
"Senate Republicans Ask FDIC to Withdraw Bank Boards Proposal"
Sens. Thom Tillis, R-NC, J.D. Vance, R-OH, and Tim Scott, the ranking member of the Senate Banking Committee asked the FDIC to withdraw its guidance for corporate governance and risk management, claiming it would disproportionately harm small banks in rural areas. The FDIC proposal, which has also garnered industry pushback, calls for directors to manage the risk profiles of their banks and prevents them from sitting on the boards of both a bank and its parent.
"How Regional Banks Like Citizens and NYCB Are Tackling CRE as Office Sector Drags"
A number of banks have been modifying CRE loans, reducing CRE concentrations, and selling loans at steep discounts, and analysts expect more of the same. Read how Citizens is adapting its business, and how the new leadership team at NYCB is managing that bank's turnaround.
"Capital One-Discover Merger Is Getting a Lot More Political"
Progressives are against the deal, and they're watching it unfold to gauge how skeptical the Biden administration truly is about big-bank mergers. Rep. Maxine Waters, the lead Democrat on the House Financial Services Committee, went so far as to call on regulators to block the deal at a community benefit hearing last month. Meanwhile, the vast majority of Republicans and many moderate Democrats, including Mark Warner, D-VA, support it.
"Five Lessons for Partner Banks from the Synapse Bankruptcy"
Banks that are serious about offering banking as a service need to invest prudently in compliance, governance, and staffing, this article says. And only those that are serious about BaaS will succeed with the model, claims Alex Johnson, founder of Fintech Takes. Johnson joined Banking with Interest this week to discuss BaaS, the Synapse meltdown, and more; check the episode out here.
"Ex-Biden Treasury Official Details Playbook for Next Administration"
Former Treasury official Graham Steele outlined a detailed regulatory reform agenda for the Fed, FDIC, and OCC and implored the next administration to complete new banking regulations quickly.
"Are You Taking Enough Risks?"
CRE exposure, higher interest rates, and liquidity issues shouldn't be taken lightly. However, by managing such risks effectively, bank executives will be better equipped to navigate the economy and financial markets.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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