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John Tyson
CFO;Chief Financial Officer
Altamaha Bank & Trust Company
Vidalia, GA
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Original Message:
Sent: 06-23-2022 16:39
From: Barb Rehm
Subject: Weekly News Roundup
A magnitude 5.9 earthquake in Afghanistan killed over 1,000 people, and President Biden plans to ask Congress for (but likely won't get) a holiday on federal gas taxes to lower prices at the pump. Hunting pythons this summer? Don't miss these tips. Here's what else you might want to read this week.
"How Banks Can Respond to the Shifting Funding Landscape"
Founder and CEO of The CorePoint and Peer Intelligence participant @Neil Stanley joined "Banking with Interest" recently to share his thoughts on the Federal Reserve interest rate outlook, how soon banks should wait to raise deposit costs, alternative investments to consider, and more. IntraFi published the above article based on that conversation, which has been edited for length and clarity.
"An 'Untenable' Talent Climate"
Bank Director's annual survey on compensation found that greater competition for talent is forcing banks to increase wages and offer more perks for new hires and existing employees. "Our most significant competitor just implemented [four] weeks of vacation for ALL new hires and pays up to 25% higher for retail banking positions," said one community bank exec. "That cost structure is untenable unless we earn more." Check out Bank Director's full compensation report here.
"FDIC Plans to Raise Assessments in Face of Deposit Glut"
The agency is planning to raise its assessment rates for insured depository institutions by two basis points in 2023. Banks are expected to push back on the timing of the increase, given the likelihood of a recession this year or next.
The FDIC is also planning to add a section on the underbanked back to its biannual report on the unbanked. Former Chair Jelena McWilliams removed the section a couple years ago, claiming that the term "underbanked" was subjective and that the agency had defined it inconsistently over the years, which made survey-to-survey comparisons difficult.
"Warning Signs Emerge for Neobanks: 'Doomed to Not Survive"
So-called "challenger" banks may not pose as much of a challenge to traditional institutions as once believed. A new report found that just 5% of the world's 400 neobanks are breaking even, and as the economic tide goes out, many of their valuations are expected to come under additional pressure. According to a senior partner at Simon Kucher, 75% of them won't be around five years from now.
"CFPB Launches Opening Salvo in Battle Against Credit Card Late Fees"
The CFPB issued a proposal this week on credit card late fees and late payments aimed at curbing what banks and other issuers charge. For months, Director Rohit Chopra has signaled that the bureau wants to cut late fees, which total $12 billion annually. "Credit card late fees are big revenue generators for card issuers. We want to know how the card issuers determine these fees and whether existing rules are undermining the reforms enacted by Congress over a decade ago," he said, adding that "current rules might give companies the incentive to impose big hikes based on inflation."
"'We Grew Too Quickly': Crypto Faces Reckoning as Market Rocked"
The crypto crash has erased billions in wealth and tarnished the industry's standing in Washington following a two-year lobbying campaign to do just the opposite. "When everything's going up, it hides a lot," noted Commodity Futures Trading Commissioner Caroline Pham. "From a regulator's perspective, it really just underscores that we just need to be doing something."
Despite the recent swoon in the digital-asset market, some institutions are taking the long view. For instance, Cross River Bank just hired the former compliance chief of Robinhood's crypto unit as it aims to ramp up its crypto business.
"Global Central Banks Are Playing Catch Up with the Fed"
That mournful sound you're hearing is the collective moaning of doves around the world. As the Fed's rate hikes push the dollar ever higher, several foreign central banks have followed or are planning to follow suit to support their own currencies. If they don't, high dollar-based commodity prices could become even more expensive, making inflation in their countries worse. On the other hand, overtightening could trigger a global recession, especially given how growth is already slowing in Asia and Europe.
President of the Philadelphia Fed Patrick Harker did tell Yahoo Finance yesterday that demand was showing signs of cooling in the U.S., and during a Wednesday hearing with the Senate Banking Committee on inflation and the economy, Fed Chair Jerome Powell said that a U.S. recession was "certainly a possibility." However, Powell also reiterated that the Fed will keep hiking rates until it sees "compelling evidence" that inflation is abating.
"Three Ways Community Banks Can Respond to Generational Digital Payments Needs"
Eighty-three percent of consumers are using digital wallets or mobile payment apps at least occasionally, including 71% of people aged 55 years and older, according to Fed research. To compete with nonbank payment providers, including large, well-known tech companies such as Apple, banks should focus on three things, says ICBA Bancard President and CEO Tina Giorgio.
"Republicans Seek Delays to Housing Bills, Citing Inflation"
Rather than vote against several new housing bills during a House Financial Services Committee markup hearing, nearly all of which were proposed by Democrats, Republicans tried to add new language delaying down-payment assistance and other programs until inflation cools. Separately, a bill on overdraft reform was quietly pulled from consideration during the hearing because it didn't have enough Democratic votes to clear the committee, American Banker reported.
"Auto Loan Delinquencies Tick Up as Inflation Hits Nonprime Borrowers"
Around 7.25% of subprime auto loans were delinquent last month, up from 5.2% a year ago. This could be a sign that the credit environment is beginning to deteriorate, though late payments remain below pre-pandemic levels. With inflation expected to persist for the foreseeable future, delinquencies should accelerate over the summer once consumers spend their tax refunds.
On a related note, review four reasons bank managers should remain vigilant about credit risk in the coming years.
"Recent Developments to Combat Redlining"
In recent months, the CFPB, OCC, and DOJ have worked on a number of proposals to curb redlining, including "climate redlining." While regulators have not yet proposed any official rules, there are a few steps banks can take now to prepare for potential policy changes.
Additionally, the Government Accountability Office found that the OCC's exam process for fair-lending practices is outdated because it hasn't adopted up-to-date statistical methods to analyze redlining.
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Barb Rehm
Senior Managing Director
IntraFi Network
Arlington VA
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