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An Abundance of Regulators

By: Bill Poquette

Regulators dominated the list of speakers at the annual convention of the Missouri Independent Bankers Association last month. Included were representatives of the Federal Reserve Banks of Atlanta, Kansas City and St. Louis, plus the FDIC, the Office of the Comptroller of the Currency and the Missouri Division of Finance.

Insights into the aftermath of the Dodd-Frank regulatory reform legislation were offered by a panel comprised of James LaPierre, FDIC Kansas City regional director; Michael Koll Sr., OCC assistant deputy comptroller for the Kansas City North field office; Kevin Moore, senior vice president of the supervision and risk management division of the Kansas City Fed; and, as moderator, Julie Stackhouse, senior vice president and managing officer of banking supervision at the St. Louis Fed.

LaPierre labeled the Consumer Financial Protection Bureau the most important provision. “How that is implemented will be crucial,” he said. Pointing out that the FDIC has experienced examiners who will be charged with bank enforcement, the question becomes who will examine non-banks, and “will it result in a level playing field?”

The Dodd-Frank Act’s phase-out of the Office of Thrift Supervision is a concern for all of the regulators. Koll said his agency is just beginning to get an insight into what resources it will be required to deploy as it takes over the role of thrift supervisor.

Click here to view photos from this convention.

Moore said his agency has seen some interest in thrifts converting to commercial banks. Their stance, according to Moore, seems to be if they are going to be regulated as banks they may as well convert.

In a luncheon address, Federal Reserve Bank of Kansas City President and CEO Tom Hoenig expressed concern about the “enormous concentration” of assets and power in New York and Washington stemming from the financial crisis and government bailouts.

The biggest banks have just gotten bigger, he pointed out, to the point where 20 companies control 80 percent of the system’s assets. These same companies hold assets equivalent to 90 percent of gross domestic product.

Because these companies have gotten even larger, the procedures for breakup or resolution will be more complicated. “We have a ways to go on too big to fail,” he said.

Hoenig also warned that pressure to concentrate the Federal Reserve’s power in Washington, which was narrowly averted in the Dodd-Frank Act, will resume in the next few months. “I will be part of the push-back when it comes,” he promised.

On a brighter note, Missouri Division of Finance Commissioner Rich Weaver reported that three-fourths of the state’s banks “have weathered the crisis quite well.” Earnings are back to positive for two consecutive quarters for state-chartered banks, with reduced loan and lease loss provisions the biggest factor in the gains. The average net interest margin is 3.89 percent, Weaver reported, and 102 banks recorded returns on average assets of 1 percent or higher.

That’s not to say there are not continuing problems, he acknowledged. Banks are struggling with high levels of other real estate owned because “there is a lot of excess inventory out there.” Common problems he sees in troubled banks include commercial real estate concentrations and out of territory loan participations.

Bill Poquette is editor-in-chief of BankNews.

Copyright © October 2010 BankNews Media