Regulatory excess — of the punishing sort for community banks and the liberating variety for credit unions — are both challenges for members of the Kansas Bankers Association, they were told at their CEO and Senior Management Forum and Annual Meeting at the Broadmoor in Colorado Springs last month. Also on the program, popular economist Dr. Ed Seifried, enjoying a repeat engagement with the KBA, described how ending the dependence on imported oil promises to dramatically boost GDP growth.
The complexity of Basel III was criticized by Esther George, president and CEO of the Federal Reserve Bank of Kansas City, as well as other speakers, as a burden community banks should not have to bear. Noting that she is determined to read every page of the capital proposals, including a 34-page addendum for community banks, she urged the bankers to do so as well. Basel III is far more complex than the community bank business model, in her opinion, and it ignores community banks’ experience in allocating risk weights. She noted that the comment period on the proposals has been extended to Oct. 22 and urged the KBA members to make their views known.
The KBA’s incoming chairman, Frank L. Carson III, chairman, president and CEO of Carson Bank in Mulvane, also noted the extended deadline. “They need to hear from all of you,” he said.
Sen. Jerry Moran, R-Kan., called stricter capital rules for community banks misdirected and counterproductive. “A one-size-fits-all solution is not a solution when it causes more problems,” he said.
Matt Williams, American Bankers Association chairman-elect, reported that a template will be available soon on the ABA website where bankers can analyze how they will be affected by Basel III. He also noted that the KBA has initiated a member survey as part of the process of drafting a comment letter.
Williams, who is chairman, president and CEO of Gothenburg (Neb.) State, also commented on what he called the National Credit Union Administration’s “end run” around credit unions’ business lending cap by declaring that, because of the drought, any credit union designated as low income will not have to observe the cap. He said the ABA has written to President Barack Obama objecting to the NCUA’s move without congressional approval, and is considering a lawsuit to overturn it.
One of the biggest problems the U.S. economy faces is the European financial crisis, according to Ed Seifried, professor emeritus of economics and business at Lafayette College in Pennsylvania, and co-chairman of Seifried & Brew. He does not see the problem easing for at least two more years, during which U.S. interest rates will continue along their current low path. And that being the case, he urged the bankers to keep their deposit prices at rock bottom.
“You’re out of your mind to pay 50 to 75 basis points,” he said. “You should be paying 10 basis points. Banks that I see with the lowest rates still take on deposits. Put the yield curve up where your retail folks can see it,” he added. Rates could get lower, Seifried conceded, but he doesn’t think they will. “Zero percent isn’t going to last forever but it isn’t going to change for the next year or two.”
Lamenting the current slow pace of GDP growth, Seifried said one of the best things happening is the energy independence movement. “Imported oil slows U.S. growth,” he said. “We need to put OPEC out of business.”
The largest natural gas find of all time, stretching from Ohio to Virginia and New York to Tennessee is in the process of being exploited, Seifried reported. “We need to get interstate trucks, school buses and UPS and mail delivery vehicles off of diesel fuel and onto natural gas,” he said. “When all interstate trucks are on natural gas GDP growth will jump to 5-6 percent annually and OPEC will be out of business.” Starting this fall, Pilot Flying J truck stops will have natural gas available, he added.
Seifried told the bankers in concluding a question and answer period that if they see anything on the horizon more important than energy impacting GDP growth, “please tell me.”
Next year’s conference is scheduled for Aug. 8–10 at the Broadmoor.
Bill Poquette is editor-in-chief of BankNews.
Copyright (c) September 2012 by BankNews Media