November 15, 2012

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Despite New Regulatory Burden, Banks Cautiously Optimistic

Di Lewis

November 15, 2012

Bankers remain concerned about increasing government regulation, but despite those doubts most are somewhat optimistic for the short-term future, according to attendees at Utah Business magazine’s banking roundtable Wednesday morning.

Between the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) and Basel III, the attendees had plenty to say.

Richard Beard, CEO of Bank of American Fork, said the new capital requirements in Basel III are going to hurt community banks, which he said is counter to the U.S. administration’s stated goals.

“I think the fundamental question is do you want community banks in this country or not? And if you do, you’ve got to figure out a way that’s intelligent to protect the economy since we’re concerned about banks going under,” Beard said. “But at the same time look at the realities of trying to operate a community bank and do it in a way that’s thoughtful.”

In the last six months, AmericanWest Bank purchased three small, community banks, largely because the small banks could not raise capital and decided the way to solve that problem was to be acquired, said AmericanWest President Mark Howell.

“It’s going to be a too-big-to-fail environment because those are the only people who can be able to survive in this sort of once-size-fits-all regulatory approach,” said Wendy Holloway, senior vice president with the Utah Bankers Association.

Regulation is becoming seriously disconnected from the marketplace, said George Sutton, attorney at Jones Waldo. He said regulations are becoming unworkably complex and only a handful of people in the financial centers really understand many of them now.

Holloway said she is concerned the CFPB will end up restricting consumer access to services without providing additional protection to them. Most attendees said they are hiring new employees to address regulatory issues and those costs will be passed on to consumers.

Despite their concerns about regulation, many banks are feeling like the future is at least stable and some are optimistic.

Howell said there are a lot of good things happening in the local economy. TAB Bank President Steve Sala agreed, saying the Utah business climate is good and will continue to help drive growth.

While some in attendance were concerned about the upcoming fiscal cliff, others felt like it would end up being relatively minor. In the short term, the next five to 10 years, Curtis Taylor said he is more optimistic, knowing that business is cyclical. But in the long term, it’s harder to know the future and there are serious issues to address, said Taylor, Heber Valley Bank president and CEO.

Beard said, “That which is unsustainable will end. The politicians can artificially kick it down the road a little bit, but at some point it will come home. I believe there are natural laws of economics and we are going to have to suffer the pain of that at some point if we’re unable to deal with it.”

An edited transcript of this discussion will be in the January issue of Utah Business.

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