Richard's Rapid Fire - August 10, 2018

Couldn’t Make the Membership Call? Here’s What You Missed - CBA held a membership call yesterday to offer an update on all things D.C. – ranging from BCFP rulemaking and OCC priorities to the latest updates on CRA, the midterm elections and CBA news.
If you missed the call, here is a quick recap:
Bureau of Consumer Financial Protection
  • The Senate Banking Committee had scheduled a vote on Kathy Kraninger’s nomination to lead the BCFP, but adjourned early for recess. We expect her vote to be rescheduled as soon as next week. The vote is expected to be along party lines. 
  • The Bureau released its rulemaking agenda earlier this year. As you know, what was included in the agenda is just as important as what was not. The Bureau, notably, removed overdraft and long-planned rulemaking efforts for student loan servicers.  
OCC Update
  • Comptroller of Currency Otting has outlined his top priorities for the OCC, which include: Modernizing the Community Reinvestment Act; Expanding short-term, small-dollar lending; Adjusted bank capital requirements; Recalibrating the Volcker rule; and, Improving the functionality of the Bank Secrecy Act.
  • He has made progress on many of these issues, and we are all anxiously awaiting the OCC’s ANPR on CRA. Based on our meetings with Comptroller Otting, we expect the CRA modernization to achieve the following goals: Provide more clarity and certainty in the process by creating a metric approach to evaluation; Broaden products and services that would qualify for CRA; and, Create a more streamlined approach to evaluations and timeline for exam grades.
Fed Update 
  • There are currently four vacancies of the seven seats on the Board of Governors. Martin Goodfriend, Michelle Bowman and Richard Clarida have all been nominated to fill three of those vacancies. 
Midterm Elections
  • Republicans currently control both the House of Representatives and the Senate, though by a slimmer majority. It is too early to accurately predict the election outcome, but there could be significant changes for banking should Democrats win either – or both – chambers.
CBA News
  • The 67th session of Executive Banking School was a success. There were nine honors graduates and Chris Manderfield with KeyBank took top honors with the Tem Wooldridge Award. Some of you were not able to access the list of EBS graduates last week, so I wanted to resend the link here.
  • Our fall in-person committee meetings are just around the corner and I am looking forward to seeing many of you at CBA World HQ here in Washington.
  • Our CBA Board will be in town – along with all our committee chairs and vice chairs – in September for meetings with the FDIC and Fed. Our current Board Chair Brad Conner with Citizens – who has done an unbelievable job leading the Association – will hand the gavel over to Todd Barnhart with PNC. Todd has big shoes to fill, but I am confident he will do an equally great job leading CBA for the next year – and helping us commemorate our 100th anniversary. 
  • Save the Date: CBA LIVE will be April 1-3, 2019, and a special continuing education event for EBS grads will be March 30-31, 2019. Stay tuned for details to come.
  • Want to speak at CBA LIVE? Submit your proposal to be a part of retail banking’s MUST ATTEND event. 
Must Read Article - FDIC Chair Jelena McWilliams is one to watch. She has an inspiring life story, experience working in Congress, and most recently worked at Fifth Third – talk about well-rounded. The Wall Street Journal had a must-read article this week offering some insight into her agenda for the agency. Chair McWilliams said she is “ready to re-evaluate rules on bank capital, small-dollar loans and investments in low-income areas.” 
In the interview, she discussed the need for a pilot program – or sandbox – for new products where banks and regulators work together. Not only is it good to hear the need for cooperation with banks, it is also refreshing to hear regulatory heads expressing similar ideas and talking about coordination across agencies. 


Time on the West Coast – Bank of the West, Visa, Novantas & SoFi - If you think jambalaya has a lot of ingredients, how about my 24-hour trip to San Francisco. I flew in Sunday afternoon and stopped by my favorite Apple store and the Chase branch at the corner of Post and Powell, one of the country’s first high-tech bank branches. 
Bright and early on Monday, I had breakfast with CBA Board Member Ryan Bailey, head of retail at Bank of the West, and really enjoyed his insights on marketing, market segmentation and how the new regulatory environment on the East Coast is impacting what goes on all the way to the West Coast. 
I visited Visa HQ and meet with Oliver Jenkyn, EVP and Group Executive, North America. We spoke at length about payment trends and how CBA Premier Sponsor Visa is working globally with clients and our members. 
The last stop on the trip was lunch with Sherief Meleis, EVP, Client Services at Novantas – another CBA Premier Sponsor. We had a great discussion about digital banking, the quest for deposits and bank consolidation. 
In between meetings with Members and Sponsors, I squeezed in a quick trip to SoFi. They have hired former bankers and it is showing. Some items of note: they are watching employment closely for signs of an economic downturn; they are expanding their student loan refinancing portfolio as well as branching out into mortgages and other personal lending; and, despite watching for a downturn, have not seen any erosion in credit quality.
Fintechs Will Have Trouble Meeting Banking Standards - The fintech charter requirements outlined by the OCC will likely “deter some lenders from applying and may prohibit others from being approved,” according to a report issued this week by the credit rating agency Moody’s. The report backs up earlier comments made by Comptroller Otting. He said many fintechs the OCC spoke with previously about a charter ran for the doors after hearing the increased bank-like regulatory requirements.
Moody’s noted the liquidity and capital standards could pose particularly high hurdles.
I believe competition is good for the industry and as long as there is a level playing field, I will bet on banks all day long.  
Approaching the 10 Year Mark - It seems like yesterday, but a decade after the financial crisis banks are a lifetime away when it comes to operations and risk management. Retail banking is in a good spot – as we have been tested and are regulated to the nth degree. 
One of the biggest trends we have seen since the crisis deals with mergers and acquisitions. When the financial crisis hit, there were 7,146 commercial banks. The U.S. today has 4,880 FDIC-insured commercial banks and there were 60 mergers during the first quarter alone. Mergers and acquisitions are a new reality of doing business and we have seen it here with CBA Members. I am fascinated at the calculations and strategy decisions behind each of them – is there a threshold when banks need to merge, how big does the new bank need to be, what about areas of overlap … All questions bank executives and boards have to answer. 
Say Cheese - Former Chair of CBA’s Digital Committee Alex Jimenez, Zion’s Vice President and Senior Strategist, wrote an interested piece in The Financial Brand asking if the banking industry is having a “Kodak Moment.” Alex writes, “The popular belief says that Kodak was brought down by the public’s acceptance of digital photography. The real Kodak story has them inventing digital photography but failing to adjust strategy to leverage their own innovation … Kodak’s failure to adjust their strategy is a lesson that financial services firms need to heed.” He notes many naysayers say banks will act like Kodak, having developed new technology but not continuing the investment. In reality, banks – especially the large ones – are allocating massive amounts of capital in technology. 
Every industry has had to deal with this phenomenon – Blockbuster lost to streaming services like Netflix; Borders was taken down by Amazon; Taxi drivers are fighting ride services like Uber and Lyft in cities across the country. And, banks are dealing with fintechs.
What’s the takeaway? To avoid having our Kodak (or Blockbuster or Borders) moment, Alex says, “A single cut in a single vertical isn’t bringing down the industry. Winning organizations require a strategy that can deal with small cuts in all directions.”


Bankers on the Move - Many bankers are forgoing summer vacations for summer promotions and new jobs. Here is a quick rundown of activity at just a few CBA Member institutions: 
  • Discover Names New Chief Executive: Discover Financial’s current President and COO Roger Hochschild will take over as Chief Executive this October. Roger has been with Discover since 2004 and help lead the direct banking firm through its 2007 spinoff from Morgan Stanley. Congratulations to Roger and to Discover, a great CBA member! 
  • Mark Schultz – From Vice Chair to Vice President: Mark Schultz, the vice chair of CBA’s Fair and Responsible Banking Committee, has been promoted to Vice President at Capital One. Congrats to Mark on his promotion and thanks for his dedication to CBA!
  • Ryan Goldberg to Flagstar: Flagstar Bank in Michigan has tapped Ryan Goldberg to oversee its expanding retail banking business. Ryan joins Flagstar from another CBA Member, Regions, where he was head of priority banking and branch small business. Best wishes to Ryan! 
  • Leroy Abrahams Leads New Regions Department: Speaking of Regions, the bank tapped one of its regional presidents to head the bank’s new office of community affairs. Leroy Abrahams, former area president for north-central Alabama, will head the bank’s community affairs department. The new division is an integration of the bank’s existing nonprofit foundation and several community development units. It is an exciting development for Regions and best of luck to Leroy! 
Announcing Baby Leahy - Congratulations to the Leahy Family! Former CBA Team Member Deirdre Leahy, now with Citi, and her husband welcomed a baby girl, Margaret, earlier this summer. 
Congratulations to Tiffany Haas - This is our Vice President of Congressional Affairs Tiffany Haas’s last day with CBA. After several years of being a valuable member of the Team she is taking a new opportunity – but once you are a member of the CBA Team, you are always a member of the CBA Team. Congratulations to Tiffany in her new endeavor. 
Happy Birthday to Tammy Morgan - If you have been to CBA LIVE or EBS, you know CBA’s own Tammy Morgan. She is our resident database master, registration guru and choir leader. This week she got to lead the entire team in singing “Happy Birthday to me.” Tammy celebrated a big one this week, so Happy Birthday Tammy!