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Richard's Rapid Fire - August 2, 2019
Cajun Thoughts: BANKING SCHOOL FOR THE BOOKS CBA Executive Banking School is one of my favorite times of the year and this session – the 68th – delivered once again with 82+ total graduates and seven honors graduates. Over nearly seven decades, 5,600 bankers have been through EBS. The dedication of the graduating class is a true testament to their work ethic and how much their banks prioritize the importance of leadership and continued education. Congratulations to an excellent group of top-notch bankers, and especially to Angela Conti of TD Bank for being named the 2019 Tem Wooldridge Award recipient for outstanding academic performance, integrity and leadership. Retail banking is in great hands! Special thanks to the entire EBS Faculty, including Year 1 Lead Mike Allen, Year 2 Lead Tom Dent and Year 3 Lead Ted Brauch as well as the CBA Education Team for making this year’s session a huge success … CRIMINAL HACK AT CAPITAL ONE Yes, banks have a responsibility to protect our consumers, but we also must remember these professional hackers are criminals and they should be punished. Software engineer Paige Thompson, who has since been charged and arrested, allegedly accessed more than 100 million accounts and credit card applications. It is pretty unusual to apprehend a suspect so quickly, however, Thompson had engaged in online conversation which revealed ownership of the bank’s information. Importantly, Capital One emphasized NO credit card numbers or login credentials were compromised, nor the vast majority of SSN on affected applications. Senate Banking Committee Chairman Mike Crapo said Tuesday he is beginning to investigate the breach – Stay tuned … TO BRANCH OR NOT TO BRANCH I read an article this week featured in the Financial Brand that explored survey results of relationships between branch longevity and digital banking. One point by the report's lead author David Horton that really stuck out to me was, “The future belongs neither to old-school banks nor challengers/fintech startups, but to those who deliver an experience that is unique and valued.” Striking the perfect balance is key! … MEMBERSHIP CALL It was great to have many of you on Wednesday’s annual mid-year members-only call featuring legislative and regulatory updates. The House recessed last week, the Senate left town this week, and CBA’s Sam Whitfield predicts there will be no government shutdowns this coming year – Let’s see what happens!
EBS 2019 WRAP UP
Congratulations CBA Executive Banking School Class of 2019: CBA on Tuesday graduated 82+ bankers from the CBA Executive Banking School and recognized TD Bank’s Angela Conti with the school’s top honor, the Tem Wooldridge Award. The class of 2019 coincides with CBA’s Centennial year and brings EBS total graduates to more than 5,600 bank leaders.
Conti was selected by the CBA Executive Banking School faculty, with input from senior class peers, to receive the Tem Wooldridge Award. This prestigious honor recognizes the top student who demonstrates outstanding academic performance, high integrity and a strong work ethic. In addition to academic merit, Tem Wooldridge Award winners possess the necessary character and leadership skills to bring out the best in their teammates. Presented annually, the award was established to honor a now-retired faculty member.
Now marking its 68th session, CBA Executive Banking School offers the banking industry's top talent the knowledge and skills they need to develop into the leaders of tomorrow. Designed and delivered by leading industry practitioners, the program immerses students in real world scenarios experienced daily at banks.
The following students graduated from CBA Executive Banking School with honors:
- Angela Conti, TD Bank (Tem Wooldridge Award Winner)
- Jenny Jacobs, Huntington Bank
- Mark Moran, SunTrust
- Prashant Nateri, Huntington Bank
- Robin Patrick, PNC Bank
- Scott Phillips, Citi
- Andrea Whitehouse, M&T Bank
FDIC Publishes 2019 Risk Review: The FDIC published its 2019 Risk Review, an annual publication that summarizes conditions in the U.S. economy, financial markets and banking industry, and presents key risks to banks in two broad categories: credit risk and market risk.
Overall, FDIC-insured institutions performed well in 2018 – the strong financial condition of banks contributed to a declining number of institutions on the Problem Bank List and there were no failures during the year. However, the FDIC cautioned economic growth will slow in 2019 from recent highs, and that the pace of net consolidation rose in 2018 for the first time since 2015 and remains relatively high by historical standards.
Key takeaways from the report:
- Credit Risk: Loan performance metrics at FDIC-insured institutions remain strong. However, institutions with concentrations of credit have greater exposure to market sector changes. Competition among lenders has increased as loan growth has slowed, posing risk management challenges. Market demand for higher-yielding leveraged loan and corporate bond products has resulted in looser underwriting standards.
- Agriculture: The agriculture economy is now in its sixth year of low commodity prices and farm incomes, and agricultural exports have reflected pressure from trade uncertainties and slowing global growth.
- Commercial Real Estate: Commercial real estate market fundamentals remain favorable as the economic cycle matures. However, outstanding CRE loan balances are rising, and competition among lenders to maintain market share in the face of slowing loan growth is increasing.
- Energy: U.S. oil production reached record highs in 2018 but the energy industry is susceptible to volatility that has produced past boom and bust cycles. Banks most exposed to this geographically concentrated industry are vulnerable to future downturns.
- Housing: The housing market began to slow in 2018 as concerns about affordability intensified. Banks with concentrations in this portfolio could be vulnerable to the slowdown, but credit quality has been resilient so far.
- Leveraged Lending and Corporate Debt: Nonfinancial corporate debt as a share of GDP has reached a record high level. The increase has been driven by growth in corporate bonds and leveraged loans, which have become increasingly risky as the share of low-rated bonds has grown and lender protections in leveraged loans have deteriorated.
- Nonbank Financial Lending: By lending to non-depository financial institutions, banks are increasingly accruing direct and indirect exposures to these institutions and to the risks inherent in the activities and markets in which they engage.
- Market Risk: The current interest rate environment presents earnings and funding challenges to banks and could pressure liquidity at some institutions.
- Interest Rate Risk and Deposit Competition: Banks have enjoyed several years of abundant low-cost deposit funding, but they could be challenged if deposit competition intensifies.
- Liquidity: Short-term liquidity at smaller banks has declined in recent years, potentially reducing these institutions’ ability to manage a future downturn
OCC Consolidates Supervision Support Functions, Announces New Units: The OCC this week announced it was realigning approximately 150 employees to create two new units. According to an OCC release, “The announcement follows several months of work by cross-functional teams, analyzing functions and looking for opportunities to enhance support provided to OCC bank supervision.”
The two new units include:
- Supervision System and Analytical Support: This unit will pull together supervisory information system teams, data management, business intelligence, risk analysis, and supervision risk management staff from other OCC supervisory and policy units.
- Systemic Risk Identification Support and Specialty Supervision: The second unit will consist of lead experts from Large Bank Supervision and Midsize Bank Supervision as well as teams responsible for the supervision of trust companies from the Northeastern District National Trust Banks team and significant service providers from Bank Supervision Policy.
The OCC noted the realignment, which will be effect Oct. 1, 2019, will consolidate certain supervision and supervision-support functions. The Midsize and Community Bank Supervision and Large Bank Supervision units will retain primary responsibility for overseeing the banks, savings associations, and federal branches and agencies of foreign banks that compose the federal banking system.
The vast majority of employees who will make up the new units will be reassigned from other OCC divisions. A limited number of new positions will be advertised later this year.
A copy of the OCC announcement is available here.
CBA Debt-Collection Working Group Meets with CFPB: Members of CBA’s debt-collection working group came to town this week to meet with the CFPB, discuss their rulemaking agenda and what CBA plans to propose in our comments.
The main points we advocated for:
- Creditors should be clearly exempt from the proposed rules. The CFPB should issue a strong statement in the rule that states it is not intended to apply to first party creditors, and should derive their authority to proceed with this rulemaking from the FDCPA, not Dodd-Frank’s UDAAP provisions;
- “One-size-fits-all” contact caps are not appropriate for consumers and can lead many consumers vulnerable to financial harm;
- The rules should not require collectors to distinguish between work and non-work email addresses and phone numbers as it is infeasible to do so, and often consumers wish to be contacted through their work addresses. If a consumer no longer wants to be contacted at a work address, the opt out provisions in the rules properly protect and cover the individual.
It was a productive meeting allowing us to better respond and inform them on many of these issues than CBA will be filing an ex-parte letter summarizing our comments that will go on the record as well for the CFPB to consider throughout the rulemaking process.
Attendees from CBA included CBA Regulatory Counsel Stephen Congdon, Heather Bentley of Citizens, Chris Rathsack of Citi, Harry Smith of U.S. Bank, Jeff Bloch of U.S. Bank, Larry Tewell of Wells Fargo, Laura Arce of Wells Fargo and Rod Abele of PNC Bank. CFPB participants included John McNamara, Ghandi Eswaramoorthy, Emma Haas, Courtney Jean, Jennifer Stockett, and Nhu-Han Duong.
KeyBank to Offer Financial Wellness Checkups at Branches: KeyBank is now offering customers an opportunity to sit down with bankers at its branches to assess their financial wellness. According to bank officials, Key’s goal here is to offer customers more personalized service, not to attract new customers.
JPMorgan Chase Taps Persado, AI-Written Ad Copy: JPMorgan Chase has partnered with artificial intelligence firm Persado on a five-year deal that will see more of the bank's creative copy in ads being written by AI.
The companies teamed up in 2016 on a pilot, which resulted in click-thru-rates increasing by up to 450% after human-created copy was rewritten by AI, and JPMorgan marketing chief Kristin Lemkau says that the technology "rewrote copy and headlines that a marketer, using subjective judgment and their experience, likely wouldn't have." Learn more here.
Wells Fargo Shuffles Three Executives Into New Roles: Wells Fargo appointed former Head of Private Wealth Financial Advisers and 14-year bank veteran Jim Hays to succeed David Kowach as the head of Wells Fargo Advisors, and named Kowach the Head of Community Banking. The bank also announced the creation of a new role, Executive of Enterprise Customer Excellence, which will be filled by Consumer Banking Executive Andy Rowe.
Tune In to CBA's Suite 550 Podcast: On the latest episode of CBA's Suite 550 Podcast, Bank of America’s Managing Director and Head of The Academy John Jordan and PNC’s SVP of Human Resources-Retail Distribution Jenny Rhodes sit down with Brenda Mechling, CBA’s SVP of Education Relations, to discuss what the banking industry is doing to recruit, retain and prepare the best and the brightest retail bankers.
John and Jenny lead CBA’s Talent Management Committee and both of their banks have a focus on ongoing education for their team members.
The podcast is available here.
CBA’s Kris Fallon Talks Student Lending on Yahoo Finance: CBA’s Kris Fallon spoke with Adam Shapiro and Julie Hyman of Yahoo Finance on Tuesday to discuss student debt and the need for common-sense reforms to the federal lending program.
These reforms, championed by CBA, would help constrain skyrocketing college tuition and help students better understand the amount of federal debt they are responsible for repaying.
MERGERS & ACQUISITIONS
MERGERS & ACQUISITIONS: THIS WEEK
STATE OF THE WEEK
CBA’s State of the Week is MAINE, where more than 1 out of every 5 residents bank with a CBA member! CBA members in the Pine Tree State hold $13 Billion in total assets, employ 4,000 people, provide $300 Million in small business loans and serve 300,000 customers. Check out our state by state numbers here