FDIC Udate Four Priorities for 2012

Excerpts from a presentation by
Paul M. Nash
Deputy to the Chairman
Federal Deposit Insurance Corporation
New Orleans, LA

IPaul M. Nash, Deputy to the FDIC Chairman for External Affairs, offered remarks to the audience at the Louisiana Bankers Association Convention & Exposition in New Orleans, LA, on Friday, April 27. He reviewed the agency’s four priorities for 2012: Dodd-Frank Act challenges, the community banking initiatives, research project for the division of insurance, and risk management supervision. This column will focus on his community banking initiatives (www.fdic.gov/regulations/resources.cbi/index.html) remarks and the questions and answers from the audience.

Nash, who joined the FDIC in March 2009 as deputy to Chairman Sheila Bair, has been the agency’s lead for community bank outreach and assisted in setting up the special advisory committee to examine issues unique to community banking. Emphasizing the importance of community banks to the FDIC and the U.S. economy, Nash cited two statistics: the FDIC supervises roughly 2/3 of the 7,400 statechartered, non-Fed member banks in the U.S., including the majority of the nation’s community banks (by definition according to the FDIC banks with
less than $10 billion in assets). Community banks comprise 11% of U.S. banking assets but make up 39% of the small business loans in the U.S.

Nash said the FDIC is studying ways to apply to the banking industry the collective knowledge (best practices) learned from the survivors of the recent
financial crisis. Nash explained that this could happen through discussions
with community bankers at conferences such as the February FDIC Future of Community Banking Conference in Arlington, VA, through the ongoing series of six regional roundtables, the first of which occurred in Dallas in March (for the remaining schedule visit: www.fdic.gov/regulations/resources/cbi/roundtable);
or through the FDIC Advisory Committee on Community Banking’s meetings. The FDIC’s goals are to deepen its understanding of community banks and to explore further the issues facing them, Nash said. The FDIC plans to publish reports from its research.

In the question and answer session, bankers in the audience had an opportunity to voice concerns and frustrations with the federal regulators.

On the topic of dialogue between community banks and regulators regarding lessons learned from survivors of the financial crisis, Nash referred bankers to the agenda and minutes of the FDIC Advisory Committee’s meetings (www.fdic.gov/communitybanking/) and to the six regional roundtables. If a banker has a specific question or concern, he said, the FDIC has a mailbox on the internet for such communication: communitybanking@fdic.gov.

Bankers said they are frustrated with the Dodd-Frank Act and in particular with the creation of the Consumer Financial Protection Bureau (CFPB) and its rulemaking authority. Bankers said that the CFPB does not understand the banking industry and specifically the role of community banks. Nash responded that CFPB Director Richard Cordray, who sits on the FDIC board, is learning the importance of community banks, knowledge which should aid the CFPB when it writes rules that impact the banking industry. A comment was made that the CFPB needs a community banking advisory council to offer advice and to function as a sounding board for its rulemaking.

On the question about “bifurcation” of rules for big banks and community banks, Nash said virtually nothing will happen on this topic before the November 2012 elections, but he said he believes there may be an opportunity to resolve this problem in 2013, if compromise can occur with bipartisan support.

Other questions concerned compensation for community bank mortgage loan officers and FDIC referrals to the Department of Justice. Stay tuned!