Anonymous Banker Weighs in on the FDIC’s Advisory Committee on Community Banking

The Federal Deposit Insurance Corp. has a new advisory committee on community banking. Except for one professor, it is made up entirely of Presidents and CEOs of community banks. A small problem with this set-up is that there should be one or two regional or national bank representatives to give perspective to the discussions. But what strikes me even more, is that there are no people on the committee whose job it is to actually go out and meet business owners, kick the boxes, and feel their pain. There should be folks on the committee that mix and mingle with the businesses they serve, directly, and that actually perform the credit analysis.  The committee needs underwriters who can see and comment on where the industry is falling short in meeting the borrowing needs of the small business community. But there aren’t any.

There was an opportunity here that I don’t think the FDIC capitalized on (no pun intended!) as well as they could have. Instead, given the mix, the agenda for this committe will not be improving lending in the markets these community banks serve.  Rather, it will be on improving these banks’ balance sheets and positioning these banks to take advantage of some of the bailout opportunities and improve their share prices.

What should an FDIC advisory committee on community banking be dealing with?. How about the two-faced message regulators are sending to the banking industry, with one group yelling “lend, lend, lend” while the second group holds the banks’ working capital lines to an ever higher debt service coverage ratio and requires them to reserve for loan losses before the approval signature is dry on the offering sheet–thus making it very difficult indeed for them to “lend, lend, lend”. The lenders are getting their direction from the  very folks that are serving on this committee. Yet its very composition limits the type of dialogue so desperately needed within the group, and between the group and the regulators.   As it stands, I am not confident that this group will have any impact on the banking industry’s ability to meet its fundamental role as lender to the small business communities they serve.

I hope I am wrong. I always seem to hope I am wrong.

 

Cross-posted in Bizbox:  The Problem With the FDIC’s New Small Bank Committee

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