Counting change | Is 2011 the year that will restore banking's reputation?
Executive director of the Maine Bankers Association
Recognizing that the public’s increasingly contemptuous view of the banking industry is about to enter the sixth year, bankers need to begin the process of correcting the generalities, reducing the anger and putting an end to the blame game. The time to move forward has arrived, and 2011 should focus on the role banks play in the recovery from the nation’s economic troubles. First and foremost, Maine’s banking industry is healthy, has a professional work force of nearly 7,000 employees statewide and, yes, banks have money to lend.
Congressional and administration decisions at the height of the crisis will continue to be analyzed in numerous books, but nationally, the vast majority of Treasury funds lent to banks have been repaid (with 5% interest to the U.S. taxpayer, I might note) and the remaining funds borrowed by banks, analysts believe, are likely to be repaid in full. Maine banks of all sizes are well capitalized and have navigated the rigorous examinations by federal and state regulators extremely well. In fact, New England banks as a whole have strong balance sheets even with elevated delinquencies and historically low interest rates.
While most agree that the real estate bubble and the loan products supporting that bubble weren’t the only cause of the financial meltdown (add actions by the Congress, lax or no regulation of the majority of non-bank lenders and many convoluted Wall Street products to ‘streamline’ loan packaging, just to name a few), we are told the current package of remedies is now in place to move the economy forward.
The remedy of course is the Dodd-Frank financial reform package with 2,319 pages of new language and 243 new regulations to be implemented over the next three years. The final document was your basic congressional bill that gave a gift to every pro-banking reformist organization in the nation and a major victory for law firms specializing in interpreting banking laws. So the nation’s 8,000 banks (32 here in Maine) are agonizing over the implementation. Bankers are great at compliance. We have exceptional professionals specializing in finance, compliance, security and lending, all working to insure that we get it right. Adhering to existing and new regulations and treating our customers right are a major component in rebuilding our image.
The economy’s problem at this juncture is readily identifiable: jobs, jobs, jobs. Banking is the business of lending, and in order for borrowers to use our accumulated deposits, they must expect growth, anticipate additional sales, see expanded service opportunities or need corporate capital. We can meet all of those needs, but a combination of anxiety about the economic world of 2011 and the stressed balance sheets (both corporate and personal) cause loan applications to be withheld or lender decisions to become turndowns. The economic world would be a better place for everyone if in 2011 we began to see some improving economic numbers.
Maine’s banks hold assets in excess of $26 billion (including 28 banks headquartered here and the Maine portion of the four national institutions with branch networks here). All of those assets require an enormous amount of loan activity just to keep the current outstanding loan balances because borrowers continue to make their payments and reduce the principle. For banks to grow their loan portfolios in a climate where fewer qualified applicants are applying is very difficult and, at this point in the cycle of interest rates, very frustrating. We would welcome renewed activity both because it is good for our business and it is good for all communities in Maine and nationwide.
Noting how beneficial this would be to communities may be our best message. For most people, access to banking services is a matter of convenience, price and customer service. Every individual, small business owner or corporate treasurer seeks a banking relationship that is excellent in all those three categories. We give back to those communities by giving the opportunity for economic advancement, whether it is a first-time homeowner, a working line of credit for a growing small business or an international transfer of funds for a Maine exporter.
Our people, our strong financial statements and our history of safe and sound management are very important, but the fact that all 7,000 Maine bankers live and work in this state is most important. We need 2011 to be a year that changes the face of banking in every Maine community.
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