As expected, at yesterday’s board meeting the NCUA proposed raising the cap below which a credit union is considered a small credit union for regulatory relief purposes from $50 to $100 million. According to NCUA, the increase means that an additional 745 credit unions will be eligible for potential relief from future regulations for a total of approximately 4,869.
Great job by the agency in coming forward with the proposal; but we won’t really know how much this helps the industry for some time to come. First, the agency has already exempted credit unions below the threshold from onerous mandates including those dealing with enhanced protections against interest rate risk and the proposed enhanced Risk-Based Capital framework. Second, many of the biggest mandates are out of NCUA’s hands. For example,the CFPB has been willing to extend mandate relief to institutions with as much as $2 billion dollars in assets, but these exemptions come with strings attached – such as a requirement that exempted institutions hold most of their mortgages. Thirdly, the fact that NCUA justifiably feels the need to dramatically raise the small credit union designation after having raised it from $10 million approximately two years ago shows you how quickly the industry is changing and not for the better. NCUA examined rates of deposit growth, rates of membership growth, rates of loan origination growth, and the ratio of operating costs to assets and determined that credit unions below $100 million are at a “competitive disadvantage” to their peers.
The branch is dead! Long live the branch!
I actually found myself muttering in disagreement as I read a report issued by the FDIC yesterday. It concluded, based on an analysis of bank branching patterns from as far back as 1935, that:
“New technologies have certainly created convenient new ways for bank customers to conduct business, yet there is little evidence that these new channels have done much to replace traditional brick-and-mortar offices where banking relationships are built. Convenient, online services are here to stay, but as long as personal service and relationships remain important, bankers and their customers will likely continue to do business face-to-face. “
Maybe the researchers who came to this conclusion can use their Blackberries to see if RadioShack could use their help. More on this in a future blog, but for those of you who still believe the branch model is alive and well, read away.
What would Karl Malden say?
Yesterday, the Justice Department scored a major antitrust victory when a federal judge in New York found American Express guilty of anti-trust violations. I haven’t read the 100+ page decision yet, but if I was Amex I would have gone to trial too.
One of the touchstones of antitrust law is market dominance. Amex isn’t exactly a card that your typical merchant has to accept these days if he wants to stay in business. It has been a long time since Karl Malden convinced consumers that they shouldn’t leave home without their American Express Card. The win underscores just how dominant a hand merchants have when it comes to demanding changes to the plastics industry.
By the way, if you are wondering what to do this weekend as you try to stay warm, On the Waterfront, starring Karl Malden and Marlon Brando, would be an excellent movie pick. It’s one of those cultural reference movies and includes the classic line “I could have been a contender.”