Millennials Are the Future for Community Banks

Forget what you think you know about Generation Y. The nation’s millennials—the biggest and most diverse generation of customers in our nation’s history—account for more than $1 trillion in annual purchasing power. And according to ICBA’s recently released 2014 American Millennials and Banking Study, this generation represents a major opportunity for community banks.

This is a generation raised amid the Wall Street financial crisis, plagued by large amounts of student loan debt, and so risk-averse that more than 60 percent don’t have a credit card. It should come as no surprise that they are looking for financial institutions that are locally owned and can help achieve their entrepreneurial dreams.

According to our survey, locally owned and operated banks are the first choice of all Americans for a business loan or other funding. Further, being a locally operated banking institution is almost twice as important to Americans as being a national or international banking institution. Now isn’t that something? Community banks with less than $10 billion in assets make nearly 60 percent of all small business loans, and that is what sets Main Street apart from Wall Street.

If small business lending is important to your community bank, then the millennial generation is very important. Some business-focused millennials intend to start their small businesses within the next two years. More than 40 percent are very interested in starting their own business at some point in their lifetime, and almost a quarter currently earn part of their income from a business they started or have a stake in.

The millennial generation is also hungry for financial education. They want to be more financially literate, and the nation’s community banks are an excellent resource to quench this thirst for knowledge. This generation is beginning to take the reins of their careers and financial wellbeing, and now is the time for community bankers to become their trusted entrepreneurial advisors.

Millennials have a greater lifetime value as customers than any other generation in the market and are the most likely to refer their friends and family if they have a great experience with your company.

All community banks should embrace this new generation. Millennials are unique and belong with their local, one-of-a-kind community bank. This generation is ready to become community banks’ newest customers, and it is time for community banks to rise to the challenge of serving them.

Regulatory Capture Old News for Community Banks

20141006 Regulatory Capture

A new report exposing the New York Fed’s coddling of Wall Street megabanks—particularly Goldman Sachs—is making waves in Washington. And why shouldn’t it? The ProPublica report exposes the New York Fed’s culture of deference to the megabanks it is charged with regulating as well as its marginalization of the few examiners who have spoken out.

In one memorable passage, a Columbia University professor hired to conduct a no-holds-barred investigation of the agency cited in his report “regulatory capture,” in which regulators are co-opted by the banks they oversee. Fittingly, officials at the agency—who had hired professor David Beim to tell it like it is—nevertheless asked him to remove the phrase.

While news of this regulatory capture is causing an uproar in Washington, it is frankly old news to community bankers. We appreciate the investigative reporting, with its secret recordings and bureaucratic inertia in the face of Wall Street power. But, please, tell us something we don’t know.

ICBA and community bankers have been saying for years that the regulatory playing field is heavily tilted in favor of the megabanks. While regulators defer to systemically risky institutions and their teams of compliance lawyers, they pounce on local community banks every chance they get. Call it “regulatory capture” if you like—it sounds to me like Stockholm syndrome. You know, when hostages have sympathy for their captors.

In fact, one of the reasons ICBA has long opposed the consolidation of the federal banking agencies into a single agency is the threat that this new regulator would become quickly co-opted. How long do you think it would take the multi-trillion-dollar banks to lobotomize the single national regulator, to the detriment of our financial system and global economy? In a New York minute!

After all, just look at what the New York Fed did with David Beim’s all-access report on the agency’s problems. After he handed over his report to the regulators, Beim never heard from them again.

Making Progress on Making News

What a difference a year makes. Last summer I embarked on a media tour of New York City. Joined by ICBA’s media expert, Senior Vice President of Media and Public Relations Aleis Stokes, I met with representatives from several of the nation’s preeminent financial news outlets.

It wasn’t exactly a Hillary Clinton book tour, but some of the top editors and reporters in the financial world were genuinely interested in what we had to say. Nevertheless, it was often an educational process. We were frequently informing them of the regulatory burdens facing community banks or introducing them to the community bank perspective on too-big-to-fail banks and credit unions.

This time was different, and in a good way. I was back at The Wall Street Journal, The New York Times, Bloomberg, and American Banker. But instead of laying out our industry’s top policy priorities and concerns, I was engaged in a two-way discussion. This time around, these journalists were fully familiar with the issues on the table. In other words, instead of talking at them, I was talking with them.

To me and Aleis, this was a big development for ICBA and community banks. It shows that ICBA’s relentless effort to raise awareness of our issues is making progress. Our voice—the voice of community banks—is being heard loud and clear. For example, when I brought up the impact of growing government overreach into the community banking sector, they were ready to talk about Operation Choke Point. When we talked regulation, they were ready to hear about the progress of our Plan for Prosperity and our petition advocating streamlined call reports.

And while these editorial meetings are often about the long-term payoff—i.e., ensuring these outlets remember to get the community bank position in their reporting—this year’s trip has paid immediate dividends. American Banker has already covered ICBA advocacy on regulatory relief, de novo charters and Federal Home Loan Bank membership, and Bloomberg included us in a report on new mortgage rules.

In Wall Street’s backyard, the nation’s top financial reporters and editors showed that they understand and want to cover the issues that matter most to Main Street institutions. That’s a testament to the hard work and dedication that community bankers across the nation and ICBA have put into raising our industry’s profile.

Take Charge: Combat Call Report Encroachment with ICBA Petition

20130415 Letter

Before I was ever a community banker, I was a cadet at the Virginia Military Institute and an officer in the U.S. Army. One of the core principles instilled in me during my military training was the importance of never giving up ground—of always looking for opportunities to take ground from the enemy.

Well, in ICBA’s constant war on excessive regulation, we are mounting a new assault to halt and roll back what has become a significant burden for many community banks—the quarterly call report. Last week we launched a petition urging relief from the increasing length and complexity of the call report and advocating streamlined reporting rules for community banks.

But just like in combat, we need boots on the ground. In this case, we need a massive show of force to demonstrate to regulators that we are not about to lay down our arms. That is why I’m calling on every community banker, every staffer, every director, every industry ally—join the fight! Sign our petition today to help us turn the tide.

Let’s be clear what we’re fighting for here. The massive growth of the call report—to nearly 700 pages of instructions and 80 pages of forms—has a tangible impact not only on community banks and their compliance staff, but also on the success and economic growth of the local communities they serve. Like other regulatory burdens, the additional time and resources that community banks devote to the call report cannot be dedicated to local economies.

And there is no question that the size and complexity of the call report burden is rapidly growing. ICBA’s recently released call report survey found that the annual cost of preparing the report has increased for 86 percent of community bank respondents over the past 10 years. Further, 98 percent of respondents said ICBA’s proposed short-form call report, which qualifying community banks would submit twice annually, would reduce their regulatory burden. Seventy-two percent said the reduction would be substantial.

That is why we must act now! Community banks and the communities they serve can’t cede any more territory to the growing call report threat.

As part of our broader fight for regulatory relief, we must hold our position on this crucial issue. Let’s turn out in force, let’s halt the advance of this costly burden, and let’s strike a blow for smarter and more equitable regulation! Sign ICBA’s call report petition, enlist reinforcements, and make sure Washington hears every single one of us loud and clear!