Hey, Regulators! What Happened to the “Short” in Short Form Call Report?

What Happened to the “Short” in Short Form Call Report?

It’s the law of the land. After years of an ICBA initiated campaign to streamline the Call Report filing process for community banks, the Congress listened. The Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) mandates that the nation’s federal bank regulatory agencies develop a “short form” call report for the first and third calendar quarters for all FDIC insured banks under $5 billion in consolidated assets.

In 21st century America such a statute is just common sense. There are no other small privately-owned businesses in America that are required to submit a 50+ page report on every minute detail of financial activities and equity position every 90 days – whether the information has materially changed or not!

To be fair, Federal bank regulatory agencies have “shortened” the previously 80+page quarterly call report to about 54 pages, a reduction of over two dozen pages. However, the main reason those pages were eliminated was that nearly all the data sought on those pages by the banking agencies did not apply to the nation’s community banks in the first place. So, with the elimination of those pages, a process that previously took 52 hours per quarter to complete (equivalent to just over one full work week for one person per quarter) now takes only 50.5 hours per quarter to complete for banks under $1 billion in assets according to the banking agencies. Time to pop the champagne cork, everyone! Small banks can now save a little over an hour every three months with the new and improved quarterly call report. Somehow, I don’t think that is what Congress had in mind when it ordered the regulatory agencies to create a short form call report for small community banks.  

And what defies common sense even more is that other non-bank financial businesses offering the same products and services to the same consumers are not required to file these overly burdensome reports – only commercial banks are required to do so. And worse, the smallest commercial banks in the nation are required to file basically the same report as the largest banks in the world! And to add insult to injury, community banks are only asking to file the short form call reports twice a year – not all four quarters. Year-end and mid-year reports would still be the full long form call report.  

Do Federal bank regulators seriously believe that a $50 million-dollar asset bank or even a $5 billion-dollar asset bank has a financial profile so dangerous and volatile that the bank must fill out an over 50-page financial report to regulators every 90 days? What is so vital in the typical community bank that regulators must drill down in minute detail into every financial facet of the bank every 90 days? Remember, every commercial bank in the nation, large and small is also examined and audited annually (and many times more often) by both Federal and state regulators and independent audit firms. So, the quarterly call reports are in addition to those audits and examinations.

Can we all get real? Congress gets it. Congress understood that requiring small banks to fill out reams of paperwork on every single financial item of the bank every 90 days was a waste of bank management time, and frankly regulatory authority time. There are much more productive uses of bank management time and regulatory time than pouring over a financial snapshot of a $200 million-dollar asset bank every 90 days.

Here’s an idea. How about a “no material financial changes” report filed at the end of the first and third quarters? It would be an attestation by the board and senior management of the bank that nothing material has changed financially in the bank since the filing of the most recent long form call report (year end and mid-year). That should do it, right?

But such an approach or something close to it is apparently unacceptable to Federal bank regulators. They cut a couple of dozen pages that mostly didn’t apply to community banks and believe that satisfies the requirement for a “short form” call report. Never mind that the time it takes for a small bank to fill out the report is essentially the same as it was before they reduced the number of pages. Again, is this what Congress really intended? I think not.

It is high time that our bank regulatory agencies recognize that in 2019 America the banking system has evolved to a point where anachronisms like 50+ page quarterly call reports every 90 days for small commercial banks makes absolutely no sense at all.

Blowin' in the Wind

Blowin’ in the Wind

“How many times can a man turn his head
And pretend that he just doesn't see?”

Peter, Paul and Mary ~ “Blowin' in the Wind”

"Equal Justice Under Law" is a societal ideal that has guided the American judicial system since our founding. But within the American financial services system this ideal, this phrase, which is engraved on our Supreme Court Building, has been undermined by size and wealth. “Too Big To Prosecute” and “Too Big To Jail” are more apt phrases - at least when it comes to holding the mega financial firms like Wells Fargo accountable.

Much of the current distrust of our nation's banking system and the public cynicism toward our regulatory authorities stem from the fact that not one single CEO or even the second or third ranking executives of the so called "Too Big To Fail" (TBTF) financial firms was ever prosecuted much less charged with any kind of wrongdoing. What do you think spawned movements like “Occupy Wall Street”?

How many times does Wells Fargo have to break the law and violate banking regulations before real consequences are imposed? The laws and regulations that Wells Fargo has violated over the past decade are too numerous to count. Yet the CEO, top executives, and the Board have faced no personal consequences. And like the most recent fines, the numerous monetary penalties levied against Wells Fargo amount to nothing more than a slap on the hand in relation to the firm’s balance sheet. We must demand a regulatory and judicial system that will punish wrong doers no matter their societal perch or the size of their institution.

The public knows that crimes were knowingly committed, and yet the CEOs and senior executives who committed these crimes were allowed to "retire" with enormous multi-million dollar bonuses and severance packages in their pockets. All the while, community banks and bankers were and still are severely punished for what are relatively minor offenses compared to many of the outrageous actions of the mega financial firms.

"Equal Justice Under Law" indeed. More like the kind of justice you find in south American dictatorships or third world countries run by "strong men". If you are a mega bank CEO and your firm is big enough and rich enough, “Equal Justice Under Law” has a much different meaning for you than it does for the ordinary community banker.

Former Attorney General Holder openly admitted this fact in public testimony to the Senate. In plain language he admitted that the Department of Justice does hesitate to bring the top executives of the largest financial institutions to account because their institutions are so large and powerful. And to hold one of these executives accountable could destabilize the nation’s entire economy. Basically, he said that these institutions have become so large and powerful that they are too big to prosecute and so are their executives.

So regulatory authorities default to the smaller community banks by making examples out of them and their executives for far less offenses. No wonder the public is so jaded and cynical. The general public is not stupid. They see this unequal treatment before their eyes. Why is the Main Street bank CEO prosecuted, but not the Wall Street CEO or senior executive? “Unequal Justice Under Law” seems to be the apt phrase here.

"Equal Justice Under Law" has been the cornerstone upon which we differentiated ourselves from nearly every other nation on earth for most of our nation’s history. Now it seems we are just like everyone else - if you are a top executive of a mega institution, you are safe from the consequences of your actions, no matter how many thousands of lives you and your institution have ruined – so says the United States Attorney General.   

And what or who is going to change this sorry state of affairs? “The answer, my friend, is blowin’ in the wind; the answer is blowin’ in the wind.” 

Transitions

"Retirement may be an ending, a closing, but it is also a new beginning."   ~Catherine Pulsifer 

Professionally and personally, 2018 was a great transition year for me and my family. My fifteen year tenure as President and CEO of ICBA ended in May, and I began a new adventure as a consultant.

 My decade and a half as CEO of ICBA were some of the most exciting and rewarding years of my professional life. Together with my colleagues at ICBA and our incredible volunteer banker leadership, we accomplished so much for the community banking industry beginning  with defeating Wal-Mart's bid for a commercial bank charter (a feat nobody in official Washington thought was possible at the time), and culminating with the passage of S. 2155, the community bank regulatory relief act, in the same month that I retired - what a great retirement gift! During my time at ICBA, we were recognized as one of the top 10 most powerful associations in Washington, and by the time the Great Financial Crisis hit, we had gained seats at Washington's top financial policy tables.

 We have come a long way since my first days in Washington, D.C. in 2003 when it was "ICBA who?" to being honored at the White House in May 2017, when both the President and Vice President addressed over 100 top ICBA leadership bankers - the first national financial trade group to have been so honored. One year later, when I retired in May, I took pride in handing off to my successor an association that is widely known and respected (and in some quarters feared) by not only policy making Washington D.C., but also in European governmental and financial association circles as well. 

 After retiring from ICBA, I started my new consulting adventure. I was retained by ICBA to consult and assist with advocacy issues, and in July, Visa retained me as a consultant to the executive management team for all things community banking. I have enjoyed these assignments, but I will candidly admit that the transition from CEO to consultant has been more of an adjustment that I had imagined. Ha! I had the honor to speak to a couple of groups last year, and I have some speaking engagements lined up for 2019. We will see how that goes. :)

 As a new year begins, I want to thank the many, many hundreds of volunteer bankers who helped and supported me during my time at ICBA. I want to especially thank the members of the Executive Committee and Board of ICBA. A more dedicated, passionate bunch of bankers one will never find. Great men and women all. And I have a special place in my heart for all the wonderful men and women who work so tirelessly at ICBA to defend, promote and advance the community banking industry. All of my former colleagues are very special people, and I cannot thank them enough for all that they did for me and Debbie during our incredible fifteen year journey at ICBA. 

Debbie and I wish you all a happy, healthy and successful New Year!

Triumph of a Dedicated Voice

On May 22nd the Congress passed S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. The vote in both the Senate and the House was bipartisan and POTUS signed the bill on May 24th. Passage of S. 2155 was the culmination of several years of focused and dedicated hard work by ICBA and the nation’s community bankers it represents. Pure and simple, this was a victory for the community banking industry and the association formed by community banks to exclusively represent their interests in the nation’s capital.

Long ago, community banks recognized that to have a seat at the national policy table they would have to create an association focused on their best interests. And so, the Independent Community Bankers of America was born in 1930. S. 2155 represents the triumph of a dedicated voice focused exclusively on the best interests of community banks. It is a community bank bill, start to finish. It is a testament to the power of a dedicated voice for community banks. Does anyone seriously believe that a bill dedicated nearly exclusively to regulatory relief for the nation’s smaller community banks could have passed without ICBA?

No matter how others might spin it, this was an ICBA and community bank triumph. Ask the Senators and the Representatives who voted for passage of the bill who they were trying to help. (Hint: It wasn’t Wall Street.) This bill passed because ICBA fought hard over a period of years to enact a bill that would enshrine the principle of tiered regulation. Wall Street institutions (aka mega banks), and the numerous trade groups they control or have outsized influence within, did everything they could to tuck amendments into the bill that would benefit only mega banks – they failed. They failed because of one reason – ICBA and the nation’s community banks.

THAT is the power of having an association that is dedicated solely to one constituency – one mission – community banks.

Community banks will flourish because their national trade group, ICBA, exists to give voice to the them by sitting at the policy table in Washington.

Welcome Again to Finer Points!

After May 5, 2018, you will be able to find my thoughts and comments about financial policy right here.  This is the new home of my Finer Points blog that I wrote while I was with ICBA.

Thanks for following me to this new space!