John Stinner is the new chairman of the Nebraska Bankers Association. The president and CEO of Valley Bank & Trust Co. in Gering took office last week after new officers and directors were elected at the annual NBA convention at the Embassy Suites Omaha in La Vista.
I had a great childhood and a special relationship with my dad, who served in World War II. His service to our country was cut short when he was shot off a mountain and broke his back in six places.
I was one of seven children and we had quite a bit of discipline in our house when I was growing up. First, I learned from my father we were to always tell the truth, even if it hurts. Second, always do the right thing — even when no one is looking.
It’s pretty evident from reading the newspapers these days that not everyone grew up like I did. The most recent and vivid example of failing to “do the right thing” in the business world was the mortgage crisis.
Now we have the Dodd-Frank Act, which supposedly will fix our banking system.
But since Dodd-Frank was enacted, 475 banks throughout the nation have gone out of business and, in fact, no new banks were chartered last year.
This is a sad commentary since the great majority of all the problem foreclosures leading up to the mortgage crisis were created outside the community banking structure in a faraway place called the “shadow banking system,” where private trading of complex instruments occurs and new products are created that are very difficult to understand and even harder to value.
Through my travels throughout the state this past year, it’s clear to me that Nebraska bankers don’t live in the “shadow banking” world. Nebraska bankers understand the same lessons my dad taught me. We appreciate the importance of infusing ethics and integrity throughout our organizations, of working hard, of helping our customers realize their dreams, of bettering our communities.
“Always doing the right thing” is an important part of our definition of success. As community bankers, we have a special connection with our customers, communities and state, as well as a responsibility to protect the integrity of community banking.
At this time, we are at a critical juncture in ensuring that our state and our country have a strong economic future.
One of the keys to that future is a healthy, vibrant community banking sector. Although community banks were not to blame for the recent crisis and lack of ethics, the resulting legislation and ensuing regulations are unfortunately impacting us all today.
Steps are now needed to reduce the regulatory burden on our community banks. Banks across the state and the country are feeling a strong pull on resources as the Dodd-Frank Act is implemented. Bankers face more than 9,000 pages of new or expanded regulations as a result of the bill, itself 2,000-plus pages.
Managing the tsunami of regulation is a significant challenge for any bank, but it’s overwhelming for community banks, which have a median size of only 39 employees.
In fact, the cost of regulatory compliance as a share of operating expenses is 2½ times greater for small banks than for large banks. The weight of the new rules creates pressure to hire additional compliance staff instead of customer service staff, and is moving our banking culture from “customer centric” to “regulatory centric.”
This reduces resources that could be directly applied to serving a bank’s customers and community. It means fewer loans get made, slower job growth and a weaker economy.
In addition, Basel III, a global voluntary accord, proposes the changing of capital requirements for all banks beginning in 2019. If passed, it will add extreme volatility to equity capital and, as a result, restrict lending and other banking activities. Basel III should be reformed so capital rules enhance, not inhibit, the role of community banks.
Furthermore, new mortgage rules are imposing such high costs that many community banks are likely to scale back their mortgage operations; these new rules may even force my bank and others like it out of mortgage lending altogether. We need simpler mortgage rules that both encourage banks to make loans and protect our consumers.
I live in Gering, a community of 8,500 people, and I know small business owners can relate. According to a recent National Federation of Independent Business poll, small business owners’ top concerns include poor sales, taxes and government regulation or red tape.
Banks and businesses understand that more regulation doesn’t necessarily make consumers safer, banks stronger or the economy healthier. In fact, more regulation — if it’s not smart regulation — has the opposite effect, chilling growth and driving up prices.
Today’s approach to regulation should ensure that consumers and our environment are protected without bogging down businesses in red tape or chilling expansion with threats of additional rules and harsh penalties. Solutions should be enabled by the government, not funded by the government.
Great leaders know when to lead, when to follow and when to get out of the way. Our government leaders would do well to take this advice.
America is full of smart bankers, bright businessmen and women, and energetic entrepreneurs. We are all eager to innovate and grow market and hire — if government would just do the right thing and get out of the way.