Community banks have a competitive advantage in small business lending due to their relationships and personal attention, finds a
recent research paper by two noted economists.
All banks use relationships in addition to hard data such as financial statements when lending to small businesses. But large banks focus on professional referrals and are more likely to use business credit scores.
Small banks, by comparison, focus on community involvement and personal attention. That allows them to grant exceptions in underwriting policies based on existing loan and depositor relationships. Further, they have a speed advantage in approving small business loans, finds the paper, authored by Temple University professors William C. Dunkelberg and Jonathon A. Scott.
The paper examined the CSBS 2018 Community Banking Survey and compared its findings to recent studies by the FDIC and National Federation of Independent Business. It is one of a series of papers that take an in-depth look at the results of the CSBS annual survey, which this year included 521 community banks from 37 states.
Small banks do have a disadvantage when it comes to ancillary products and services. While community banks tend to offer deposit services, larger banks are more likely to offer advice on strategy, product development, operations and management succession due to their scale. That may even out over time as community banks expand their technology-based services.
Competition on small business loans relies on geography, however. Rural community banks view other banks of the same size as competition, while in urban areas, community banks are also competing with banks between $1 and $10 billion in assets. And those banks are growing concerned about the competitive threat of fintech firms, the paper finds.
committee member Jerry Moran (R-Kan.) last week called for the banking agencies
Luetkemeyer (R-Mo.) and Ranking Member Patrick McHenry (R-N.C.) expressed concerns to Securities and Exchange Commission Chairman Jay Clayton about the coming CECL loan loss accounting approach and its effects on markets and investors.
Reps. Earl Blumenauer (D-Ore.) and David Joyce (R-Ohio) introduced a bipartisan bill that aims to resolve the conflict between state and federal laws on marijuana. The States Act would amend the Controlled Substances Act so that it no longer applies to persons acting in compliance with state or tribal laws on cannabis, and the proceeds of any compliant transaction would not be deemed unlawful under anti-money laundering statutes or other federal laws.
observations about gaps in financial institution contracts with technology service providers. Some contracts may not adequately define rights and responsibilities regarding business continuity and incident response or provide sufficient detail to allow financial institutions to manage those processes and risks. Specifically, some contracts did not require the vendor to have a business continuity plan, establish recovery standards, define remedies if a vendor misses a standard, detail a vendor's post-incident notification duties or define key terms related to business continuity and incident response.
