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Community banks scaling back growth
Community banks are shifting their growth and deposit-gathering strategies in the wake of uncertainty following the recent bank failures.
Many banks are hunkering down, focusing inward and slowing their growth as they grapple with the changing and challenging operating environment. However, they are still moving full steam ahead with deposit growth as funding pressures intensify, community bankers said during panels at S&P Global Market Intelligence's 2023 Community Bankers Conference.
Overall, banks are not pursuing rapid growth, particularly with lending, as uncertainty surrounding liquidity, regulation and credit quality grows. Speaking on panels at the conference, multiple community bankers said they are pumping the brakes and focusing on lending to their best borrowers as they become pickier when making loans.
While banks are largely slowing growth, they will still aggressively pursue deposit growth. However, they are focused on sticky deposits, not rate-chasing customers.
Source: S&P Global Market
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Uncertainty over future interest rate hikes
The members of the Federal Reserve's Open Market Committee remain divided over the future course of interest rates.
Minutes of the committee's May 2 and May 3 meeting showed that some members expressed uncertainty about how much more policy tightening may be appropriate, while others viewed that the committee needs to retain optionality following the recently concluded meeting.
Those who viewed that the current monetary policy needs additional firming believed that the progress in returning inflation to the 2% target could continue to be unacceptably slow.
Meanwhile, several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming may not be necessary at the upcoming policy meetings.
Borrowing from the Fed's Bank Term Funding Program increased for the third week running during the week ended May 24, while discount window borrowing decreased for the second consecutive week, according to the central bank's latest H.4.1 data.
The Bank Term Funding Program borrowings totaled $91.91 billion on May 24, up by close to $5 billion from $87.01 billion in the prior week.
Borrowing from the discount window fell to $4.21 billion from $9.05 billion in the previous week.
Source: S&P Global Market Intelligence
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ACB members among ICBA’s 2023 top-performing
Congratulations to the ACB member banks spotlighted in ICBA’s 2023 list of top performing community banks based on the 3-year average pretax ROA in their asset category.
UNDER $300 MILLION
Priority Bank-Fayetteville 2.94 #7 of 25
$300 MILLION - $1 BILLION
Bank of England 3.56 #4 of 25
Great job!!
Source: ICBA
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Updated anti-ransomware guide
The Cybersecurity and Infrastructure Security Agency and other agencies published the #StopRansomware Guide—an updated version of their 2020 guide with additional recommended actions, resources, and tools.
The #StopRansomware Guide is a one-stop resource designed to help organizations reduce the risk of ransomware incidents through best practices and step-by-step approaches to address potential attacks. The update incorporates lessons from the past two years, including recommendations for preventing common initial access techniques and for addressing cloud security backups
Separately, CISA and other agencies published a joint Cybersecurity Advisory warning of a malicious actor sponsored by China and known as Volt Typhoon that is working to compromise networks and avoid detection by using legitimate network administration tools.
Source: ICBA; CISA
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Litigation looming
The Consumer Financial Protection Bureau's proposal to drastically cut credit card late fees to just $8 a month could end up in contentious litigation, with trade groups representing large issuers threatening lawsuits once the rule is finalized, American Banker reported. The trade groups claim the CFPB failed to convene a small-business review panel, as required by law, as a large number of small community banks and credit unions face economic harm due to the proposed law, according to the report.
Source: S&P Global Market Intelligence; SEC
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Revised Actions Against Persistent Weaknesses
The Office of the Comptroller of the Currency (OCC) announced revisions to its policies and procedures manual on bank enforcement actions to reflect its consideration of actions against banks that exhibit or fail to correct persistent weaknesses.
Policies and Procedures Manual (PPM) 5310-3, “Bank Enforcement Actions and Related Matters,” now includes “Appendix C: Actions Against Banks With Persistent Weaknesses,” which provides greater transparency and clarity about how the OCC determines if a bank has persistent weaknesses and the possible additional actions the agency may take to address them. The policy is focused on larger and more complex banks the OCC supervises.
“This revised policy promotes strong management by making clear that a bank’s inability to correct persistent weaknesses will result in proportionate, fair, and appropriate consequences, including growth restrictions and divestitures when warranted,” said Acting Comptroller of the Currency Michael J. Hsu. “These guardrails are especially important today, as banks grow to better serve their communities, improve their competitiveness, and achieve economies of scale. Well-managed banks provide invaluable support to our economy, and this revised policy promotes this result.”
Source: S&P Global Market Intelligence
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Replenish insurance fund with devalued bonds?
Sen. Elizabeth Warren (D-Mass.) urged Federal Deposit Insurance Corp. Chair Martin Gruenberg to oppose a reported attempt by "Big Banks" to repay close to $16 billion owed to replenish the deposit insurance fund with devalued Treasury bonds.
In a May 19 letter, Warren called on Gruenberg "to quickly, forcefully, and publicly reject this unjustified giveaway that could be worth billions of dollars to the big banks and threatens the stability of the deposit insurance trust fund."
Warren highlighted that these "Big Banks" have experienced a surge in deposits following the collapse of Silicon Valley Bank while also receiving "favorable loans from the Fed's Bank Term Funding Program" and had $30 billion of their own deposits guaranteed in the First Republic sale.
These banks are seeking to replenish the deposit insurance fund "with devalued assets, getting those assets off their books, while leaving the federal government to assume the risk," Warren said.
The FDIC had recently released a proposal to replenish a portion of these costs by imposing a special assessment that would fall primarily on the country's largest banks.
Source: S&P Global Market Intelligence
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contact information for any purpose.
With the exception of official announcements, the Arkansas Community Bankers Association Board of Directors, Officers and staff disclaim any responsibility for opinions expressed and statements made in articles published in Arkansas Community Bankers NewsWatch 2023.
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