Washington Wants to Impose “Wall Street” Rules on Local “Main Street” Community Banks
By Frank Capaldo
October 16, 2012
Although located a long way from Wall Street, many local communities throughout New York State are on track to suffer the consequences from the kinds of regulations imposed on the enormous Wall Street financial institutions. Regulations due out in a matter of weeks would unnecessarily impose the same complex capital requirements on local “Main Street” community banks” that were directed at the nation’s largest financial institutions. If you don’t think that’s going to make a tangible difference that will hurt local communities and economies across our state, think again.
We all understand the recent financial crisis took down some of the very largest financial firms, and contributed to the ongoing economic downturn. But what you might not know is that in response, a body of regulators based in Basel, Switzerland established new requirements on how much capital reserves large institutions must hold.
Their idea is that the more capital they hold on their books, the more secure these large banks will be when a crisis hits. In addition, these “Basel III” rules included complex standards on calculating the risks of a bank’s assets. All in all, perhaps not an unreasonable approach if intended as a response to a crisis borne by Wall Street.
Here’s the catch. When U.S. financial regulators released their plans for implementing these new standards, they proposed imposing them universally—even on the community banks that did not contribute to the crisis. This is unreasonable, and dangerous for the smaller independent financial institutions and the communities they serve throughout New York – particularly upstate.
Imposing complex capital regulations on them, as designed in Switzerland and prescribed from Washington, DC for the very largest of institutions, would severely limit the resources of community banks to lend and reinvest locally, further threatening our economic recovery.
The Independent Bankers Association of New York State represents an industry of smaller, locally owned and operated community banks which already maintain the banking industry’s highest capital levels, and operate a relationship-based banking model that recognizes the unique needs of their customers.
We believe the way to prevent another Wall Street crisis is not to force community banks out of business, leaving their customers and communities solely in the hands of much larger financial institutions.
When it comes to our financial options, without a thriving community banking industry New York’s smaller communities won’t be that far from Wall Street after all.
Frank J. Capaldo
President and Chief Executive Officer
The Independent Bankers Association of New York State (IBANYS) exclusively represents the interest of independent community banks located throughout New York State. Community banks share a commitment to meeting the financial needs of their respective local communities.
Community banks committed to local relationships
Published: Tuesday, November 08, 2011,
Independent Bankers Association of New York State, Inc.
As an unintended consequence of the above, IBANYS community bankers are concerned that those individuals exercising their constitutional right to peacefully protest will paint all financial institutions with one brush of blame. While well meaning, they do not understand the community bank difference. However, while independent community banks are different, we want to make it clear that we are not assessing or attributing blame, as there is plenty to go around.
Part ofwhat community banking is about is the development of a relationship with the customer, and knowing and helping your neighbors, in good times and trying times. IBANYS would like to extend an opportunity for all New Yorkers considering transferring their business from major banks to consider a local, independent community bank. You can find one or more in your town by going to our website, www.ibanys.net.
An independent community bank is one that is locally owned and operated and paying taxes where it is located. These banks' deposits and loans are all local, and management is made up of local citizens who live, work and play in the communities they serve. One-on-one individual attention, customized service and understanding the needs of clients and business owners are the drive and the backbone of community banks. Employees of local independent banks are friends, family and neighbors.
While other financial institutions have their appropriate mission within our financial system, community bankers make decisions locally, accept funds that local depositors have entrusted to them and turn around and lend those funds locally to credit-worthy borrowers for homes, small businesses and education. Community banks do not gamble with their customers deposits!
Through responsible loan practices, community banks were able to maintain or increase their lending ability to credit-worthy individuals, families and small businesses during these difficult times. More importantly, our New York community banks were there for their customers during the worst of the recession, and now at the start of the road to recovery. The sound underwriting standards held by independent community banks have been their mainstay for generations, and it is not a practice that will change.
The Independent Bankers Association of New York State speaks with one voice in asking all news sources, government officials and politicians to stop lumping Main Street New York community banks in with all other financial institutions and lenders, Wall Street included. We want those who have the bully pulpit and the ear of the citizens of New York to encourage all in the state and throughout the country to give your local community bank a chance to win your business. You will not be disappointed.
By: Yael Goldman
September 2, 2011, Saratoga TODAY Newspaper, Saratoga Springs, NY
SARATOGA COUNTY – Our economy and community has stayed strong through the recession, and we have our local banks to thank for it.
“If you look at upstate New York compared to the rest of the country, our banks are healthy,” said Frank Capaldo, president and CEO of IBANYS. “We get lumped in with everybody else, with Wall Street. They do their thing and we just do ours a
Small banks have a different low-risk model. They are involved in a closed system of financial exchange between the individual account-holders, homeowners and businesses that make up a community.
In our economy, independent banks like The Adirondack Trust Company, Saratoga National Bank, Ballston Spa National Bank and 1st National Bank of Scotia, have been thinking local for generations. These County banks gather their pool of capital from individual deposits, and then use that money to invest in the local economy.
“We’re the original recyclers,” said Charles Wait, president of The Adirondack Trust Company.
He explained that the bank lends to business owners who keep the majority of their profits inside the system. In turn, a local enterprise will provide jobs and taxable revenue and that goes back into the economy to support infrastructure, hospitals, charities, and all the things that keep our community ecosystem healthy.
“The whole purpose of us to exist is to make loans,” Wait said.
In this economy, when even the employed lack job security, lending would seem like a risky business. But right now, our banks are lending and are doing so with confidence because at the core of their model is the high value they place on personal relationships.
“The key for us, as a community bank, is being close to the ground and having regular communication with our customers,” said Ray O’Conor, president and CEO of Saratoga National Bank. “At a bank like ours, when people encounter trouble, whether it’s because of the loss of a job, an illness, a divorce or some other issue, we operate on a scale where we can actually talk to the customer and try to make some accommodation, to work through the issues.”
Saratoga National has had just one foreclosure in the past 23 years.
Similarly, Adirondack Trust only cites two failures out of the more than 1,200 mortgages in its portfolio, and, according to Wait, that’s how it should be. In one extreme situation, the bank waited 10 years for a payment from a customer who broke her back and was unable to work.
For a small community bank, going out on a limb for a customer in an unfortunate situation is the most reasonable risk to take. It’s an investment in the community.
“It is bad out there, but there are some bright spots, and those bright spots have been in your community forever,” Capaldo said.
Independent Community Banks More Than Willing to Lend
Exclusive to the Wall Street Journal
By Frank J. Capaldo, President/CEO, Independent Bankers Association of New York State, Inc.
Many in the media and politics have created the impression among the general public that all banks are the same and all banks were responsible for the toxicity that caused this great recession. The Independent Bankers Association of New York State (IBANYS) is writing this article to address those inaccurate impressions. Instead, we seek to replace those negative impressions with positive factual information that families and small businesses of the Empire State can find security in and rely upon.
Simply stated, New York Independent Community Banks should not be lumped in with all banks and non-bank banks.
We commend the members of the Fourth Estate for the light they have shed on the practices of financial and too big to fail institutions. However, there has been a failure by those who hold the pen and the bully pulpit, to distinguish community banks from the crowd. To not separate out all those independent community banks that lend, that are safe and sound, and did not, for the most part, involve themselves in the sub-prime debacle, misinforms the American people and perpetuates disruption on Main Street. Too many headlines and speeches continue to deter recovery with such statements as banks are “less able or willing to lend than before the recession… have reduced money available in credit lines…and have reduced home equity credit lines.”
For New York independent community banks, these statements simply do not tell the entire story. We believe for numerous reasons, of which only a few can be touched upon herein, that community banks are distinguishable from the pack as “Champions of Main Street”. They were before, during, and we are confident, after our resilient country rises phoenix-like from this recession.
Through responsible loan practices, which remained consistent pre- and post-recession, to credit worthy individuals, families and small businesses, community banks were able to maintain or increase their lending ability. More important our New York community banks were there for their communities during the worst of the recession and now, at the start of the road to recovery. The standards held by independent community banks have been their mainstay for generations, and it is not something that will change. Just ask John Buhrmaster, fifth generation community banker and President of 1st National Bank of Scotia, or Peter Forrestal, CEO, fourth generation community banker at Bank of Akron, and a host of others.
Community banks make money by lending, and loans on the balance sheet are assets. To not lend is counterintuitive because that is how community banks (our members) generate profits and shareholder return. Not lending inhibits profitability and growth. To illustrate a few specific examples, the following IBANYS members were able to lend prudently and grow in a safe and sound manner.
Oneida Bank, at $550 Million in assets, has funds to lend and wants to do just that. Oneida has provided over $40 million dollars in lines of credit and credit facilities to small businesses in the local community. Yet, as of June 30, 2011 the dollars outstanding have hovered at 20% usage, while interest rates are at historical lows. This suggests fear of the unknown by small community business, NOT unavailable funds. According to Chief Credit Officer, Tom Dixon, “underwriting standards have not changed in the past three (3) years.”
Alliance Bank, a community bank in Syracuse, is typical of most community banks. From 2008 to present, their home equity lines of credit increased by approximately 18%. Through the end of 2010, Alliance provided nearly $400 million in residential mortgage financing in Central New York. A 63% increase over 2007, the year before the financial meltdown. Alliance also reported a 55% increase in commercial loan origination over 2009. Alliance is $1.4 Billion in assets.
We would suggest another reason small businesses fear borrowing — not because funds are unavailable — but because small businesses are uncertain about tax changes, depreciation schedules, job creation, deficit spending and strained local budgets. The general perception is that Washington and state governments ignore or do not understand Main Street Banks and their customers; small businesses and homeowners.
State chartered, Solvay Bank, is another typical example of our member community banks. Solvay was founded in 1917, and currently has approximately $600 million in assets. From January 1, 2008 through March 31, 2011, Solvay has seen commercial and industrial loans grow by 17.3%; residential and home equity loans grow by 6.5% and retained the same underwriting policies and practices during the entire period. Solvay Bank, CEO, Paul Mello, stated, “Solvay, never stopped and will continue to lend to qualified customers to support the communities we serve, work and live”.
Mello, who is also the Chairman of the Independent Bankers Association, further stated, “The fact is, businesses remain cautious about borrowing because of sluggish economic growth, NOT because community banks do not want to lend”.
Moving from a few specific examples, let’s take a quick general look at a Region the FDIC Tracks for banks with less than $5 Billion in assets. (Which constitutes the asset size range of 95% of our members): The Region is Upstate New York Community Bank Performance vs. the rest of the United States as tracked from the first quarter of 2008 through the first quarter of 2011. The percentages below are for the end of the first quarter of 2011, but graphs for the entire period can be supplied upon request.
1. Share of Noncurrent Loans: U.S. 3.68% vs. Upstate NY (UNY) 1.78%.
2. Net Charge offs to total loans: U.S. 1.45% vs. UNY 0.39%.
3. Annual Change in Net Loans & Leases: U.S. -7.8% vs. UNY 1.5%.
Conclusion: Upstate New York Community banks have kept the loan window open and continue to
4. Annual Change in Commercial & Industrial Loans: U.S. -6.4 % vs. UNY 1.6%.
5. Annual Change in Real Estate Loans: U.S. -8.2% vs. UNY 2.7%.
6. Annual Change in Commercial Real Estate: U.S. -4.7% vs. UNY 5.6%.
The Independent Bankers Association of New York State, on behalf of all Independent Community Banks in New York speaks with one voice in asking all news sources, government officials and politicians to stop lumping Main Street New York community banks in with all other banks and lenders, Wall Street included. After all, community bankers lend funds locally to credit worthy borrowers, funds that local depositors have entrusted to them. Let us not, through generalization of all banks, undermine the confidence of the businesses, residents, schools and churches toward these generational stalwarts of our communities, the “Champions of Main Street”, New York Independent Community Banks.
The Independent Bankers Association of New York State, Inc. is the single focused voice of independent community banks in New York State since 1974.
- Community banks keep the community growing and vibrant by reinvesting back into the neighborhoods where their depositors live, work and play.
- Community banks understand the needs of local families and small businesses.
- Community banks are personal – with exceptional customer service, and tellers that know you by name.
- Community banks care – involvement in community affairs and outreach that benefit local families and businesses.
- Community banks are accessible – with more opportunities to interact one-on-one with bank officers.
IBANYS: IBANYS Newsletter May 22, 2013 #constantcontact http://t.co/G3wSW45dJh
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IBANYS: IBANYS Newsletter May 15, 2013 #constantcontact http://t.co/PWiiSezWer
IBANYS: IBANYS Newsletter May 8, 2013 #constantcontact http://t.co/ozMhRJrpFN
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