Oliver: I’ve been a banker for 41 years at banks large and small. I’ve been active in the association for over 20 years, and the chairmanship is a rotating position. I’ve had six positions in the organization and always been real active, so I guess it was my turn (to be chairman).
How does the Community Bankers Association differ from the Georgia Bankers Association?
Oliver: Both are very well established with the GBA dating back to 1929 when a handful of institutions came together (after the epic stock market crash) to form the group. Some of those banks became large and naturally influenced the thinking of that association maybe more than ours. So, in 1969, another group came together for a strictly community bank-only group with small banks’ interests represented. Over the years, the interests of large and small banks have become more and more divergent. And, interest-wise, most of the things that affect us now are laws coming not from the state but from the federal level. Thus, the need for a focused community bank organization.
What are some of those issues you face?
Oliver: In the 1970s and ’80s you had more than 50 large banks operating in America. Now you have five or six mega-banks. That’s an enormous concentration (of assets). Fifty-five percent of all bank deposits are now in the hands of 19 or fewer institutions. So, differences have evolved in the main interests of these few large banks and their smaller counterparts. Only 14 percent of bank assets are in the hands of community banks, yet they account for about 46 percent of the loans made to farms and small businesses.
And small businesses create the majority of the jobs in this country, correct?
Oliver: That’s right. We lend a disproportionate share of the capital provided to small businesses, and that capital is used to fuel our economy. Coca-Cola doesn’t earn most of its revenues in the Atlanta area, so are they going to care more about what happens in China or in Smyrna? If Cobb County suffers, we suffer. So, as a community bank you have a very intimate interest in making sure your community is sound economically as your bank should then be sound.
So how does this affect the way regulations are made in your industry?
Oliver: The toughest thing is to find an effective way to communicate with those who pass legislation at the federal level. We try to let them know that the ultimate result of their regulations is going to be on the guy who is working 50 hours a week trying to provide for his family. We have some wins and we have some losses.
The biggest piece of legislation to affect your industry in years has been Dodd-Frank. Was that a win or a loss?
Oliver: It has some good aspects, things that were needed in the wake of the financial meltdown of 2008, but it also has some really bad stuff.
Let’s start with the good. Was there anything good in that bill, from your perspective?
Oliver: Sure. The main thing was a change in the cost of federal deposit insurance. Bank deposits are insured by FDIC on accounts up to $250,000. Banks pay for that insurance. But what causes a bank to fail is bad loans, not bad deposits. Dodd Frank said the way banks will pay for that insurance is based on their net tangible assets, which is a more appropriate, more fair, method of charging for risk in the bank. Prior to that, many larger banks were paying far less of a share than what they had in potential risky assets because it was based only on the amount of domestic deposits a bank had.
And what is the bad stuff?
Oliver: This legislation has so many new regulations and such a broad scope, encompassing so many activities, that even the regulators are unsure how to write all the rules and regs.
Can you give an example of a regulation that is particularly onerous?
Oliver: Take fees on debit cards, resulting from the Durbin amendment. If you look across the nation, people like to use debit cards for more and more transactions. Here, at Vinings Bank in Smyrna, that is not so much of an issue. As required by the amendment, the Federal Reserve is responsible for setting the fee. Now the issuers of cards have a problem to figure out if they can survive, profit wise, and comply with the limited fee. You can’t do that through legislation, you have to let the marketplace determine your fee structure. There’s another provision that calls for broad new requirements in collecting data (for bank loans) to minority-owned and female-owned businesses. There’s an entire new bureaucracy needed to administer this. It’s so massive in its scope and narrow in its intent that it may cause problems in small communities. Volume wise, even for a bank the size of SunTrust, this will be a monumental task. But think, if you’re a person on the street (in need of a loan) in a small community, requiring banks to collect this data, where it may be obtained through other sources, may result in unintentioned disclosure of the information to people you know. That could be catastrophic.
So, in the end, this legislation, you believe will hurt small banks and the people who depend on them. What about in terms of mortgage loans?
Oliver: This is a worry to almost every banker I know. They have continued to regulate owner-occupied single-family residential mortgages to the point where many community banks may no longer make these mortgage loans directly. It’s not just inconvenient but nearly impossible for many (smaller banks) to compete and comply with all the rules.