If there was a single mood that seemed to prevail at the 86th annual convention of the Utah Bankers Association, it was this: Bankers don't believe they are getting much respect or admiration these days.
Speakers at this year's UBA convention referred to "banker bashing" so often that a casual observer might have thought it was some new sport or perhaps a dread disease for which there is no cure.It's not hard to figure out the reasons for the paranoia. Never in the long history of their profession have bankers been so besieged by regulators on one side and a host of new competitors on the other.
But if they can't be loved, they can at least make money, the past few years have shown that. But for how long? Even during the recent years of record profits, bankers have been hearing from "experts" wielding charts and graphs that they are losing market share to the credit unions, stock brokers, thrifts, mutual funds, chain stores . . . just about everybody.
That's why the message that Daniel R. Smith brought to the UBA Wednesday during the convention's closing session was so welcome. Banks are not dying institutions, assured Smith, national president of the American Bankers Association. In fact, he declared, their best days lie ahead.
Smith, who also is chairman and CEO of First of America Bank Corp., Kalamazoo, Mich., said banks have been shown to be losing market share - as much as 30 percent according to some estimates - simply by demonstrating an overall reduction in bank loans and deposits.
That may or may not be true, said Smith, since none of those making that claim seem to use the same numbers. But even if it is, he said, it ignores the fact that banks today are involved in many new areas of business that have more than taken up the slack.
He pointed out that banks sold 20 percent of the mutual funds last year, up from 0 percent six years ago. "If that's not growth, what is?" he asked. Annuities are another relatively new enterprise that have become an important part of many banks' portfolios. And he pointed out that the banking industry is virtually buying up the savings and loan system.
"We are the growth industry for the next 10 years," said Smith. "And, yes, we are going to get back the bulk of the mortgage-loan business again, and we will dominate some aspects of the insurance business. We will be the major players in the financial industry, so I would encourage those thousands of grandchildren you have out there in Utah to look at careers in banking."
Smith's upbeat prediction of the future of banking could not have been more welcome, but he tempered it with warnings that the industry has some heavy lifting ahead. Among his concerns are:
- Fair lending, the No. 1 issue facing bankers everywhere, according to Smith. "It has come on us with a vengeance. When we violate fair-lending laws, you can be sure the (U.S.) Justice Department will become involved."
Smith said the Clinton administration has said the banking industry is discriminating in its lending policies on purpose. The administration may be half right, said Smith. "We may be discriminating, but we're not doing it on purpose."
On purpose or not, Smith said the time has come for banks to junk policies that might even hint at discrimination. Does your bank have minimum amounts on which it will make home-equity loans? That looks suspiciously like discrimination, said Smith. Do you have a policy of not making loans on cars older than five years? Low- to moderate-income people buy those older cars, so that policy will show up as discrimination, he said. Smith said it may be true that a bank loses money on loans for older cars, "but how are you going to prove it?"
- Banks have been accused of not adequately informing customers who buy their mutual funds that the funds are not insured by the Federal Deposit Insurance Corp. It may not be fair that banks are held to a higher standard than others selling mutual funds, but that's the way it is, Smith said. "We are the ones offering FDIC insurance, so we must be very careful in our advertising that those products are not confused with other investments."
- The banks vs. credit unions issue has cropped up in every state, mainly over the issues of credit unions not being taxed as are banks and credit unions expanding beyond the "common bond" of their traditional customer base. Smith said he believes credit unions are most vulnerable on the latter issue and asked Utah bankers to keep lobbying and litigating on it.
"I think we will eventually win this fight," he said, "but it will take hundreds of wins in courts around the country to do it."
- Consolidation of state and federal regulatory agencies is a "dead issue," said Smith, and will hopefully stay that way for awhile. "Ours is the best banking system in the world and, not coincidentally, the only one which has a dual banking system. All of the banking innovations of the past 20 years have come out of the state agencies."
- Relief from the regulatory burden banks now face is virtually certain to be passed by Congress this year, he said.