BOULDER — Despite the impression the federal government is portraying of lightening the burden of regulations, bankers might disagree.
Bankers gathered Tuesday for BizWest’s CEO Roundtable on banking generally agreed that while the Dodd-Frank Act over time has created more financially fit institutions, it has favored big banks more than smaller community banks.
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New regulations that banks are dealing with center around having to ask more and more questions of loan applicants. They are also causing banks to add workers who must be trained to understand the laws’ language, and have thick skin to put up dealing with aggravated loan applicants.
Shawn Osthoff, president of Bank of Colorado, pointed to two new sets of regs, a revision of the Home Mortgage Disclosure Act and another called the Beneficial Ownership rule, which requires financial institutions to identify and verify the beneficial owners of any customer that is a corporation, LLC, general partnership or any other entity, when a new account is opened. The new rule becomes effective May 11, 2018.
“The questions are intrusive,” said Laurie Bartholomew, First Citizen Bank’s area executive in Colorado.
The Home Mortgage Disclosure Act, and old law first implemented in 1975, is taking on new life with more information required by the Consumer Financial Protection Bureau, which took over rulemaking authority from the Federal Reserve Board in 2011.
Osthoff said the disclosure act is now requiring banks to collect “26 new data points” from loan applicants.
David Wright, community bank president of ANB Bank, said while the changes are “supposed to be good, they are impossible for consumers to read. “We had to add staff to help consumers understand,” he said. “They are wondering, why collect all this information?”
Matt Gorr, chairman of First Western Trust in Boulder, said that under the new beneficial ownership requirements, banks are having to collect both personal and corporate information including, income, wages and tax reporting data.
Ray Lindley, chief loan officer of Elevations Credit Union, said finding new staff to take on these tasks is difficult.
“Regs are very unclear; they need interpretation. You need someone who can make those interpretations, but even then that adds a lot of risk for all of us in this room.”
Searching for this talent, and paying for it, is presenting challenges for banks. Lindley said he’s having to widen his search to outside the Boulder area because of the low unemployment rate and the high cost of living in Boulder.
Gretchen Wahl, senior vice president of MidFirst Bank, is still assembling her staff for the bank’s new branch in Boulder.
“Getting people to commute from Denver to Boulder is not easy,” she said, adding that salaries don’t match with housing prices here.
The recently passed tax-reform bill has allowed some companies to increase wages and pass out one-time bonuses, Bank of Colorado recently provided $1,000 bonuses to its 641 full-time employees. Despite being able to help employees with possible pay raises in the future, Osthoff agreed with Wahl that locally, wages haven’t kept up with housing prices.
“The old saying is drive to where you qualify (for a home loan),” he said. “People are moving to Greeley to work in Fort Collins.”
Bonifacio Sandoval, commercial market manager for First National Bank, said there are signs that the strong economy in the area from 2015 to 2017 is beginning to taper off.
“It is getting tougher and tougher to secure a commercial construction loan because of increasing interest rates,” Sandoval said. “It’s still OK in Boulder, but it is slower now in Fort Collins and Greeley.”
Bartholomew said in the broader view, “there is less refinancing because the way interest rates are going.”
Company expansion may be slowing down because of the current climate, said Aaron Spear, vice president of commercial banking for Community Banks of Colorado.
“Labor constraints are making people nervous about expansions,” Spear said, pointing out that one of his clients south of Denver is planning on expanding its manufacturing operation in Fort Morgan.
Wahl pointed out that some manufacturers are investing in equipment that is so sophisticated that one person can run three machines, enabling the firm to produce more with fewer employees.
Fintech, originally the term applied to technology applied to the back-end of established consumer and trade financial institutions, is now associated with an emerging financial services sector, that is creating competition for established banks.
The industry is not as heavily regulated as conventional banks, and it does not collect consumer deposits, and generally charges higher interest rates than most banks for business loans.
Susan Graf, senior vice president and regional development manager for New Resource Bank, said fintech lenders are “attracting clients that are not bankable.”
Tom Chesney, president of AMG National Trust Bank’s commercial banking division, said under fintech’s structure, “it’s more difficult on the borrower to manage cash flow. … Fintech has not gone through an economic downturn,” alluding to possible trouble for borrowers if there is one on the horizon.
If a recession were to hit, Wright said banks could “handle a downturn. … Our balance sheets aren’t as leveraged as they were in the last recession (that hit in 2008).”
“That’s been the upside of regulation,” Graf said.
Laurie Bartholomew, area executive, Colorado, First Citizens Bank; Thomas Chesney, president, commercial banking division, AMG National Trust Bank; Joe Coleman, senior vice president, Colorado & Nevada market manager, Chase Business Banking; Matt Gorr, chairman, First Western Trust, Boulder; Susan Graf, senior vice president and regional development manager, New Resource Bank; Ray Lindley, chief loan officer, Elevations Credit Union; Shawn Osthoff, president, Bank of Colorado; Bonifacio Sandoval, commercial market manager, First National Bank; Aaron Spear, vice president, commercial banking, Community Banks of Colorado; Gretchen Wahl, senior vice president, MidFirst Bank; David Wright, community bank president, ANB Bank.
Jim Cowgill, EKS&H; Mark Changaris and Giovanni Ruscitti, Berg Hill Greenleaf & Ruscitti.