Peter Stanton, newly elected president of the Washington Bankers Association, said he wants to boost the industry’s tattered image.
Noting a survey released last month showing only 36 percent of Americans have a favorable opinion of banks, Stanton stressed the vital role the institutions play in their communities.
“Without banks the economic engine in many small towns would sputter,” he said.
Stanton said all banks got a black eye recently when First Chicago Bank announced it would start imposing fees for such basic services as teller windows.
Nickel-and-diming consumers will not help banks, he said. Instead, he predicted the industry would split between those like Seafirst that stress technology to deliver customer services, and smaller, community banks that continue to rely on person-to-person relationships.
As president of Washington Trust Bank, the largest independent bank in the state and the biggest commercial lender in Spokane County, Stanton said he is cast as the mediator between large and small banks as they confront sweeping changes in the industry.
His experience with regulators and legislators, he said, makes it clear there will be little progress without consensus.
“We really have to speak as one voice,” he said.
Congress has already removed the longstanding barrier to interstate banking. Stanton said he expects the Washington Legislature to pass a bill that will accelerate the federal law’s implementation in the state, but only if out-of-state banks buy an existing bank.
That condition, he said, will preserve the franchise value of small banks vulnerable to new branches that could otherwise be opened by banking giants like New York-based Citibank.
Most of Washington’s major banks are already part of interstate holding companies, Stanton added.
In addition to interstate banking, federal lawmakers are also considering termination of Depression Era barriers between banking and the securities and insurance industries.
Stanton said the changes are generally pro-consumer in that financial services will become more competitive. To survive, community banks will have to cut costs and create new ties with providers of non-banking services like insurance, he predicted.
Changes are likely, too, in the premiums paid by banks and savings and loans for deposit insurance, and in the way institutions are rated for meeting community financial service needs.
Banks have rebuilt their insurance fund, and will soon be granted a sharp decrease in premiums. Reserves in the thrift fund have grown much more slowly, making a reduction in their premiums only a distant possibility.
The difference will put them at a substantial competitive disadvantage.
Although bankers have vehemently resisted any move to use a portion of their premiums to alleviate the burden on thrifts, Stanton said a compromise is likely.
He restated banker concerns about the Community Reinvestment Act, which penalizes institu tions judged deficient in serving community needs.
The cost of documentation can soak up as much money as the loans themselves, he said, noting that Washington Trust has an “outstanding” rating for its own compliance.
Looking ahead, Stanton said he is “awestruck” by the changes posed by potential new entrants, like Microsoft, in the financial services field.
A still unresolved question, he said, is who will control the new services and their vendors.
Stanton said irresponsible lending is another concern. Spiraling credit card debt could become the next industry crisis, he said, as rogue banks try to grow by extending credit with little regard to risk.
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