Community banks face significant challenges driven by inflation, recession fears, and an ever-growing regulatory burden. These factors impact community banks and the strategies being employed to navigate this turbulent environment. We recently spoke with Chris Furlow, the President and CEO of the Texas Bankers Association (TBA) about his organization’s outlook on the current community banking landscape.
Understanding the Texas Bankers Association
The TBA is the oldest and largest state banking association in the United States, founded in 1885. Its mission is to advocate for the interests of community banks and ensure their sustainability and growth. This organization plays a crucial role in promoting not only the health of banks but also the local communities they serve.
The Role of Advocacy in Banking
One of TBA's primary focuses is advocacy. This involves making the business environment more conducive for community banks. The current regulatory landscape, where new regulations are piling up, makes it increasingly difficult for these banks to operate efficiently.
- Regulatory Burden: In 2023 alone, community banks faced over 5,000 pages of new regulations. These include significant rules such as the CFPB's section 1071 small business rule and others that complicate lending processes.
- Impact on Lending: The sheer volume of regulations raises the question of whether they facilitate or hinder lending, especially to minority or women-owned businesses.
- The Economic Landscape: Inflation remains a pressing concern for community banks. The rapid rise in interest rates, a response to inflation, has created a challenging environment for lending and profitability. Banks are feeling the effects of these changes in real-time, unlike regulators who often rely on lagging data. As interest rates have skyrocketed, the banks have had to adjust their strategies to mitigate risks associated with a potential recession. The TBA has taken a proactive stance, advocating for a focus on safety and soundness in the banking industry.
Regulatory Accountability and Transparency
There is a need for accountability within regulatory agencies. While community banks are held to high standards, regulators often escape scrutiny for their roles in financial crises. TBA has called for independent reviews of regulatory practices to ensure they align with the realities faced by community banks. Moreover, Furlow contends, having experienced individuals in regulatory positions is essential, as many current regulators lack firsthand experience in community banking.
Fighting for Community Banks
Advocacy is not just about lobbying; it’s about fighting for policies that support community banks' ability to serve their communities. TBA has taken significant legal action against federal regulators to protect the interests of its members, including lawsuits over burdensome regulations.
TBA has sued federal regulators three times in the last two years to challenge regulations that are detrimental to community banking. The consequences of regulatory decisions affect not just banks but the communities they serve, making TBA's advocacy even more critical.
Creating Connections and Growth Opportunities
In addition to advocacy, TBA focuses on fostering connections among its members. With over 400 banks in Texas, TBA hosts numerous events each year to facilitate networking and knowledge sharing.
- Regular CEO Calls: TBA organizes bi-weekly calls for CEOs to discuss current issues and share insights, fostering a sense of community among bankers.
- Conventions and Conferences: TBA hosts events such as annual conventions, which attract over a thousand attendees, providing opportunities for learning and collaboration.
Addressing Cybersecurity and Fraud
Cybersecurity and fraud are significant challenges facing community banks, particularly in the wake of high-profile incidents. TBA has established a fraud task force to address these issues and is working with law enforcement to enhance resources for combating financial crimes.
Banks often bear the brunt of fraud losses, and there is a pressing need for greater awareness and legislative action to combat these crimes effectively.
Investing in the Next Generation of Bankers
TBA is also committed to developing the next generation of banking leaders. They are actively engaging with universities to ensure that banking programs align with the needs of community banks.
- Educational Partnerships: TBA collaborates with 17 universities across Texas, investing close to $2 million to support banking education.
- Diversity in Banking: TBA is particularly focused on promoting diversity within the banking industry.
Securing the Future of Community Banks
As community banks navigate the challenges of inflation, recession fears, and regulatory burdens, organizations like TBA play a crucial role in advocating for their interests and promoting sustainable growth. The leadership and commitment of TBA to support community banks demonstrate the resilience of this sector.
With a proactive approach to advocacy, education, and collaboration, community banks can continue to thrive and serve the needs of families and businesses in their communities. The future may be uncertain, but with the right strategies in place, community banks can emerge stronger and more capable of facing the challenges ahead.
Contact Midwestern Securities today to explore strategies that can ensure growth and sustainability for your community financial institution. Get in touch with us now!