What (Bank) Directors Think

Quickly:

CHICAGO — Guess what?  As institutions continue to seek out growth and efficiencies through technology, they in turn expose themselves to new risks and liabilities. Understanding the two-sided nature of this proverbial coin reflects just one of the many nuanced conversations that took place during our annual Bank Audit & Risk Committees Conference.  If you’re not familiar with this exclusive event, we invite bank leaders from across the country to take a broad and strategic view at the risk landscape, while also focusing on specific actions to improve a bank’s performance.

Indeed, our team put together an agenda filled with opportunities to improve existing audit and risk functions.  In addition, we surfaced new ideas around issues and topics such as cybersecurity, credit quality, blockchain, rising interest rates and financial reporting.

Personally, I was thrilled to welcome more than 400 men and women to the Swissotel Chicago — with over 300 participants comprising bank CEOs, chairmen, board members, CFOs, CROs, senior executives and internal auditors.  Throughout our time together, we took the opportunity to pose a series of questions to this hugely influential and knowledgeable audience.  As we discovered, the increasing level of U.S. debt proved the biggest macroeconomic concern for this group by a wide margin.  Yes, we polled this group using an audience response device and found 52% placed this issue as their top concern — far outpacing the 15% who cited a potential recession and 13% who pointed towards a political crisis.

Such in-person polling provides quite a bit of insight as to where we might be heading as an industry and an economy.  What follows are five additional survey results from this year’s event on how this experienced audience feels about various hot topics.

Q: What do you think is the biggest risk to the industry?

54% = Technology changes and FinTech
20% = Recession risk and loan quality
17% = Flattening yield curve
6% = Pushed out by consolidation
4% = Regulatory scrutiny

Q: What are your expectations for deposit competition in your markets over the next year?

78% = We face stiff competition; deposit pricing will be a key concern
13% = Our ability to compete for deposits will improve as rates rise
9% = Unsure

Q: As rates rise, are you concerned about loan terms within the bank’s existing loan portfolio?

50% = No
35% = Yes, but for a short period of time
10% = Yes, I’m deeply concerned
4% = Unsure

Q: What is your greatest concern about deploying RegTech within your bank?

23% = Updates to internal processes / infrastructure
22% = Cost of RegTech solutions
21% = Identifying valid solutions
17% = Vetting providers / third party management
15% = Internal skills
3% = Regulatory acceptance

Q: Do you believe the bank’s board has the necessary level of cybersecurity expertise?

78% = No
18% = Yes
4% = Unsure

I’ll keep my observations on these findings to personal conversations… That said, from improving risk oversight, mastering new reporting requirements and staying ahead on compliance, this year’s conference provided practical takeaways for participants to bring back to their banks.  Curious to see what we covered?  I encourage you to take a look at BankDirector.com or search for @BankDirector and #BDAudit18 on Twitter.

In the spirit of a Friday Follow

In the spirit of Twitter’s #FridayFollow, here are three stories related to the financial community that I read/watched/heard this week:

(#1) If you were at Bank Director’s 19th annual Acquire or Be Acquired conference last month, you heard that declining net interest margins, loan growth and regulatory challenges are the top concerns for banking leaders. In the following video, Grant Thornton’s Nichole Jordan discusses these concerns and provides insight into what bank executives and members of a board might do about them.

 

(#2) While I live in Washington D.C., our company considers Nashville home. In the shadows of Union Station, Avenue Bank maintains its oh-so-cool headquarters. I met with our “neighbor’s” President & COO yesterday afternoon and wound up talking about quite a few things. SEC sports, the upcoming Masters, branding (that’s their hummingbird below) and gasp(!), even a bit of banking.

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When I asked if he’d read this cover story in Wednesday’s Wall Street Journal (“Business Loans Flood the Market“) about more banks competing for lending opportunities, he said he hadn’t. But, he did have good reason: he’d been talking about that very thing in Knoxville (at UT’s business school) the night before. While a subscription is required, the story lays out how banks are putting “their liquidity to work, but added competition puts pressure on rates and elevates risk.”

(#3) Finally, I receive a number of insightful research reports and newsletters. One of the better ones, IMHO, comes from Clark Street Capital. Each week, the Chicago-based firm shares its perspectives on banking, real estate, and the debt and loan sale markets. Worth a sign up.