Throwing Big Banks Off The Bus

By Christopher L. Williston
Independent Bankers Association

Throughout Texas, community banks provide personalized, valuable services to families and small businesses each and every day. However, community banks are facing increasing challenges as a result of changes in the banking industry—in effect, they are paying a steep price because they are grouped with the huge megabanks that have been front and center in the current economic crisis. In the long run, the challenges that Texas community banks are facing will negatively impact Texas consumers in a variety of ways, including more regulatory red tape which will lead to higher-priced financial services.

In his December 20, 2011, American Banker editorial, “Community Banks Should Ask for a Divorce,” Robert H. Smith summarizes the growing frustrations of community bankers today in this way:

“Unfortunately, the community banks of this country are thrown under the bus by just being a bank. They have been unable to disassociate themselves from extra costs and lost credibility resulting from the scarred reputation of the bigger banks. Today the community banks are subject to the same increased regulatory burden, increasing capital and general public disdain as the larger bank. It’s time for community banks to disassociate themselves from the big banks in the eyes of the public, the legislatures and the regulatory community. They must seek regulation under a different set of expectations, consistent with their size, capabilities and ability to compete consistent with community opportunities.”

Smith, a former chairman and CEO of Security Pacific Corp., now founder and director of a community bank in Newport Beach, California, gets it. Having made a living in a “too big to fail” bank and now having to survive and compete with Security Pacific’s acquiring institution, Bank of America, Smith conveys the mounting uncertainty of the future of community banks in a post-Dodd-Frank era.

The big banks are taking a ride on the community bank advocacy bus in Washington and throughout state legislatures all across the country, including here in Texas. They hide like thieves in the night behind the goodwill and unified message of the community banks proclaiming “one industry voice” as the only means to a successful legislative and regulatory end. And look where that has gotten us…a “one size fits all,” over-regulated world and a growing public perception that a bank is a bank, and all bank executives are out for personal enrichment and public deception.

In his bestselling book, “Good to Great,” business consultant Jim Collins says this about the philosophy of great companies:
“They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances.”

The same is true for those of us in community banks. It is time for the little guys to throw those who are supposedly “too big to fail” off our bus. We have tied the knot with the “too big to fail” for far too long. It’s time to fight to advance meaningful regulation that works for our businesses and our customers and preserves our own good names. When it comes to banking, smaller is definitely better.

Williston is president and CEO of the Independent Bankers Association of Texas, the largest state community banking organization in the nation. The Austin-based group represents more than 2,000 banks and branches in 700 Texas communities.