Ingram's April 2023

reasoned that there are no laws—rules— against these types of loans.

system possess the character, judgment, and willpower to push back when they see excesses building. To resist the tempta tion of a few extra basis points of yield by taking imprudent risks that might imperil their bank or worse yet, the entire system. To take a long-term approach when Wall Street measures success quarter to quarter. In the end, as it often does, it comes down to having leaders who put the good of the country and system ahead of their own success. That is what it will take to stabilize a system that is inherently unstable today. Q: So much in the way of recent regulation was aimed at large national banks, but a lot of the burden has fallen on community banks. Should smaller banks be worried about forthcoming changes following SVB/Signature? A: Post the 2008 financial crisis, a myriad new rules and laws were pro mulgated with the goal of maintaining a healthy and safe banking system. While the Dodd-Frank legislation was the most noteworthy, there were many other regula tions put in place by federal and state bank regulators. While there was some attempt in Dodd-Frank to distinguish between the large systemically significant banks and the smaller regional and local banks that did not play a meaningful part in the crisis, there were still many burdensome regula tions imposed on the smaller institutions. A: The recent rapid unraveling of Silicon Valley Bank and Signature Bank will cause yet another examination of what needs to change in our banking system. Let’s hope that the regulators have the wisdom this time to look at where the real systemic risk is coming from. Let’s just say that it is not coming from America’s community banks. Community banks remain the lifeblood of their communities and regions. Without them, communities will wither and die. Community banks need to be held up as the shining light that they are. They are certainly not part of the problem, but they are part of the solution. Q: Do you think we’ll see more regulatory action?

Q: So it sounds like values matter— but so does sticking to them A: If you aspire to lead, you must adhere to the principles you hold true, remaining acutely aware of how they influence those around you and the core identity of the organization you represent. The betterment—or downfall—of your business, your community, and our society is at stake. Q: Switching gears to current banking trends: Do you see systemic issues that go far beyond the failures of Silicon Valley and Signature, or has that virus largely been contained? A: The fall of Silicon Valley Bank and Signature Bank seem largely isolated at this juncture. They both had unique features to their business models which created unique risks. They also both chose to knowingly take on interest-rate risk by purchasing long-term bonds to boost short-term earnings. They could have and should have known the risks they were taking. That’s not to suggest that the Federal Reserve’s aggressive interest-rate hikes over the past year have not put strain on other banks, especially in the smaller and mid-sized group because it most cer tainly has. It remains a bit unclear what the future holds for these banks. In the near term, falling interest rates would help these institutions by limiting the losses in their long-term securities book. The one thing is almost certain is that for good or for bad, more regulation is on the way. Q: Where does the challenge of managing imprudent behavior leave regulators? A: The broader question I think, is how do we maintain a safe, healthy, vibrant banking system in the United States? One that contributes to economic growth and stability without becoming the fuel for financial and economic uncertainty every decade or so. While regulation is essential in this regard, it is also important to ensure that the people who lead our banking

“If you aspire to lead, you must adhere to the principles you hold true, remaining acutely aware of how they influence those around you and the core identity of the organization you represent.” — Peter de Silva, author and former CEO of UMB Bank

cultures, leaders are naturally tempted to take outsized risks. Their jobs and remu neration depend on it. This expectation of superior performance at any cost was a con tributing factor to the 2008 financial crisis. Q: And the role of personal aspir- ation? A: When kept in perspective, per sonal aspirations are healthy; when those aspirations get out of hand, they can chal lenge a person’s moral compass. Again, in the run-up to the 2008 crisis, while plenty of leaders at all levels knew that certain loans seemed too good to be true were, in fact, not good for the borrower, their aspi rations may have driven them to ignore the voice of their conscience. They might have

15

I ngr am ’ s

Kansas City’s Business Media

April 2023