ViewPoint: Spotlight: Introduction

Introduction | Spotlight: Banker Outreach | Spotlight: Basel III | State of the District | National Banking Trends


By Michael Johnson, Senior Vice President
Supervision & Regulation
Federal Reserve Bank of Atlanta

Mike JohnsonAs we enter the autumn of 2012, I am happy to report that the financial condition of banks in the Sixth District continues to improve. Of note, we have seen rising loan growth, which has expanded beyond the commercial and industrial lending area. Despite favorable trends, the banking industry faces a number of challenges, many of which were highlighted at a recent banker outreach forum hosted by the Federal Reserve Bank of Atlanta in Chattanooga, Tennessee. Shortly after the Chattanooga conference, the Atlanta Fed hosted a smaller gathering of community bankers at our Birmingham Branch, which featured comments and a Q&A with Federal Reserve Governor Betsy Duke. Many of these same themes were discussed at the event.

State of the District
Nationally, improved asset quality, stronger earnings, and higher capital levels have put a majority of banks in their best condition since the start of the financial crisis. Banks of all sizes are experiencing some level of loan growth and a return to positive earnings. In the Sixth District, bank performance has generally improved as well, with a majority of the banks now profitable and the level of bank stress starting to abate. Still, without a more robust economy, asset quality, earnings, and capital will remain concerns given the link between banking and overall economic conditions.

Basel III notices for proposed rulemaking
In early June, as you are aware, the banking agencies, including the Federal Reserve, issued a series of notices for proposed rulemaking (NPRs) that represent the biggest change in regulatory capital calculations in the past 20 years for banks of all sizes across the country. The NPRs present a framework for U.S. implementation of the new international capital accord commonly known as Basel III. The article titled "New Face of Bank Capital" will hopefully provide you with more perspective on the changes envisioned in calculation of the numerator and denominator of future Basel III capital ratios and some of the potential implications for Sixth District institutions. I invite you to comment on the NPRs.

Outreach event in Tennessee
On August 10, the Federal Reserve Bank of Atlanta hosted a banker outreach forum in Chattanooga, with approximately 80 bankers from Tennessee, north Georgia, and north Alabama in attendance. The theme was "Where's the Smart Money?" Atlanta Fed President Dennis Lockhart highlighted several trends and challenges that he believes will shape the banking sector, including pressures to achieve economies of scale, higher regulatory and capital requirements, consolidation, and enhanced technology.

Following President Lockhart's remarks, Capstar Bank President and Chief Executive Officer Claire Tucker also solicited bankers' insights, which she shares with Federal Reserve policymakers as part of her service on the Federal Reserve's Community Depository Institutions Advisory Council (CDIAC). Established in 2010, CDIAC meets twice a year at the Federal Reserve Board in Washington, D.C.

The majority of the Chattanooga conference was designed to stimulate a dialogue among the bankers themselves. There were two main sessions on profitability drivers and risk management considerations, both of which started by using instant-polling technology to garner a sense of the group on a variety of key questions in these two subject areas, followed by a dialogue facilitated by Katie Edge, an attorney with the regional law firm Butler, Snow, O'Mara, Stevens & Cannada PLC. I'd like to encourage the "ViewPoint" readership to take the poll the bankers took at the forum, and in the December "ViewPoint," we plan to share the results of your input, plus some related analysis.

As always, I look forward to hearing from our readers, so please share with me any feedback you may have at, and best wishes on continued profitability for the remainder of the year and into 2013.

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