Risk

The Federal Reserve and Office of the Comptroller of the Currency terminated enforcement orders against Industry Bancshares and its subsidiaries. The banks were considered prime examples of interest rate risk management gone awry.

As we enter one of the banking industry's most extreme cycles of deregulation, we should remember it doesn't always work, especially when supervisory police are reduced and consumer protection guardrails are removed, resulting in a high-speed lane for risk-taking banks and nonbanks.

The voluminous resolution plans banks are required to submit to regulators are often set aside in the case of actual bank failures. There are far more efficient ways to ensure orderly bank resolutions.

A number of fintechs emerged amid the COVID-19 pandemic as a flurry of Paycheck Protection Program loan applications inundated banks. Now, the government is alleging many of them facilitated or committed fraud.

The Federal Reserve is the latest bank regulator to purge reputational considerations from its supervisory materials.

The Office of the Comptroller of the Currency's decision to remove reputational risk from banks supervision plans means that one of examiners' most effective tools has been stripped away.

Wise bankers will recognize that as the Trump administration dismantles much of the supervisory structure built up over past decades, regulatory risks are being supplanted by other dangers.

It is past time to rethink how we treat banking organizations in trouble. It is time we work to support institutions in trouble wherever possible, rather than simply punishing the institutions and the public.

The probability of a trade war-induced recession is unclear and fluctuates almost daily. However, the possibility is real enough that banks have a responsibility to prepare for a serious economic downturn on par with the 2008 financial crisis.