Following the 2008 financial crisis, the banking industry was definitely not very healthy, to say the least, whereas now it is. In fact, according to 2018’s Banker’s Top 1000 World Banks Ranking, the total assets worldwide were as high as $124 trillion for that year.
More and more today, neobanks and startups that possess some pretty obstreperous technologies are coming on the banking scene every day. That leaves the traditional banks no other choice but to either merge with them or do more to compete with them by improving their service. That’s why a number of major banks, like BofA, JPMorgan Chase, and Wells Fargo have started to offer more new features for the purpose of not only attracting lots of new customers but also retaining their existing ones.
Just about every single aspect of American life involves banking in some way or another, whether you’re a consumer, business owner, or involved in trading stocks. That’s why the Federal government has introduced a number of new regulations and collections compliance rules on the banking industry as a whole.
Dodd-Frank & CPA
The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 was enacted following the devastating 2008 financial crisis. It brought about an overhaul of the U.S. financial regulations and the changes that were the most impactful included:
– Eliminating of the Office of Thrift Supervision,
– Creating the Consumer Financial Protection Bureau (CFPB) for protecting consumers against unfair practices and abuse involving and financial products and services, like mortgages and credit cards, and mortgages,
– Reassigning responsibilities for agencies like the Federal Deposit Insurance Corporation (FDIC),
– Creating the Office of Financial Research and the Financial Stability Oversight Council for analyzing the potential threats to the financial stability of the United States,
– Expanding the Federal Reserve’s powers of regulation of particular institutions.
Now, a law enacted by President Trump in 2018 called the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA) has been responsible for raising the economic threshold from $50 billion to $250 billion for banks that are deemed to be “too important to fail” by the Federal government.
The Volcker Rule
The EGRRCPA also eliminated the Volcker Rule (a federal regulation forbidding banks from conducting specific investment activities involving their accounts and restricting them regarding any dealing with private equity funds or hedge funds). This rule only affected smaller banks holding assets of less than $10 billion.
Digital Banking Trends
Today, one of the most prevalent banking industry trends is the conversion to digital, specifically in the areas of online banking and mobile banking. We’re living in an era of previously unprecedented speed and convenience where banking customers don’t have any desire to have to drive down to their bank branch for handling their transactions.
Therefore, the digital transformation has caused more startup and smaller bank consolidations as well as greatly increased tech startup competition. In fact, according to CB Insights, the overall fintech funding in the U.S. rose to $32.6 billion by end of Q3 2018, which was an increase of 82 percent over the total figure for 2017 of $17.9 billion.
Difficulty Acquiring Banking Licenses
Despite some of the changes, it’s still extremely difficult to acquire a banking license in the U.S., (even billionaire Bobby Axelrod on the Showtime hit “Billions” can’t get one). This continues to spur increasing activities involving mergers and acquisitions, while also hampering certain bank startups. As a result, going forward, the banking industry will be making regulation their key focal point for years to come.
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