Pulling Back the Reigns of Growth – Small Banks Restrain Progress Fearing Costly Regulations
Banks have come under intense scrutiny in recent years following the financial crisis that began in 2007. The regulatory pressure doesn’t seem to be letting up anytime soon as regulators attempt to reign in banks designated as “systemically important.”
According to regulators, systemically important banks are those which report assets of more than $50 billion on average for four quarters in a row. Once a bank has achieved this status, banks are required to comply with, among other things, stringent capital requirements, submit to yearly “stress tests” and to create processes for the winding down of a bank in the event of a crisis.
The purpose of placing a $50 billion asset threshold amount, according to regulators, is to keep a closer eye on banks whose potential problems could endanger the broader financial system. However, some critics within the banking industry argue the threshold is too low and that banks who come close to that amount are far from “financial giants”. This issue has caught the eye of Federal Reserve governor Daniel Tarullo, who stated in a speech that it might make more sense to increase the threshold from $50 billion to $100 billion for applying certain rules. The suggestion being that the “stress test” process seems unnecessary for banks under $100 billion.
As a consequence of these stringent and costly regulatory requirements, some small asset banks like New York Community Bank (NYCB), whose reported assets in the first quarter of 2014 was $47.6 billion, has come out with a statement that it is restraining its lending growth citing loans amount to assets. If other small banks, like NYCB, who are coming up to the $50 billion threshold limit decide to take a similar approach and restrain growth by curbing its lending practices, some borrowers, like small business owners, may have a more difficult time obtaining the necessary financing they need to maintain and grow their business. Fortunately, Capstone Business Funding, LLC has the solution.
Capstone Business Funding, LLC has been helping small to mid-sized businesses for years obtain the necessary working capital they need to sustain and grow during uncertain economic times without all the red tape you normally get from most banks. Capstone Business Funding, LLC specializes in Purchase Order factoring, Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Business Funding.