With funding challenges becoming pervasive for community bankers, a provision inside of recently passed reg relief is prompting renewed enthusiasm for reciprocal deposits. At least that’s the conclusion drawn by a recent survey conducted by Promontory Interfinancial Network of bank CEOs, presidents and CFOs from nearly 400 banks located across the country.
Bank executives were asked to rank the anticipated impact of various provisions of the recently-passed reg relief bill on a scale of one to five — with five indicating a positive impact, and one suggesting a negative impact. Thirty-seven percent of bank leaders assigned a top score to reform on reciprocal deposits and nearly three out of five bankers said they plan to start or expand their use of reciprocal deposits immediately. A third of respondents indicated they’d be willing to consider using reciprocal deposits in the future.
Reciprocal deposit reform should be particularly beneficial for community banks. “In general, the new law should enable banks to generate more lower-cost, stable funding to support more local lending initiatives,” said the Promontory’s President and CEO Mark Jacobsen.
Promontory’s survey also took a look at bankers’ confidence levels with regard to access to capital, loan demand, funding costs and deposit competition. Bankers reported the lowest levels of confidence since Promontory launched its quarterly surveys more than three years ago. The change in banker confidence is likely due to expectations regarding deposit competition and funding costs, the release stated.
Expectations varied by institution size, with larger banks expecting a decrease in loan demand and worsening economic conditions for their banks in the coming year while smaller banks reported being relatively neutral about the future.