By: Staci Baker Just before the holidays, the Fed released proposed rules, which implement Sections 165 and 166 of the Dodd-Frank Act. According to The American Bankers Association, “The proposals cover such issues as risk-based capital requirements, leverage, resolution planning, concentration limits and the Fed’s plans to regulate large, interconnected financial institutions and nonbanks.” How will these rules affect you? One of the biggest concerns that I have been hearing from institutions is the affect that the proposed rules will have on profitability. Greater liquidity requirements, created by both the Dodd-Frank Act and Basel III Rules, put pressure on banks to re-evaluate which lending segments they will continue to participate in, as well as impact the funds available for lending to consumers.   What are you doing to proactively combat this? Within the Dodd-Frank Act is the Durbin Amendment, which regulates the interchange fee an issuer can charge a consumer. As I noted in my prior blog detailing the fee cap associated with the Durbin Amendment, it’s clear that these new regulations in combination with previous rulings will continue to put downward pressures on bank profitability. With all of this to consider, how will banks modify their business models to maintain a healthy bottom line, while keeping customers happy? Over my next few blog posts, I will take a look at the Dodd-Frank Act’s affect on an institution’s profitability and highlight best practices to manage the impact to your organization.

For as long as there have been loans, there has been credit risk and risk management. In the early days of US banking, the difficulty in assessing risk meant that lending was severely limited, and many people were effectively locked out of the lending system. Individual review of loans gave way to numerical scoring systems used to make more consistent credit decisions, which later evolved into the statistically derived models we know today. Use of credit scores is an essential part of almost every credit decision made today. But what is the next evolution of credit risk assessment? Does that current look at a single number tell all we need to know before extending credit? As shown in a recent score stability study, VantageScoreSM remains very predictive even in highly volatile cycles. While generic risk scores remain the most cost-effective, expedient and compliant method of assessing risk, this last economic cycle clearly shows a need for the addition of other metrics (including other generic scores) to more fully illuminate the inherent risk of an individual from every angle. We’ve seen financial institutions tightening their lending policies in response to recent market conditions, sometimes to the point of hampering growth. But what if there was an opportunity to relook at this strategy with additional analytics to ensure continued growth without increasing risk?  We'll plan to explore that further over the coming weeks, so stick with me.  And if there is a specific question or idea on your mind, leave a comment and we'll cover that too.

By: Staci Baker Just before the holidays, the Fed released proposed rules, which implement Sections 165 and 166 of the Dodd-Frank Act. According to The American Bankers Association, “The proposals cover such issues as risk-based capital requirements, leverage, resolution planning, concentration limits and the Fed’s plans to regulate large, interconnected financial institutions and nonbanks.” How will these rules affect you? One of the biggest concerns that I have been hearing from institutions is the affect that the proposed rules will have on profitability. Greater liquidity requirements, created by both the Dodd-Frank Act and Basel III Rules, put pressure on banks to re-evaluate which lending segments they will continue to participate in, as well as impact the funds available for lending to consumers.   What are you doing to proactively combat this? Within the Dodd-Frank Act is the Durbin Amendment, which regulates the interchange fee merchants are charged. As I noted in my prior blog detailing the fee cap associated with the Durbin Amendment, it’s clear that these new regulations in combination with previous rulings will continue to put downward pressures on bank profitability. With all of this to consider, how will banks modify their business models to maintain a healthy bottom line, while keeping customers happy? Over my next few blog posts, I will take a look at the Dodd-Frank Act’s affect on an institution’s profitability and highlight best practices to manage the impact to your organization.

By: Staci Baker Just before the holidays, the Fed released proposed rules, which implement Sections 165 and 166 of the Dodd-Frank Act. According to The American Bankers Association, “The proposals cover such issues as risk-based capital requirements, leverage, resolution planning, concentration limits and the Fed’s plans to regulate large, interconnected financial institutions and nonbanks.” How will these rules affect you? One of the biggest concerns that I have been hearing from institutions is the affect that the proposed rules will have on profitability. Greater liquidity requirements, created by both the Dodd-Frank Act and Basel III Rules, put pressure on banks to re-evaluate which lending segments they will continue to participate in, as well as impact the funds available for lending to consumers.   What are you doing to proactively combat this? Within the Dodd-Frank Act is the Durbin Amendment, which regulates the interchange fee an issuer can charge a consumer. As I noted in my prior blog detailing the fee cap associated with the Durbin Amendment, it’s clear that these new regulations in combination with previous rulings will continue to put downward pressures on bank profitability. With all of this to consider, how will banks modify their business models to maintain a healthy bottom line, while keeping customers happy? Over my next few blog posts, I will take a look at the Dodd-Frank Act’s affect on an institution’s profitability and highlight best practices to manage the impact to your organization.

For as long as there have been loans, there has been credit risk and risk management. In the early days of US banking, the difficulty in assessing risk meant that lending was severely limited, and many people were effectively locked out of the lending system. Individual review of loans gave way to numerical scoring systems used to make more consistent credit decisions, which later evolved into the statistically derived models we know today. Use of credit scores is an essential part of almost every credit decision made today. But what is the next evolution of credit risk assessment? Does that current look at a single number tell all we need to know before extending credit? As shown in a recent score stability study, VantageScoreSM remains very predictive even in highly volatile cycles. While generic risk scores remain the most cost-effective, expedient and compliant method of assessing risk, this last economic cycle clearly shows a need for the addition of other metrics (including other generic scores) to more fully illuminate the inherent risk of an individual from every angle. We’ve seen financial institutions tightening their lending policies in response to recent market conditions, sometimes to the point of hampering growth. But what if there was an opportunity to relook at this strategy with additional analytics to ensure continued growth without increasing risk?  We'll plan to explore that further over the coming weeks, so stick with me.  And if there is a specific question or idea on your mind, leave a comment and we'll cover that too.

By: Staci Baker Just before the holidays, the Fed released proposed rules, which implement Sections 165 and 166 of the Dodd-Frank Act. According to The American Bankers Association, “The proposals cover such issues as risk-based capital requirements, leverage, resolution planning, concentration limits and the Fed’s plans to regulate large, interconnected financial institutions and nonbanks.” How will these rules affect you? One of the biggest concerns that I have been hearing from institutions is the affect that the proposed rules will have on profitability. Greater liquidity requirements, created by both the Dodd-Frank Act and Basel III Rules, put pressure on banks to re-evaluate which lending segments they will continue to participate in, as well as impact the funds available for lending to consumers.   What are you doing to proactively combat this? Within the Dodd-Frank Act is the Durbin Amendment, which regulates the interchange fee merchants are charged. As I noted in my prior blog detailing the fee cap associated with the Durbin Amendment, it’s clear that these new regulations in combination with previous rulings will continue to put downward pressures on bank profitability. With all of this to consider, how will banks modify their business models to maintain a healthy bottom line, while keeping customers happy? Over my next few blog posts, I will take a look at the Dodd-Frank Act’s affect on an institution’s profitability and highlight best practices to manage the impact to your organization.