The Daily Dividend

News, notes and insights from around the industry

NOVEMBER 16, 2018
Banking in Ten Years
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Banking in Ten YearsBlockchain, fintech companies, open banking – there are plenty of thoughts as to what banking will look like by the year 2028. Will branches completely die? Will AI replace tellers? Will community banks or big banks be the ones who suffer most from the shifts? 

Colin Walsh at Forbes recently shared his vision of the future, focusing on a handful of thought-provoking possibilities:

All new developments moving forward will be fintech-centric. From focusing on customer convenience to verifying identities digitally, fintech will be the major driver behind industry shifts.

Over the next ten years, the financial industry will prioritize regaining customers’ trust. Still bruised from the crisis, it will be only through consistency, transparency and relationship-building that institutions will fully recapture the faith of their customers.

Data will be crucial in the future. Advanced technology will allow financial institutions to better protect their customers’ identities and finances, while data analysis will allow them to offer quicker loan decisions, specialized advice and more.

By 2028, financial institutions will be much better at helping their customers meet their financial goals, a practice that sits squarely at the intersection of regaining their trust and using their data for good.

NOVEMBER 15, 2018
Lending Trends
By Mark Loehrke, Editor, Financial Managers Society

Lending TrendsThe growing potential for credit risk has been on the minds of regulators and many institutions over the past several quarters, and recent data from the Federal Reserve indeed suggests that as loan growth has recently slowed, underwriting standards have in turn taken a bit of a hit. 

The information in question comes from the Senior Loan Officer Opinion Survey for October, wherein the Fed notes that weaker business loan demand in the third quarter led to eased standards and terms for commercial and industrial loans in particular. Banks also eased standards across many categories of residential real estate, including government-sponsored enterprise-eligible and government residential mortgages. However, the report goes on to note that banks mostly left standards unchanged on some categories of commercial real estate loans, while some actually tightened standards on construction and land development loans. Other notable findings from the survey include: 
Demand for auto and credit card loans was largely unchanged in the third quarter, with lending standards remaining fairly constant for these products as well

Banks were less likely to approve auto and credit card loans for borrowers with FICO scores of 620 compared to the beginning of the year, but were more likely to approve such consumer loans for borrowers with FICO scores of 720 over the same period

When asked for their likely response to an inversion of the yield curve, a significant share of surveyed banks indicated that they would tighten their standards or price terms across every major loan category

NOVEMBER 14, 2018
The Promise and Risk of UltraFICO
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

The Promise and Risk of UltraFICOComplaints about the credit score system have been fairly persistent over the years, the most prevalent critique being that the current criteria are opaque and confusing, with outsized power to determine a person’s financial future. While a great credit score can unlock many doors for someone, including lower interest rates that save thousands over time, better treatment and special products, those with bad credit scores – or no credit score at all – can find themselves without access to these perks.

The UltraFICO Score, set to launch in early 2019, is proposed as an answer to these concerns. Its purpose is to help people who score poorly under the traditional system prove that they can be responsible borrowers. But while the new scoring system should open doors for people who don’t fit the typical mold of a creditworthy borrower, it also creates new risks for borrowers and lenders alike.

From the point of view of the borrower, the way that UltraFICO plans to collect their data could have complicated privacy implications. Traditional credit scores, for example, don’t analyze account balances or transactions, meaning consumers will be exchanging a lot of personal data for the possibility of a boosted score.

From the lender’s perspective, UltraFICO appears an excellent way to expand the group of people to lend to, while still weeding out high-risk borrowers. However, Benjamin Keys, a real estate professor at Wharton and a fellow at the National Bureau of Economic Research, cautions against diving in without due consideration. 

“The dream here for lenders is they want to increase lending without taking on more risk,” he says. “But the idea that you can simply boost lending without taking on more risk is very unlikely.”

NOVEMBER 13, 2018
CECL Transition: Are You Ready?
By Mark Loehrke, Editor, Financial Managers Society

CECL likely occupies a very interesting place for finance and accounting professionals in many institutions. On the one hand, having heard and read about the new standard for the past couple of years, they probably feel like they know just about all there is (or all they care) to know about it. But with implementation still a couple of years out, they may have yet to take any concrete action to get ready for the reality of working under a dramatically different new philosophy.

This dichotomy makes now the perfect time to take stock of CECL, and FMS has a convenient way to do just that. Join us for our upcoming virtual seminar on the CECL transition on December 5-6, as Ryan Abdoo of Plante Moran and Mike Guglielmo of Darling Consulting Group team up for an in-depth look at the issues facing institutions as they begin to implement CECL, including lessons learned from those already well down the path and ideas for getting strategic value from the standard.

This is a terrific opportunity to get a better feel for where your institution stands on CECL – and to get up to five hours of CPE before the end of the year – without ever leaving the comfort of your office. So be sure to register today!

NOVEMBER 12, 2018
Happy Veterans Day
By Danielle Holland, President and CEO, Financial Managers Society

Happy Veterans DayOn behalf of the staff of FMS, we’d like to say “thank you” to all of those who have served or are currently serving our country.

NOVEMBER 9, 2018
The Incredible Shrinking Call Report
By Mark Loehrke, Editor, Financial Managers Society

The Incredible Shrinking Call ReportOne of the more welcome regulatory rollbacks for banks in recent years has been the slow and steady chipping-away of the Call Report – particularly for smaller and less complex institutions. And the trend appears set to continue with a recent joint announcement from the OCC, the FDIC and the Federal Reserve of a plan to further simplify this regulatory reporting requirement.  

The proposed rule would permit institutions with total assets of less than $5 billion that do not engage in certain complex or international activities to file the most streamlined version, the FFIEC 051 Call Report. The joint proposal further aims to reduce the number of existing data items reportable in the FFIEC 051 Call Report for the first and third calendar quarters by approximately 37%.

This proposal will be open for comment for 60 days following publication in the Federal Register. In the meantime, make plans to stay up to date on the latest Call Report updates by joining FMS in Orlando in March for our Call Report Boot Camp.

NOVEMBER 7, 2018
Why the Robot Invasion is Nothing to Fear
By Mark Loehrke, Editor, Financial Managers Society

Why the Robot Invasion is nothing to be afraid ofAs AI and other advanced technology seep into more and more aspects of our daily lives, many workers have grown increasingly concerned – and not without plausible reason – that the robots may eventually be coming for their jobs. In fact, two areas that have seemed particularly ripe for an automation apocalypse are finance and accounting, where the numbers- and routine-oriented nature of much of the work is well-suited to the exact kind of efficiencies that much of the evolving technology promises to deliver. 

But rather than worrying that the robots are coming to replace them, maybe finance and accounting pros should instead be putting out the welcome mat for their new robot coworkers. Why? Because while there is sure to be realignment and a phasing-out of some traditional manual tasks as technology assumes a larger role in the day-to-day finance function, the elimination of much of that mundane, labor-intensive work – such as data entry and spreadsheet maintenance – will ultimately free up time for accountants and finance folks to instead shift their attention to more in-depth analysis and bigger-picture strategic projects.

Will some jobs be lost? Most likely, but the real story may just be how the jobs that remain suddenly become far more interesting to those doing them and far more valuable to the organizations relying on them. Because most of the people going into finance and accounting didn’t necessarily set out to spend their careers crunching numbers – and with the help of automation, maybe they won’t have to.


Mark Loehrke
Editor and Director, Publications and Research

Danielle Holland

Hilary Collins
Specialist, Publications and Research