CEO of Citizens Financial Group, Bruce Van Saun, recently expressed concern over the presumption of guilt laid on regional banks by authorities in light of a prominent bank collapse last year. He insists that this presumption has led to an unnecessarily intense regulatory environment. Van Saun emphasized the need to restructure these perceptions. He argued that each banking institution operates uniquely and should be judged according to its unique practices.
New York Community Bank (NYCB) has experienced issues in its lending procedures that dropped its share prices. To rectify this, NYCB is implementing stricter risk management policies, conducting extensive internal audits, and hiring expert financial advisors for the assurance of more reliable lending procedures. Despite initial repercussions, NYCB is confident these refinements will restore its credibility and share prices gradually.
Despite a significant bank collapse last year resulting in minor stock drops, the financial sector appears to be showing resilience.
This resilience is attributed to robust measures in place and an increasing trend towards digital banking. This incident at NYCB did not cause panic amongst regional bank stocks, suggesting a matured investor response. The advent of Artificial Intelligence and Machine Learning in banking operations is also anticipated to reshape regional banking.
The banking sector, though showing signs of health one year following a significant collapse, faces a challenge in increasing bad commercial real estate loans due to increased telecommuting and growth of e-commerce. Lending markets reveal cracks, but the rise of digital banking and fintech startups brings hope to the suffering industry.
Individual bank flaws, not whole sector
Van Saun states that the bank crashes from last year were indicative of flaws in individual bank’s growth strategies and risk management. These banks often had rapid expansion, limited customer bases, high uninsured deposits, and significant flight risks. Combined with insufficient regulatory oversight and diversification, these factors led to a high chance of failure.
Van Saun emphasized the necessity of rigorous customer due diligence and risk management strategies to avoid future financial crises. He proposed that adopting technologically advanced systems could help in early risk detection and strategic decision-making. The Citizens Financial Group CEO also believes improved transparency within the banking industry is essential for creating trust with stakeholders.
