ABA Convention: Acting FDIC chair outlines priorities

The banking industry is "on a path of general improvement" declared Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corporation. Gruenberg spoke Oct. 25 at the American Bankers Association convention. In addition to key industry performance indicators, the soft-spoken Gruenberg discussed the FDIC's priorities.. Gruenberg noted that the FDIC's problem bank list declined in the second quarter, the first decline in five years. "There is significant positive news," he said. "The FDIC and the banking industry are emerging from the financial crisis… increased lending will be the key to earnings growth for the industry.". Gruenberg identified systemic risk responsibilities, the future of community banks and economic inclusion as the FDIC's top priorities.. Tackling the too-big-to-fail problem is at the heart of the FDIC's systemic risk challenge. "I cannot stress enough the importance of the FDIC developing a credible system for closing a SIFI (systemically important financial institution) without disrupting the rest of the industry," he said. The Dodd-Frank Act mandates the largest financial institutions write "living wills" and Gruenberg said they will be an important complement to the resolution plans the FDIC develops.. Gruenberg said the FDIC recognizes the crucial role community banks play in the financial system and the agency plans to study the sector. Early in 2012, the agency will host a conference on the future of community banks. Gruenberg noted the importance of community banks, particularly in small business lending. "Although community banks hold less than 11 percent of the industry's assets, they make 40 percent of the small business loans," he said. "There is a strong public interest in having a vital community bank industry… The FDIC has a particular responsibility in that regard.". Citing new research, Gruenberg said 7 percent of U.S. households have no relationship with any financial institution and that 18 percent of households rely on check cashers and other non-bank financial companies. "That's 25 percent of households that are not served or are underserved by banks," noted Gruenberg, who would like to see more people participating in the traditional banking sector.