STEVEN L. ANTONAKES
New Bank Commissioner
Much of the buzz surrounding the coming year is centered on budgets, mergers and elections, but most banking industry observers say that 2004 also is likely to be a year of steady – though possibly slow – growth in the economy and in the banking sector.
According to one local banker, the banking industry is poised for some big changes in 2004.
“I think there are two truths playing out in the banking market for 2004 – convenience and old-fashioned service,” said Thomas Hollister, president and chief executive officer of Citizens Bank of Massachusetts. “Having the size and resources to have ample ATMs, 24-hour phone service and Sunday hours will be discussed and … people like old-fashioned service and attention. They want respect and want to be recognized in their bank.”
But, according to Hollister, the Bay State has some serious struggles to overcome as it enters the New Year. The region also has some positive events on tap, such as the Democratic National Convention, which will be held in Boston this summer.
“Thankfully, I am pretty reassured that we are in [an economic] recovery. Sadly, job pickup is not robust,” said Hollister. “Things to watch in 2004 are the state budget, Democratic National Convention, which will be vital for the tourism industry, and the mutual fund scandals should end rapidly.”
While many agree that the commonwealth is in the early stages of an economic recovery, industry experts say it is likely to continue at a slow pace.
Not everything in the New Year will be new, as several unresolved issues from the past year will resurface for further debate in 2004.
Predatory lending and Community Reinvestment Act legislation for the mortgage industry is likely to be back on the table, and money laundering and identity theft will draw more attention in banking circles. Reform of the Real Estate Settlement Procedures Act also is likely to generate more debate.
“RESPA and lingering questions of the CRA and predatory lending bills will dominate 2004, because very little transpired with them in 2003,” said James Dougherty, president and chief executive officer of the Massachusetts Mortgage Association. “Given this point in time and looking forward, as I look at RESPA … there is no guarantee that there is any greater likelihood that RESPA reform will go forward in 2004. And there is clearly a continuing need to clarify the issue that CRA is attempting to address, in ways other than through a somewhat arbitrary obligation to an industry group that may or not be able to comply with CRA regulation the way that the legislation is drafting.”
Dougherty said the mortgage industry association will devise an agenda that includes demands on the U.S. Department of Housing and Urban Development to revisit RESPA in 2004 and propose educational sessions with members of the Legislature.
“If the members of Legislature want to have an impact on the economy, they should sit down at the table with industry leaders to understand how issues they are trying to confront can be better addressed,” Dougherty said.
But one issue remains foremost on the minds of banking industry leaders as they gear up for 2004: the continuing fiscal crisis of the commonwealth.
According to the Federal Reserve Bank of Boston, incomes and employment in New England still have not picked up and the Massachusetts economy remains among the weakest in the nation. In 2003, Connecticut and Massachusetts posted the largest job losses in the region.
“The overriding issue [for 2004] continues to be the [state’s] fiscal situation, and clearly the Legislature is going to be really focused on that,” said Daniel J. Forte, president of the Massachusetts Bankers Association. “And we [MBA] want to assure that nothing [dire] happens to corporate or bank taxes that would be detrimental to the industry.”
At the State House
Members of the state Legislature are anticipating a busy 2004 session as they prepare to reconvene and review bills from the 2003 session that were not resolved.
According to Rep. John Quinn, D-New Bedford, tackling the predatory lending bills will be a top priority for the Joint Committee on Banks and Banking, as well as new pieces of legislation that were just proposed and those that have struggled for a signature over the past year.
“Predatory lending will be a top priority to act on, and we’ve been working diligently with Sen. [Andrea] Nuciforo’s [D-Pittsfield] office to put a comprehensive bill out that in many respects keeps with state regulation we currently have, but includes other positive aspects,” said Quinn.
Quinn said he hoped Nuciforo’s recodification bill would see its turn on Gov. Mitt Romney’s desk.
The recodification bill, which was filed by Nuciforo in 2002 and fell short of passing due to rewrites needed before the last day of the session, seeks to modernize the lending and investment statutes for state-chartered banks and broaden the definition of “community” to allow more “underserved” neighborhoods to be considered part of an institution’s core market area, according to Nuciforo.
New issues being brought up for the 2004 legislative session include bills that would establish a Board of Registration to regulate the business of credit counseling. The bills define the powers of the board, including the authority to promulgate regulations and amend state law to expand the number of entities that are permitted by law to provide credit counseling services to include nonprofit corporations.
Older pieces of legislation ranging from money laundering, confidentiality and debt collection to criminal justice authority and Division of Banks supervision of financing companies also will be revisited this session.
The state’s Division of Banks begins 2004 facing not only such possible changes to its regulatory authority, but also with a new commissioner at the helm.
Steven L. Antonakes took over as the new banking commissioner effective Jan. 1, and members of the banking industry said they are pleased to see Antonakes assume the role.
“He is following in the footsteps of someone who carved his own profile and he will carry on [Thomas J.] Curry’s traditions,” said Quinn. “We’ve worked very closely with Antonakes on a lot of issues – now he’s just in a different spot. It’s a great comment to our state to have Commissioner Curry heading to FDIC [the Federal Deposit Insurance Corp.] – it’s a great testament to the product we have here in Massachusetts.”
Antonakes, who was senior deputy commissioner under Curry, was selected to succeed him by Gov. Mitt Romney when Curry was appointed as a director of the FDIC.
What remains to be seen for the upcoming year, besides the status of the economy, is the impact the arrival of national powerhouse Bank of America will have on the New England banking industry, and what other mergers will follow in the wake of BofA’s mega-merger with FleetBoston.
According to Forte, mergers are inevitable in the banking world and banks in the Bay State will continue to make strategic business decisions for the betterment of the bank and its consumers. Some industry analysts, however, predict that Bank of America’s acquisition of Fleet could hasten the pace of merger activity as other institutions reevaluate their place in the Massachusetts market.
“The Bank of America merger is symbolic of what is transpiring in the industry. We will never become a Canadian banking system with only six major banks across the country, but we will have a handful of national banks across the country,” said Forte. “As for more mergers in 2004 – it’s anyone’s guess. Obviously, consolidation will continue but still at a slower pace in Massachusetts, simply because we have a high percentage of mutual banks. You will see some of the smaller community banks looking for a greater footprint to serve their market, but that’s a strategic decision that each individual bank needs to make.”
All in all, industry executives predict 2004 will be a relatively stable year and remain optimistic that the economy will strengthen. The strength of the banking industry may play a key role in the recovery.
“In general, the Division of Banks would anticipate continued consolidation for the banking industry. However, given the number of community banks in Massachusetts, consumers will continue to have an abundance of choices for their financial services needs,” said David Cotney, Division of Banks deputy commissioner. “Unlike 12 years ago, when it was a weak banking industry that contributed to a prolonged recession, today banks remain strong and we will be able to contribute capital and credit to the economy.”
