Press Conference Follows Two Weeks of Meetings and Discussions With Banking and Government Leaders in China
BEIJING, CHINA -- FDIC Chairman Sheila C. Bair held a press conference to discuss a memorandum of understanding (MOU) signed today by the FDIC and the People's Bank of China (PBC). The MOU is designed to forge a formal international working relationship between the two entities, with the purpose of developing expanded methods of interaction on economic and financial issues. The Chairman also discussed her experiences in China after meeting with Chinese financial and political leaders over the past two weeks, including stops in Beijing, Shanghai and the Hunan and Shanxi provinces.
Chairman Bair said: "I'm very pleased and honored to support the work of the PBC and the China Bank Regulatory Commission (CBRC), which have taken the lead in establishing a deposit insurance system in China. The MOU is a very positive and important step toward making a deposit insurance system in China a reality. The FDIC has a proud history of protecting the savings of Americans, while serving an important regulatory function involving more than 5,200 banks. The work of the Chinese to create a deposit insurer is critical for China's continued progress in building the financial infrastructure necessary to sustain economic growth, particularly in rural areas where community-based lending and banking relationships are so critically important.
"The PBC and the FDIC also share many other related areas of common interest, including those of economic inclusion, small-dollar financing and financial literacy. On many fronts, these important issues can be successfully addressed through an established banking sector that includes a deposit insurance system.
"I would also like to note our important discussions with the CBRC, which has made great strides in the supervision of China's banking industry. Our meetings with the Ministry of Finance also provided useful perspectives on China's developing banking sector and the role of deposit insurance.
"Touching on safety and soundness issues, consumer protection, international financial stress and other regulatory issues, our meetings were a productive exchange of common interests and experiences. Given the pace of globalization and the continuing integration of our respective financial systems, we also discussed the importance of preparing for the eventuality of one or more troubled institutions operating in both jurisdictions simultaneously.
"I would like to thank our Chinese hosts, particularly the officials at the People's Bank of China, for accommodating the delegation from the FDIC.
"In addition to the generous hospitality, I deeply appreciate the honest and open dialogue that has been possible throughout our meetings here in China. It is clear that we have much to learn from each other in a number of economic and financial areas. For example, in a discussion on savings, it became clear to me that one of the reasons for the high savings rate among the Chinese is the cultural upbringing of taking responsibility for the education and improved lives of their children. As many American strive to save more and borrow less, we should also be motivated by the betterment and security of our future generations.
"In addition to the MOU, I would like to continue discussions in the area of rural finance in China. I believe there are opportunities that can greatly benefit both countries.
"I look forward to continuing these exchanges and fostering the healthy relationship we have forged between the U.S. and Chinese financial policy officials."
Let's Get One Started in Your Neighborhood I had the privilege of attending the 6th Annual Minority Depository Institution in Miami Beach this past week. Although that sounds like a mouthful, it was simply an opportunity for regulatory agencies, minority bankers, and supporters to share best practices. It was exciting to see an entrepreneurial spirit, so quintessentially American, alive and well in our industry - and it's growing.
Today there are approximately 240 minority owned banks in the country with an ever-growing list of de novo banks and projects focused on establishing themselves as their community's primary financial catalyst. Their missions often follow a common theme of profitable banking through empowerment of local business and people in their community through the delivery of intelligent and innovative financial services.
These institutions are incubating viable solutions to the tough challenges like predatory lending and the foreclosure calamity, to charting a healthy path for those historically considered un-bankable, to countering the devastating impacts of Katrina. Our agenda was packed with examples of institutions taking a lead in making economic citizenship more attainable throughout the country.
One example presented by Alden McDonald, President of Liberty Bank in New Orleans www.libertybank.net, was his establishment of small dollar loan program focused on countering the crushing fees of payday lenders and check cashiers. These services, commonly used by folks in low-to-moderate income areas, often charge rates 300 - 400% more than your common retail bank. His approach of ‘doing good while well' demonstrated to the audience that a bank could attract customers, improve their financial condition, and convert them into profitable long-term relationships.
Starting any new endeavour can be a challenge. Starting a new bank can be outright daunting. It takes inspiration, courage, and commitment. Something I witnessed time and time again at this conference. It is something I continue to see in the folks I work with in their pursuit of building smart banks. Inevitably the consistent answer to the question I always ask, "Why do you want to start a bank?" is the same, "I want to bring quality banking services to my community where the ‘big box retail banks' are not cutting it. I know I can do a better job of serving my community's banking needs"
According to Thomas Curry, a director of the FDIC, one challenge it appears that all banks have is that net interest margins are at their lowest level in 15 years. This is the same for both minority and non-minority banks. However, where the income differences appear is in non-interest income[1]; for some reason minority banks seem to have less non-interest income. As minority banks focus on increasing their non-interest income, profit levels will raise, thus becoming stronger, more competitive financial institutions.
It is that drive that I look for when an individual or group approaches me and ask me to help them organize a new bank, help them submit their application, or raise capital so they can get their doors open and their communities growing.
[1] This information came from a presentation he delivered at the Minority Depository Institutions Interagency National Conference, held July 31st - August 2nd, 2007 at Miami Beach, FL.