Frank Keating has served as president and CEO of the American Bankers Association (ABA), since 2011. ABA represents banks of all sizes and charters and describes itself as “the voice for the nation’s $13 trillion banking industry and its two million employees.”
Before taking the helm at ABA, Keating served for 7 years as president and CEO of the American Council of Life Insurers. From 1999-2003, he served as Oklahoma’s 25th governor, earning praise for his handling of the bombing of the Murrah Federal Building in Oklahoma City, and for his tireless efforts on behalf of families affected by the attack. He served in several cabinet-level positions in the Reagan and G.H.W. Bush administrations, and his career also included stints as an FBI agent, U.S. Attorney and state prosecutor, and Oklahoma House and Senate member.
The Score caught up with Keating as he and ABA were gearing up for their flagship conference, the ABA Annual, held this year from Oct 19-21 in Dallas.
The ABA has been outspoken in recent months about consumer-data breaches in retailers’ electronic-payment systems. You’ve urged regulators to subject retailers and other electronic payment processors to security rules on par with those imposed on banks. Is the banking industry bulletproof when it comes to electronic security? Is there more that banks can or should be doing do to continue preventing breaches?
No company is “bulletproof,” but banks embrace and have adopted the most stringent standards for cybersecurity of any industry. And we cooperate with each other and the federal government to share threat information, because a cyber threat to one bank could become a threat to the entire financial system.
Unfortunately, when other industries have breaches, banks usually end up holding the bag because of our commitment to make our customers whole. For example, after the Target data breach, banks reissued 6.8 million payment cards at an average cost of $9.72 per debit card and $8.11 per credit card. And based on historic reimbursement patterns, these banks likely received nothing back to cover reissue costs and fraud losses.
This has got to change. Congress needs to hold retailers and other industries to the same high standards banks are subject to, and those responsible for data breaches should bear the costs of them.
Last spring, you referred on CNBC to federal regulators “codifying excessive caution with their Qualified Mortgage rules.” What is your sense of the current effect of QM regulations on bank lending practices? Has the regulatory impact on mortgage volume had any spillover effects on banks’ other businesses, such as issuing cards or personal loans?
We’re still evaluating the precise effects of QM, but the initial indications are pointing to a tighter credit environment. Our real estate survey earlier this year showed that more than 80 percent of bankers anticipated that the CFPB’s mortgage rules will reduce credit, and I’m not one to dispute what bankers on the ground are seeing.
In fact, other surveys corroborate ours. According to a Fed survey in August, more than one-third of responding banks indicated that the Ability-to-Repay/Qualified Mortgage rule has reduced mortgage-approval volume. And a recent Fannie Mae survey found 80 percent of banks of all sizes reporting no plans to actively pursue non-QM loans.
My concern is that QM represents an overcorrection. We don’t want to go back to the days where people can get an $800,000 loan without a job, assets or income—but I fear the rules are unnecessarily restricting credit, especially for first-time homebuyers, retirees, entrepreneurs and others who have a harder time documenting their income the exact way QM requires.
One of the many achievements we were forced to trim from your condensed bio is the fact that you’ve authored several award-winning children’s books. As a writer who clearly connects with kids, and as a grandfather, what advice would you give a young person considering a career in banking?
I’d remind them—as our incoming Chairman John Ikard will at the Annual Convention—that banking has a long tradition of being an innovative industry. For example, we’ve always pioneered money transfers—from the overland stage era of Wells Fargo to credit and debit cards to the lightning-fast person-to-person payments you can make with your smartphone. Even the hottest new financial offerings, such as Apple Pay, are built on an infrastructure first innovated by banks.
It’s also important to recognize that banks exist to further other people’s goals – whether those goals involve growing or starting a business, buying a house or saving for retirement. We are very much a service industry. Any talented young person who wants to change people’s lives for the better should think about becoming a banker.
One of the goals ABA has declared for the ABA Annual Convention Oct. 19-21 in Dallas, is “to ensure that your bank stays relevant as the industry continues to transform.” What do you see as the greatest threat to banks’ relevance? What should the industry be doing to confront it?
One of the biggest threats I see is unbalanced regulation. The government has piled so many regulatory burdens on bankers that some of them can barely keep up. It’s frustrating to see nonbank competitors like credit unions, the Farm Credit System, alternative payment processors, payday lenders and shadow lenders take market share, especially since banks offer the highest levels of consumer protection. What we’re working to do in Washington is to level the regulatory playing field so that banks can keep their competitive edge.
What two or three topics do you expect to dominate beverage breaks and networking conversations at this year’s ABA Annual Convention?
Despite a challenging policy environment, bankers are optimistic about the future of our industry. I expect to hear a lot about how to succeed with 21st-century technology and 21st-century customers. We have a session on digital versus brick-and-mortar banking, as well as an innovation showcase of all kinds of ways to reach customers—and I expect everyone at the convention will leave with a new idea or three.