WASHINGTON – In 2012 financial services companies strengthened their balance sheets, policymakers and the industry moved ahead on financial regulatory reform and, for the first time in years, there was broad recognition that the financial services industry is safer and stronger.
That is the message from the Financial Services Roundtable, which recently released its 2012 year end recap. The group said bank capital reached $1.6 trillion – the highest level in history. Banks’ average Tier 1 capital ratio set a new record of 13.25% in the third quarter of 2012, according to FDIC data.
Lending increased $268 billion year-over-year, according to the FDIC’s Quarterly Banking Profile. Business lending increased by 13.5% during this period. Small business lending in October was up 11% year-over-year, according to The Thomson Reuters/PayNet Small Business Lending Index. The Roundtable said loan quality improved across the board, according to the FDIC’s Quarterly Banking Profile. Loan losses declined for the last 12 consecutive quarters, and the number of noncurrent loans decreased for 10 consecutive quarters.
Net income reached its highest level in six years in the third quarter of 2012, according to the FDIC’s Quarterly Banking Profile. More than half of all FDIC-insured institutions (58%) reported higher earnings than a year ago.
The Roundtable noted that as of Dec. 3, one-third (133) of the 398 total rulemaking requirements of the Dodd-Frank Act had been finalized, according to the Davis Polk Dodd-Frank Progress Report. These rules produced more than 58.7 million hours of paperwork for the industry, according to Federal Register estimates. This is the equivalent of 28,222 full-time employees working year-round to file Dodd-Frank paperwork. Significant Dodd-Frank developments during the year include: (1) the SEC and CFTC adopted a series of final rules regulating derivatives; (2) the FDIC finalized rules for how to price higher-risk assets for deposit insurance; and (3) President Obama appointed the first Director of the Consumer Financial Protection Bureau, Richard Cordray.
In 2013, the Roundtable forecast that the industry likely will face final rules for proprietary trading (the Volcker Rule), qualified mortgages definitions, Basel III capital standards, and enhanced prudential standards for systemically important banks and nonbanks (Sections 165 and 166 of the Dodd-Frank Act).