FRIDAY MAY 8, 2020 VOL. 185 No. 89 AMERICANBANKER.COM Follow us on Twitter @AmerBanker As states reopen, will credit 5 union branches follow suit? Is bigger better? Credit unions moved quickly to reduce branch access as the coronavirus crisis worsened. The Pre-pandemic, customers of the six largest retail banks — Chase, harder decision will be when and how to begin Bank of America, Citi, Wells Fargo, U.S. Bank and PNC — were more lifting those restrictions. Page 7 active users of digital channels than customers of regional and midsize banks N26’s $100M funding spotlights % of customers with high levels of digital engagement 6 a rush to digital models amid coronavirus pandemic See story on page 7 The strength of the post-coronavirus recovery will determine if that’s enough for 50% the digitally focused challenger to battle well-capitalized banks. Page 9 40% Citigroup spins off 30% 7 proxy-voting startup Proxymity, backed by eight major players 20% including JPMorgan and State Street, lets 10% investors vote virtually on corporate matters, a service that has grown more popular 0% during the coronavirus pandemic. Page9 Above $250B $55B to $250B Less than $55B How Fannie Mae’s advance cap of deposits* of deposits of deposits 8 has impacted the market so far Source: J.D. Power (*excludes Truist Financial) Some benefits are materializing from Fannie Mae’s pledge to limit servicers’ exposure to principal-and-interest advances the way Freddie Mac does, dailybriefing Parting words from Beth but counterparties of both GSEs remain 3 Mooney: ‘Rebuild trust exposed to other concerns. Page 10 through your actions’ Is the coronavirus giving banks In an exit interview with American Banker, Libra Association names 1 an excuse to spy on employees? the former KeyCorp CEO reflected on a 9 Stuart Levey as CEO Financial institutions have been monitoring trailblazing career, shared her thoughts on ahead of regulatory push workers’ productivity at home with tracking leadership and described what it’s like to The former Treasury Department official software and webcams. Now they’re mulling retire in the middle of a pandemic. Page 5 would be the first CEO of the digital currency whether to mandate contact-tracing apps, association, which is seeking payment COVID-19 testing and other practices that Old-school email could help licenses in the U.S. and Europe. Page 11 could raise further privacy issues. Page 2 4 midsize banks close digital gap Regional and midsize banks, which PPP is a compliance Coronavirus prompts continue to trail the biggest banks in 10 minefield for banks 2 renewed calls for postal digital engagement, could attract younger Regulators need to give more detailed banking, faster payments consumers by reaching out with more advice guidance on the coronavirus relief program Millions of Americans have yet to about financial basics, according to J.D. for small businesses so lenders don’t get receive their stimulus checks, leading Power. (See chart above.) Page 7 trapped in underwriting mistakes down the progressives to demand reforms improving road, Vivian Merker and two of her Oliver underbanked consumers’ access to the Wyman colleagues write. Page 11 financial system. Page 3 FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 2

limits, according to Trina Fairley Barlow, a Slack messages and emails. WORK FROM HOME partner at Crowell & Moring in Washington. “From a legal perspective, a company has “Employers should let employees know every right to monitor their employees in what their policy is around employee almost any way they want to,” Kropp said, Is the monitoring, whether their work activities can including reading personal email, if it is sent be monitored and what sorts of things might on a company laptop. “They don’t have the coronavirus be monitored, to reduce any expectation of right to take pictures of you in the bathroom.” privacy,” she said. Barlow noted that employers should Activities outside of work are a little dicier. make clear to workers what the company’s giving banks But for people whose jobs require them to monitoring policy is so employees do not travel and go place to place, GPS monitoring have an expectation of privacy in their emails an excuse of their location is OK, Barlow said, especially or instant messages. if the employer has reason to believe that “I conduct investigations, and I find that the employee was doing something job- employees aren’t grasping this with respect to spy on related that was harming the company, such to instant messages in the way that they do as providing confidential information to a with email, because a lot of times that’s where employees? competitor. you find all the information,” she said. “The farther you are away from monitoring Employers should be monitoring only By Penny Crosman activity that could reasonably be related to for a legitimate reason, like fraud, securities May 06, 2020 their job, having people follow the person worries or productivity issues, and the During a quarantine, when managers around on Saturday mornings to the grocery monitoring should be disclosed. can’t walk around and observe workers, store and to their friends’ homes on the off banks, like all companies, rely on technology chance that they might go see a competitor, Monitoring software that tracks to monitor employees as best they can. They it’s problematic.” computer activity track productivity, watch for signs of fraud Barlow and Brian Kropp, chief of research According to Gartner, in the past eight and even look for signs of burnout and stress. in the Gartner HR practice, both pointed out weeks 16% of companies have bought Some monitor employees’ instant that employers can also watch employees software to track their remote employees’ use messages and emails, one legal expert says. outside of work if they have reason to suspect of their computer and applications. Some use monitoring technology from theft, sexual harassment or that someone Banks are buying such technology in companies like InterGuard, Teramind and who has filed for disability is not disabled. four areas: time clocks, video monitoring, Time Doctor that keep an eye on workers’ “Those tend to be more about individuals sentiment analysis of communications, and computer and app usage, keystrokes and and individual behavior rather than a security and fraud monitoring tools. overall productivity, according to a major systematic thing to apply across the board,” “In the financial services space, as their research firm and a software executive. Kropp said. employees have gone remote, companies Still others have employees turn on their have been pretty aggressive at buying that web cameras in the morning and leave them Reading instant messages, emails sort of technology,” Kropp said. on all day, so they can be seen at all times. Another way to monitor employees working Part of the reason for this, he said, is that And companies are thinking about remotely is by reading communications like the financial services companies were the COVID-19 monitoring when employees return to work: measuring body temperature, watching for social-distancing rule violations, Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 even potentially ordering blood tests to make Phone 212-803-8200 AmericanBanker.com sure contagious people go back home. But how much employee monitoring is Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 OK, and when does it cross a line? Managing Editor Dean Anason 770.621.9935 Reporters/Producers Private eyes watching you? Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 In late February, Credit Suisse’s chief Washington Bureau Chief Joe Adler 571.403.3832 executive, Tidjane Thiam, was ousted by Executive Editor, Technology Miriam Cross 571.403.3834 the bank’s board after he admitted that Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 private investigators hired by the bank had BankThink Editor Rachel Witkowski 571.403.3857 been spying on two executives, the head John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 of wealth management and the head of Hannah Lang 571.403.3855 human resources. Thiam claimed he had no Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 knowledge of the surveillance. Digital Managing Editor But as extreme as that case seemed, Christopher Wood 212.803.8437 Jackie Stewart 571.403.3852, Kevin Wack 626.486.2341 physical surveillance of employees is not off-

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 3 least prepared to have their employees move about a weekly or daily call or chat where you workplace, for their own safety. to working from home because they were too check in with people?” Clearview AI, the controversial facial concerned employees might commit fraud. Through a webcam, employers can get a recognition technology startup that has One thing banks are looking at is lot of non-work-related information about been enabling police officers and companies productivity: Are people really working from employees’ homes and children. to quickly identify suspects by matching home, or are they watching TV all day? “That is certainly a time where you would photos and videos from phones and security “The early evidence is at least for the jobs think about, is there a less intrusive means?” cameras against images on the internet, is where it’s easy to measure performance, like Barlow said. “What are you seeking to trying to pivot to contact tracing. However, it claims processing, performance is just about accomplish by that?” There are laws in some is getting pushback from Washington. the same,” Kropp said. There are differences jurisdictions about recording people without “Technology has an important role to in the times that employees are most their knowledge. Policies and protocols play in mitigating the COVID-19 pandemic, productive, he said. For some, mornings are should be in place for any such monitoring. but this health crisis cannot justify using better, for others afternoons. unreliable surveillance tools that could “That could be just natural patterns,” he Contact tracing, health monitoring undermine our privacy rights,” Sen. Edward said. “It could be that they’ve got kids at home Banks and other companies are also Markey wrote in a letter to Clearview AI they’re schooling.” considering technology that monitors founder Hoan Ton-That. One provider of employee monitoring whether employees are staying six feet There is little question employees software is Teramind, which has about 300 apart. Companies have a right to install such can perceive monitoring of any kind as bank customers. tracking apps on phones they issue, Kropp overbearing. Since the COVID-19-driven quarantine said. In 2017, Barclays in London put sensors began, 40% of Teramind’s 2,000 clients have “If it’s through a private phone, then it’s from OccupEye under employees’ desks to requested additional licenses to track more a different question, and it gets a little bit see how much time they spent at their station. users. gray,” he said. “But this really comes down “A lot of employees took the sensors off “Putting employees in a work-from-home to, are you communicating about this and and threw them away,” Kropp said. environment causes two problems,” said explaining it.” Eli Sutton, vice president of operations for PricewaterhouseCoopers is preparing to Teramind. “The first and biggest one is the launch this month a phone app for employers UNDERBANKED security of that user working out of their that analyzes workers’ interactions in the home PC. When you’re working in an office, office. The consulting firm’s latest COVID-19 especially in financial services, software runs CFO Survey found that 32% of chief financial Coronavirus in the background to make sure that sensitive officers at financial services companies are information is not leaked.” mulling contact tracing as part of the return- prompts The second problem is the potential for to-work regimen. lost productivity, he said. As companies consider having people Teramind lets employees turn monitoring coming back to the office, there are questions renewed calls tools off for privacy. For instance, they could that have to be answered: Should employees turn monitoring off during a lunch break. be required to get temperature checks each for postal It does not do anything that it feels crosses time they reenter the building? Do they need a line, Sutton said. to get blood tests for COVID-19 on a regular “We’ve had clients ask us to monitor basis? Do they have to show that they have banking, employees’ webcams,” he said. “Since we antibodies to the virus? And is it fair to make haven’t found any real-world reason to employees fill out a family history to see how faster monitor the user’s webcam apart from just at-risk they are? being a creep, to be honest, we don’t do it.” “The feedback from employees so far has been, I want you to test and monitor everyone payments Watching employees through PC to make sure that they’re healthy, but don’t cameras test me,” Kropp said. “Employees are having By Neil Haggerty In at least one bank, employees are a really negative reaction to the idea of being May 05, 2020 required to turn their web cameras on first tested or monitored by their employer when WASHINGTON — Federal efforts to thing in the morning and leave them on it comes to their health.” provide stimulus checks to Americans hit all day so that people can see each other Here again, companies need to explain by the coronavirus’ economic fallout have throughout the day. Does this cross any kind what data they are collecting, why they are revived calls for better government-backed of privacy or ethical line? collecting it and how they are going to use financial delivery systems. “Even if it doesn’t create a legal issue, it’s it. For instance, before they collect employee Millions of households haven’t received certainly going to potentially create a morale temperature data, companies should tell their $1,200 payments nearly a month and a issue,” Barlow said. “Are there other, less people that if they are above a certain half after Congress authorized them. That has intrusive ways to get at the same issue? What temperature, they will not be allowed into the led some progressives and other observers to

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 4 demand reforms to improve underbanked Financial Analytics, said calls by progressives “It’s just an attempt to repurpose the consumers’ access to the financial system, for new, government-operated delivery post office, which is not doing financially such as authorizing the U.S. Postal Service models will only continue to grow. well,” said Paul Merski, group executive vice to provide financial services or creating a “All of the problems … the IRS checks president for congressional relations and Federal Reserve-backed digital wallet. Some not getting where they’re supposed to, strategy at the Independent Community have even lamented the slow pace of the Fed’s the challenges of people dealing with the Bankers of America. “It’s an extremely bad implementation of a real-time payments unbanked, this is creating a lot of progressive idea, since the Postal Service really has network. demand for alternative financial delivery virtually no experience in doing financial “It’s a real shame that even when Congress system,” Petrou said. “Where people think services and lending. There’s plenty of kind of basically agrees about the money the private infrastructure failed them … they competition in the lending space already — that we need to deploy, our systems are so want a new government infrastructure and everything from community banks to online broken that we can’t even get it to the people that again is [the] Postal Service, central bank lenders. You don’t need to go into post office.” for whom it’s intended in an expedient way,” digital currency and the new Fed-dominated Fischer, who previously served as a staffer said Amanda Fischer, policy director at the payment system.” for Brown and House Financial Services Washington Center for Equitable Growth and For years, Democratic lawmakers have Committee Chairwoman Maxine Waters, a former Democratic congressional staffer. been pushing for the U.S. Postal Service D-Calif., said the current coronavirus Over the weekend, Sen. Kirsten Gillibrand, to offer basic financial services, including pandemic is forcing policymakers to D-N.Y., tweeted, “Let’s put a bank in every low-cost, small-dollar loans as well as small reflect on deficiencies in the U.S. financial post office,” resurrecting a proposal long checking accounts, interest- bearing savings infrastructure that were not addressed after criticized by community bankers. Earlier, accounts and remittance services. In many the 2008 financial crisis. Gillibrand, who has sponsored postal instances, credit unions that serve postal “We didn’t do this work of building banking legislation, released a statement workers and their families already offer plumbing for real people and making our criticizing the Trump administration’s refusal banking services in or adjacent to postal economy more resilient for them,” Fischer to provide emergency funds to the Postal facilities. said. “I totally think postal banking is one Service. “The Postal Service is in desperate Sen. Sherrod Brown, the top Democrat area where we could see more scrutiny. need of reinforcement, and providing postal on the Senate Banking Committee, has also FedAccounts is another option.” banking for the nearly 10 million American recently introduced legislation that would However, the ability of Congress to enact households who lack access to basic banking offer every American a free FedAccount legislation would require Democratic control services is the first step,” she said. digital wallet available at post offices and of the White House and both chambers of Observers said the pandemic crisis may community banks. The wallet would have Congress after the November elections. continue to fuel such proposals, especially no account fees or minimum balance “The attempts to get stimulus checks as many American struggle to access their requirements. Account holders would receive out did reveal a huge gaping hole in the stimulus checks. The postal banking idea debit cards, online account access, automatic financial system in terms of individuals’ — supported for years by other members bill pay, mobile banking, and ATM access. access to banks and bank products,” said such as Sen. Bernie Sanders, I-Vt., and Rep. “At the height of this pandemic we must Brandon Barford, a partner at Beacon Policy Alexandria Ocasio-Cortez, D-N.Y. — has been do more to protect the financial well- Advisors. “As we saw, the president and some seen as a way to give the underserved another being of hardworking Americans and Republicans were loath to include a rescue of banking option. consumers,” Brown said when he announced the existing Postal Service and infrastructure Defects in government delivery systems the legislation in March. “My legislation in the various phases of COVID-19 relief. … have also highlighted the pace of the Fed’s would allow every American to set up a free I’m not sure that level of opposition is going implementation of FedNow, a real-time bank account so they don’t have to rely on to change unless there is a change of control system expected to compete with the private expensive check cashers to access their hard- in both the White House and the Senate.” sector’s RTP network. FedNow isn’t expected earned money,” Klein said the government’s difficulty to be completed until 2023 or 2024. Advocates for postal banking say that it in trying to deliver stimulus checks to “It’s a debacle that it takes longer in 2020 would better serve consumers who live in consumers is more an issue of its failure to to give everybody pandemic cash than it took banking deserts. implement a real-time payments network, or in the 1960s to send a man to the moon and “Part of the post office argument, the use the real-time payments network already back,” said Aaron Klein, policy director at the benefit of it is that in a lot of small, rural areas, operated by the biggest U.S. banks. Brookings Institution’s Center on Regulation where you might not have branch banking, “Problem number one is a real-time and Markets. “Why is it that we are unable you probably have a post office,” said a payment problem created by the Federal to get people money? It’s a combination of financial services lobbyist who spoke on the Reserve’s lack of modernization … three things. One is how fast can you move condition of anonymity. “It’s one of the few compounded by the Treasury Department’s money from Account A to Account B. Two, things that stays open in a lot of really small inability to use the private real-time payments does the U.S. Treasury Department know communities.” system that banks created,” Klein said. people’s accounts? And three, what share of Yet the idea has always failed to get enough The largest U.S. banks have largely the people don’t have accounts?” congressional traction, in part because opposed the Fed creating a faster payments Karen Petrou, managing partner at Federal community bankers have always opposed it. network, because they already operate a real-

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 5 time payments network through The Clearing on plane,” Mooney joked. reflections, to put a period on the end of a House. But community bankers say it will Mooney may not have been able to retire sentence at a time when you can’t do it in create a more equal playing field. on her terms, but her accomplishments person. “We are fully supportive of faster across her trailblazing career banking are payments,” Merski said. “Get all banks certainly cause for celebration. A time like this calls for real leadership. engaged in faster payments, working with the Mooney began her career in the late 1970s I know you’ve been transitioning the Federal Reserve, not just a handful of large, as a commercial lender at the old Republic CEO role to Chris Gorman, but have megabanks. … You wouldn’t have a disparity Bank of Texas, at a time when there were you still had to take a leadership role on how quickly your payments would be few women in the ranks of commercial in this? depending on where you bank.” lenders, and over the next 30-plus years held Part of a legacy is the team you leave increasingly high-ranking management roles behind. I feel like I’m getting to see our legacy at the likes of Bank One, AmSouth, Citigroup real-time, [seeing] our leadership team in C-SUITE and Cleveland-based Key, which she joined action as we face the decisions, the choices in 2006 as its head of community banking. in how do we continue to serve our clients, Five years later, she replaced the late Henry support our colleagues and communities. It’s Parting words Meyer as Key’s chairman and CEO, becoming been incredibly affirming to see Chris and the first woman to lead a top-20 U.S.-based the team step up. from Beth bank. Her tenure at Key was an eventful one. Was Chris identified early on as a On her watch, the company more than potential successor? Mooney: doubled its assets, thanks largely to its 2016 We have a really talented team at Key, acquisition of First Niagara Financial Group and our board has always engaged in active ‘Rebuild trust in Buffalo, N.Y. She also won high marks for succession planning. Chris played some reining in expenses following the financial critical roles. Not only did he lead our crisis and beefing up Key’s commercial corporate bank, he was the leader of our First through your banking capabilities, and gained a reputation Niagara integration, and then coming out of as one of the industry’s most ethical and that became president of our banking group. actions’ civic-minded leaders. Mooney was honored He has had a very successful run at Key, and as American Banker’s Most Powerful Woman he’s a terrific leader. I have a great deal of By Alan Kline in Banking for three years straight in 2013, confidence in Chris and the leadership team. May 05, 2020 2014 and 2015 and was named its Banker of It wasn’t supposed to end this way for the Year in 2017. You think about everything that’s former KeyCorp Chairman and CEO Beth Mooney spoke with American Banker happened these last few months Mooney. two days before she retired. In a 45-minute and I’m sure there have been a lot of Mooney retired April 30 after nine interview, she reflected on her four-decade discussion about returning to normal, successful years at the helm of the $156 career in banking, shared her thoughts on returning to work. What is your sense billion-asset company, and she had intended leadership and described what it is like to of what anxieties employees are feeling to spend much of her time these last few retire in the middle of a pandemic. This and what a return to work looks like weeks meeting with employees, customers interview has been edited for clarity and for Key employees? and civic leaders to thank them for making length. It’s going to be gradually, thoughtfully. her experience as CEO so rewarding. Then, Companies will have to come up with on Friday May 1, she was supposed board American Banker: You are winding protocols that keep people safe … and a plane for a France, where she planned to down your career at a very awkward employees are going to need to do a whole spend a couple of weeks touring wineries and time. What have these last six or seven series of things to keep themselves safe. It’s enjoying French culture. weeks been like for you? going to be a shared responsibility. We’re But, like the rest of us, Mooney, 65, has BETH MOONEY: I didn’t plan to retire going to have to be sensible, slow, rigorous, largely been quarantined at home for much into a pandemic. It’s changed everything in and make mutual commitments to each of the last two months. Instead of thanking how you say your goodbyes, and how you other. colleagues in person, she sent handwritten put closure on your career. You [don’t] have notes. Meetings with senior leaders were a last chance to meet with employees and We’ve heard CEOs talk about how this not held in her suite at the KeyBank Tower tell them how much they mean to you. An experience has gotten them to rethink in downtown Cleveland but over Zoom and event that was scheduled [in April] … with how banks operate going forward. WebEx. And that trip to France? Postponed community leaders [was canceled]. What I’ve Maybe that means more branch until May 2021. been trying to do is send a series of notes to consolidation, less office space because “My friend that I was going to travel with, our leadership team, people who would’ve more people are working at home. I we are laughing that we will have a Zoom or been at that event, and just reaching out know you won’t be there for this, but FaceTime raising of the glass in lieu of being with my thoughts, my appreciation and my do you see changes in the way Key and

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 6 other banks operate? doing the right things by our employees, the we design products, programs that we have All American businesses are going to have right things by our clients, the right things chosen to embrace to make a difference. We to look at some of their notions of how they by our communities and to prove that, in the are now the third-largest affordable housing do work and think in terms of alternatives as end, it would be good for shareholders as lender in the U.S. Our community benefits we try and work safely. There probably will well. That was a defining way I thought about plan, $16.5 billion, [was put in place] four be less travel, less need for office space, more approaching my tenure as CEO. years ago, and we’ve exceeded the metrics work from home and virtual protocols. This that we’ve set for ourselves. What we did, I’m concern of the health and safety and of the That’s interesting. The Business proud of. How we did it, I’m even prouder collective is going to be first and foremost. Roundtable came out with that letter of. The real pride is in the how. It’s based on Work and workplaces and work strategies will last year that shareholder value should doing the right things the right way. evolve to support that. no longer be the No. 1 thing companies think about, and that it’s now about When we talked maybe a year after you Let’s reflect on your career. Can you creating value for all stakeholders. Do became CEO, you said that you wanted recall a moment or an event that ended you feel that corporate America has the fact that you were a woman leading up being a turning point for you even been a bit late to this idea? a top bank to be a footnote, not the if it didn’t look like a turning point at I’m on the Business Roundtable and was headline. Here we are, eight years later, the time? one of the CEOs who signed the pledge, and there are still not many women There is no one thing that stands out. We all and I will tell you it was one of the easiest leading large banks. Are you surprised get presented with many opportunities and things I ever did. It was consistent with by that and in a sense disappointed by challenges and … I was always a person who my personal philosophy and how we have that? squared my shoulders, rose to the occasion, run KeyBank, and my sense was that it was When I look broadly across the industry, I was determined to figure out what to do, how the collective sentiment of how [CEOs] are believe I see real progress. I see [it] just in our to do it, how to bring people along, how to be running [their] companies. More of it was own company, I see women and minorities part of the solution. That is my basic approach that our messaging had lagged our reality. in key positions, our leadership team, our to things, and it has served me well. There was a lot of agreement in the room that board. It is a more just and equitable and this was the right thing to do. It does reflect diverse world, certainly more than in 1979 You became CEO in 2011. The country a more contemporary view of corporate when I entered banking, but even in the was still coming out of the financial responsibility. decade [since] I became CEO. crisis, and the industry was not seen in the best light. Did you come into the Do you think it’s permanent? You talked about your legacy earlier. job thinking that CEOs, particularly American businesses, we have a role What do you think that is? bank CEOs, had to lead differently than to play to bring this economy back and to The culture we have built. How we feel in the past? bring it back safely and in a way where we about each other, how we feel about what That was very much part of my thinking. can provide livelihood and support our we do as bankers and realizing our role in I had the opportunity to attend a Harvard employees. We also have a broader sense of the community and our role in helping our Business School class for new CEOs in how [the pandemic is] hitting communities clients achieve their dreams. All that has spring of 2011, and one piece of what they and different kinds of businesses and made the journey worthwhile. emphasized was to start with the end in mind vulnerable populations. If anything this Your contribution is the other piece of and have a point of view of what you were is going to be another of those moments your legacy. And I think contribution extends trying to do. where you evolve, and define corporate beyond what you did in your company. What Part of what they had you do was write your responsibility, not retreat. you did in your industry, what you did within retirement speech. I kept it and I’ve read it at your community, what have you done to least once a year. We were just coming out of Looking back on your nine years as improve everyone and everything that you the crisis, institutions, leadership all needed CEO, what are the accomplishments touch. [As CEO], you have an opportunity to redefine their value proposition with their you are most proud of? and an obligation to give back, and I have employees, clients and communities, we I do believe that our performance, our First had the privilege of having many civic roles, needed to rebuild trust broadly, and the best Niagara acquisition, the things we did from many industry roles, and some piece of my way to rebuild trust is not just your words, but a financial performance point of view are transition into my next chapter is going to through your actions. things I’m all very proud of. We are not just be that opportunity to continue to give of My notion was that we needed to have a bigger company, we are definitely a better myself and contribute and fulfill my purpose more balance. One of the lessons of the company. through board work. I’m on the boards of financial crisis was that there was an But I am also [proud of] the values-based Ford [Motor Co.] and AT&T, and I’m the overemphasis on shareholder return [and] culture, the fact that diversity and inclusion chairman of board of the Cleveland Clinic. not enough about stakeholders: employees, are so embedded. It evidences itself not just It’s an incredibly interesting time to be in that clients and communities. I believed I was in our financial performance but in how role. part of a new generation of leadership that we approach our clients, how we approach could redefine that value proposition by our communities, our mindset about how What’s next for you? Do you see yourself

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 7 pursuing more board positions? email, could help regional and midsize banks South Central regions. The privately held My next chapter … will be based on this reach the younger consumers they tend to bank has $19.4 billion of assets and about 280 notion of continuing to give of myself. I’ll start lack. Those consumers tell the research firm branches in Arkansas, Kansas, Missouri and with two corporate boards and chairmanship that they want more advice about how to Oklahoma. of the Cleveland Clinic. I have other things handle financial basics, like budgeting and Others that took top regional honors were: that I support. But a piece of advice I’ve saving, McAdam said. the $9 billion-asset S&T Bank in Indiana, gotten as I retire is that it’s real easy to “These younger customers really do want Pa. (Mid-Atlantic); the $23 billion-asset First overcommit. I want to make sure that I come more communication from the bank. They’re National Bank of Omaha (Midwest); the $4.8 at this thoughtfully and in a way where it will telling us they’re not as satisfied with the billion asset Bangor Savings Bank in Maine be not just a rewarding chapter in my career, frequency of advice or proactive contact from (Northeast); the $5 billion-asset City National but perhaps the most rewarding. their bank,” he said. “When we ask people Bank in Charleston, W.Va. (North Central); I am not seeking more. I’m seeking to their preferred method of communication, the $14 billion-asset Columbia Banking understand ... what I’ve committed to do but email in particular is underutilized, System in Tacoma, Wash. (Northwest); and also to give myself permission, for someone particularly for the midsize banks.” the $13 billion-asset United Community who has worked very hard for many years, to The need for such changes may be more Banks in Blairsville, Ga. (Southeast). balance it with a little more time for family urgent now that the coronavirus pandemic Of that group, S&T had the highest overall and friends. has forced banks to limit branch access to satisfaction score — 871 on a 1,000-point help slow the spread of the virus. Banking, for scale. the indefinite future, has become a de facto Among the big six banks, Chase was the DIGITAL BANKING digital banking environment. top performer. Apart from ranking No. 1 in All banks have work ahead of them to California and Florida, it also placed second improve mobile and online experiences. in the South Central region (Alabama, Old-school Consistent with prior years, J.D. Power’s Arkansas, Louisiana, Mississippi and latest retail banking satisfaction study found Tennessee) and had above-average marks in email could that exclusively digital customers were less every other region. satisfied than those who use the branch. The complete rankings by region can be And while branch-dependent customers found here. help midsize tended to be much more satisfied with Alan Kline contributed to this story. their bank, there is also a wrinkle to that banks close distinction: Customers who linked their bank accounts to a digital payment service, such BRANCH MANAGEMENT as Venmo or Zelle, were much more satisfied digital gap than those who had not. “Not every bank out there has the P-to-P As states By Laura Alix payments, [and] not every midsize bank May 06, 2020 has bill pay,” McAdam said. “Customers are reopen, will The answer to one of the biggest digital noticing if they’re not available. challenges facing executives of midsize banks The big six banks are JPMorgan Chase, may be sitting in their inboxes. Bank of America, Citigroup, Wells Fargo, U.S. credit union First, the problem. A J.D. Power study Bancorp and PNC Financial Services Group. conducted before the pandemic reiterated This group does not include Truist Financial, branches an ongoing concern for midtier banks: The which was created through the recent merger six largest banks in the U.S. had the most of BB&T and SunTrust Banks and is now the digitally engaged customers, with 49% of fifth-largest U.S. bank by deposits. follow suit? big-bank customers reporting high levels of When it comes to overall customer mobile and online use. That compared with satisfaction, however, midsize banks fared By Aaron Passman 41% of regional bank customers and just 36% better than their large and regional rivals. In May 04, 2020 of midsize bank customers. eight of the 11 geographic regions J.D. Power Closing branches and limiting access was The study defined regional banks as those tracks, a bank with less than $25 billion of the easy part. with $55 billion to $250 billion in domestic assets ranked No. 1 in customer satisfaction. As the coronavirus outbreak worsened deposits and midsize banks as having less The only exceptions were in California and in March, credit unions across the country than $55 billion in deposits. Florida, where Chase ranked No. 1, and in moved quickly to reduce branch access. The solution? It could be as simple as Texas, where the $34 billion-asset Frost Bank, That meant moving to a mix of appointment- sending an old-fashioned email, according to a unit of Cullen/Frost Bankers, had the No. 1 only visits, drive-thru-only service, increase Paul McAdam, J.D. Power’s senior director of ranking for the 11th consecutive year. usage of interactive teller machines and banking intelligence One bank, Arvest Bank in Fayetteville, Ark., more in order to encourage social distancing Increased communication, particularly by was ranked No. 1 in both the Southwest and and stem the spread of COVID-19.

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After more than a month of stay-at-home would put their health at risk. We’re going have to be made continuously.” orders and remote work across the country, to be very slow, very deliberate and do it “Every organization needs to do an however, credit unions now face a balancing right.” analysis on what’s the best thing for them act of when — and, more important, how and for their members,” said Tim Klatt, — to begin bringing operations back to ‘Safety, safety, safety’ director of retail strategies at La Macchia normal. Even after states reopen and employees Group. He added: “There’s going to be a lot That process is already underway in return, management will have to ensure of variety. It comes a lot down to geography Georgia, where some restrictions began to staff continues to feel safe on the job, and the density of the virus and the way lift last week. particularly if the virus dies down during people are thinking about it.” Roughly one-third of the employees the summer but resurfaces in the fall, as In rural areas where the outbreak hasn’t at Associated Credit Union in Norcross, some have predicted. been as severe, he noted, the decision to Ga., have been working from home since Marcy Goldstein-Gelb, co-executive increase access for members is likely to March, while the rest worked out of director of the National Council for be easier than in harder-hit areas like New branches and its headquarters. Much of the Occupational Safety and Health, said York, New Jersey or Michigan. member-facing business conducted during return-to-work measures should be Tom Kennedy, president of La Macchia, the state’s stay-home order was done via conducted in a “phased-in” manner over said some credit unions are also discussing ITMs, thanks to efforts undertaken in 2019. an extended period of time that ensures the how branch furniture and other fixtures can While no target date has been set, CEO Lin health of workers and the general public. be rearranged to keep people farther apart. Hodges said Associated’s leadership team “How long that phased-in approached “Simple things like reorganizing … can has begun having discussions about how to requires or who gets phased in first, those have a big impact on social distancing and shift operations back to the “new normal.” are things where workers and employers how that facility operates,” he said. “It’s not going to be like it was; it’s going need to be at the table, and workers are not One of the biggest questions is what to be a one-size-doesn’t-fit-all approach,” at the table now,” she said, speaking of the happens after branches reopen to wider he said. U.S. workforce as a whole and not financial traffic. If a second round of the virus hits Hodges noted that appointment-only services specifically. later this year, said Williams, the response service may be around for the foreseeable Some credit unions may also be “may vary by the place type of business future, while some branches will continue considering modifications to try to reduce and how bad or good things are. It’s really to focus on helping members via drive- the spread of germs. Many branches an ongoing conversation; there’s no gold thrus and ITMs and others may employ are being modified with the addition of standard correct answer because you’re greeters in the lobby who can control plexiglass shields between members and balancing lots of different concerns. Some the flow of traffic. And some branches — staff where possible, and some experts have of the lessons we’re learning for how to including those where employer groups the suggested advanced air filtration systems reduce risk … are lessons that can be credit union serves have shifted to remote can help keep clean air circulating and carried through and will hopefully be easier work and one located in a VA hospital — reduce the spread of germs. to implement in the future.” may not reopen at all. Even reducing touchpoints by converting Michigan’s stay-at-home order has “I think we’ll probably come out of this entrances to automatic doors where already been extended multiple times with a smaller footprint,” he added. possible can help reduce risks, but many and isn’t currently expected to lift until at Widespread remote work and members’ of those measures may be out of reach for least May 15, but that doesn’t mean credit quick adoption of ITMs has also led the credit unions depending on their size or the unions there will see a return to normalcy $1.7 billion-asset Associated to realize it layout of their branches. right away. Detroit remains a hotbed of the is overstaffed by as many as 20 employees, “Think about what the risks are to outbreak and even other cities continue to which management intends to deal with workers for reopening and how do you see high numbers of cases. through attrition. reduce that risk, because obviously you Lansing-based LAFCU began limiting Hodges said as Associated begins can’t take risk to zero,” said Jessica A.R. branch access on March 16, and while no transitioning employees back to branches, Williams, an assistant professor of public decisions have yet been made on when it will probably be done gradually. health at the University of Kansas Medical to loosen some of its current restrictions, Roughly two dozen staff members already Center. the shift to emphasize ITM and drive- worked from home prior to the pandemic, Even for staff who have been working thru usage is likely to continue, said Chief and others now at home “are at risk” of from home, most have still been exposed Marketing Officer Kelli Ellsworth-Etchison. COVID-19 “either from age or underlying to at least some risks by going out for “We still don’t have a vaccine, so I think medical conditions, and they may never groceries. While credit unions can it’ll be kind of difficult to go back to business come back to work here at the main office discourage staff from doing things like as usual,” she said, noting that even when or in the branch,” he said. sharing phones, they must also weigh the the stay-at-home order lifts, some elements “When your staff puts their health in situation from an emotional and social may be extended. your hands, that’s quite a responsibility,” perspective as employees adjust to a new About 80% of LAFCU’s staff are working he added. “We take that very, very seriously work-life balance, she said, adding, “there’s remotely now and management is and we’re not going to do anything that going to be a lot of difficult decisions that exploring different ways to keep employees

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 9 and members safe, including widespread to bolster its digital banking and financial The firm competes with other neobanks use of cloth masks that the credit union will services technology. Both Stripe and N6 offer such as Monzo and Revolut, which just provide to anyone working on-site. expedited access to payments and financial launched its bank in Europe. Most of these If the mantra of the real estate industry services as a competitive play against companies started with payment transfer is “location, location, location,” said traditional banks. apps and added other financial services over Ellsworth-Etchison, LAFCU’s mantra in the As economies reopen after lockdowns, time. weeks and months ahead is “safety, safety, the battle between challenger banks and N26, which has a banking license in safety.” traditional banks will continue with different Europe but uses Axos Bank to make loans in “That’s our filter for driving all of our terms. The struggle for neobanks is that many the U.S., had faced some recent headwinds decisions: How are we going to keep our are working with risk models that have not before the virus hit. It pulled out of the U.K. members safe, how are we keeping our been tested during an economic downturn, in February, citing Brexit. But it has also used communities safe and how are we keeping while the issue for traditional banks is partnerships with mobile wallets such as our employees safe,” she added. “Not managing large branch networks that were Apple Pay to extend its reach in markets such necessarily in that order, but all three are seeing less traffic before the crisis — and as Spain. equally important.” practically none during the outbreak. N26 says its model is less reliant on sudden Neobanks can stay nimble because they shifts in consumer spending since it’s entirely “don’t have the legacy technology,” said Sanat online and is built for a world of contactless VENTURE FUNDING Rao, chief business officer and global head of and NFC transactions. Infosys Finacle. “But once the pandemic is N26 has done internal research that has behind us, these neobanks are firms that are found people are shifting their spending. N26’s $100M not backed by the same strength of capital Grocery and food stores have seen a 25% that a large bank has, but are still funded by increase while restaurant spending has seen funding private equity.” a 39% decrease over the past two months, for The economic crisis born of the example. But that informs N26’s product and coronavirus pandemic is apparent in the consumer engagement strategy more than its spotlights a recent investments. Stripe’s valuation technology. remains at $36 billion while N26’s valuation is “We are agnostic as to where you spend as rush to digital still $2.5 billion. But given the overall pressure long as the merchant uses a card or an app for in the technology market, the bets on Stripe that purpose,” Kopp said. “I don’t foresee a and N26 suggest a value in providing quick lot of adjustments to our technology platform models amid access to digital commerce. because of where people are spending.” “People don’t want to leave their houses coronavirus to open a new account, they don’t want to go into a branch,” said Nicolas Kopp, N26’s U.S. SHAREHOLDER chief executive. COMMUNICATIONS pandemic Stripe’s core model is enabling merchants to accept digital payments, a strategy it’s By John Adams expanding to new merchant types as more Citigroup May 05, 2020 retailers migrate to digital. N26’s strategy German challenger bank N26 has drawn relies on fast account access, opening new spins off a fresh $100 million investment, signaling a accounts in about five minutes, with minimal flow of capital to firms with a longtime focus brand interaction. on automated transaction rails. “The future for money management and proxy-voting But the strength of the post-coronavirus financial interaction has been forced onto recovery will determine if that’s enough to people in a few days, actually in a few hours startup battle well-capitalized banks. in some cases,” Kopp said. “So we’re seeing The $100 million investment was led by these behavioral changes as a response to Tencent and Peter Thiel’s Valar Ventures, external forces.” Proxymity both existing investors that participated in N26 was founded in 2013 as a digital N26’s Series D investment round. That round payments company in Germany, and has By Penny Crosman now totals $570 million. N26 has raised a total gradually expanded to other European May 06, 2020 of $770 million in its history. markets and the U.S., using free accounts Citigroup has officially spun off the N26’s new investment follows Stripe’s and products that encourage savings for shareholder services startup Proxymity into recent $600 million fundraising round, vacations or donations. Increasingly, these a stand-alone company. which it put toward a bundle of coronavirus- savings features are being used to fund more Eight companies — Bank of New York related products, such as providing faster general purchases such as household goods, Mellon, JPMorgan Chase, State Street, access to capital. N26 will use its investment Kopp said. Deutsche Bank, HSBC, Citi, Clearstream

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 10 and Computershare — have invested $20.5 Cox said. “Through Proxymity, the investors million in London-based Proxymity and get it almost immediately. And that FANNIE MAE formed a consortium of future users. obviously gives investors and companies Proxymity’s founders developed a more time to see what’s going on. If they shareholder disclosure platform that want to, they can speak to their investors, How Fannie automates stockholder identification speak to their vote advisers, and contact requests and lets investors vote virtually companies to discuss motions in more Mae’s on company plans from afar, a service detail. So in terms of corporate governance, that has grown more important during the it has significant benefit.” coronavirus pandemic. The number of virtual meetings has advance cap The company sprung from a proposal doubled this year because of the pandemic, from two employees in the bank’s equities Cox estimates. has impacted and securities services group. “My guess is that that number will Co-founders Dean Little (now CEO) and increase as the market gets more familiar Jonathan Smalley (now chief operating with the technology,” he said. “It’s not just the market so officer) “walked into my office in 2017 and holding the meeting virtually — it’s also said, ‘We have an idea,’ ” recalled Chris Cox, about being able to vote electronically with far the head of prime, futures and securities more transparency and more auditability services in Europe, the Middle East and that’s important. So we would expect the By Bonnie Sinnock Africa at Citi. pandemic to lead to more companies May 06, 2020 That idea was to create a digital proxy- exploring technologies like this.” The coronavirus-related cap on voting capability. According to Smalley, Proxymity’s principal-and-interest advances Fannie “They described the current process as technology collects information from Mae recently reconfirmed in its earnings inefficient, anachronistic and fragmented,” custodians about their investors’ accounts call last week is beginning to revive some Cox said. “I’m an engineer by background and shareholder interests. Then its servicing-related markets. and like a simplification of processes and algorithms comb that information for links Co-issue investors have become more the application of technology to things that and the matches between the same data active in response to the Federal Housing are rule-based.” coming from other custodians. Doing that Finance Agency’s announcement about the Cox took the idea to a couple of partners quickly and at scale lets the platform build cap last month, for example. who did not have the opportunity to pursue up a map and understand the ownership Fannie’s adoption of the cap was it. He then took it to the bank’s D10X chain of any one investor. compelling to the market because of its initiative, Citi’s internal Shark Tank. They “The advantage of doing that upfront and scope. In the first quarter, it was the largest went through three rounds a venture- in advance of receiving any information player in the new single-family mortgage- capital-style work of pitching their idea, is that as soon as we get the information related securities market. validating it and building a basic product. about the meeting from the issuer, we know “There had been some co-issue buyers Citi funded the build of the original immediately who needs to be notified of it,” that had temporarily stepped out of the product, which launched in the United Smalley said. Proxymity knows the number market,” Mike Carnes, managing director Kingdom in early 2018. The product is now of shares each custodian is eligible to vote of mortgage servicing rights valuations at live in several countries. on and can track that in real time. MIAC, said during a recent IMN webcast Proxymity is also building the capability “We can track any problems so we can about the state of the MSR market. “As to identify shareholders and map them to see if there’s a break and there might be a soon as the FHFA announcement came the companies in which they own shares problem with that vote,” he said. out about the P&I advance requirements and to specific votes. Proxymity can collect and tabulate the extending only through 120 days, I think The consortium backing represents a votes on each motion and tell the investor it gave them the comfort to at least be able little more than half of the global custodial with certainty that that vote has been better project what their exposure might market, Cox estimated. delivered directly to the issuer. be, and by doing so, it did prompt some Citi is actively using the technology “That means that after the meeting we buyers to come back.” today. can deliver post-meeting vote confirmation, Conditions in the advance financing A company enters its motions through which is something investors have craved market have also improved, analysts at a stock transfer company partner like for many, many years,” Smalley said. Keefe, Bruyette & Woods noted in a recent Computershares. Investors who log in report. to Computershares’ portal can see those “Over the past few weeks, servicers motions immediately. This is an alternative have announced an increase in financing to an electronic message that is often facilities for servicing advances,” the translated into a fax or hard copy sent to an report states. “Companies have noted that investor. financing for GSE P&I servicing advances “That process takes an awful lot longer,” have been fairly readily available.”

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But financiers may be deterred by the other risks servicers remain exposed to, DIGITAL CURRENCIES BANKTHINK such as their uncapped obligation to advance taxes and insurance on loans. “There is still the stress of T&I advances,” Libra PPP is a said Eric Edwardson, a partner at the law firm Mayer Brown. “People are still Association compliance focused on those because those are going to continue on for the full duration of the forbearance.” names Stuart minefield for As a result, the advance financing available may be quite costly. Levey as banks “There is some private capital out there from private equity firms and hedge funds, By Vivian Merker, Tammi Ling but it’s at a rate that’s higher than people CEO ahead and Daniel Tannebaum are used to borrowing at,” said Kevin May 06, 2020 Brungardt, CEO at RoundPoint Mortgage of regulatory The Paycheck Protection Program is barely Servicing. a month old, and big banks already are The Term Asset-Backed Securities Loan finding that it is a potential danger zone. Facility that was re-established to support push The rescue program Congress enacted credit flow to businesses and consumers in response to the coronavirus pandemic to during the coronavirus crisis will not By Bloomberg News funnel government-backed loans to small finance servicing advances, according to May 06, 2020 businesses has been marred by complaints KBW. The Libra Association, the group behind of overwhelmed call centers, preferential How helpful the Fannie Mae and Freddie the proposed digital currency invented by treatment for certain customers, missing Mac caps are to servicers should be evident Facebook, named former U.S. Treasury paperwork and other alleged mistakes. A by the third quarter, when the coronavirus Department official Stuart Levey as its first third round of funding likely promises more crisis passes the four-month mark and the chief executive officer. headaches. extended deadline for consumer tax bills Levey has been chief legal officer at London- To be sure, the PPP places banks in a arrives. based bank HSBC Holdings PLC since 2012. unique position to support small businesses Under the terms of the coronavirus As leader of the Libra Association, he will and rebuild their communities. But past rescue package, borrowers with hardships work with global regulators to push the project crisis-relief efforts suggest the PPP is also related to COVID-19 can request to forward, a daunting task that already led the likely to create a maze of reputational and suspend payments for up to six months, group to revise its plans for releasing a digital compliance hurdles that could damage the with a one-time extension for up to another coin. The association is currently working with public’s trust in banks for years to come. six months. regulators in Europe and the U.S. to obtain the It might be tempting for some banks to Fannie expects the current 7% single- necessary payment licenses. decline to participate in the PPP altogether — family forbearance rate could more than Before joining HSBC, Levey was under but that would invite even more criticism for double over time, even with economic secretary for terrorism and financial failing to come to America’s aid in a time of activity to reviving as soon as June. intelligence at the Treasury Department, great need. In short, banks are in a bind. Unemployment is expected to peak at 15% where he helped “combat illicit finance,” the Warning bells have been ringing from day and still be as high as 7% by year-end, even Libra Association said Wednesday. Much of one. Authorities deserve praise for getting if recovery occurs by midyear. the skepticism about Libra has centered on the program launched so quickly. But amid With these stresses on the market concerns that the coin could be used for illegal that scramble, the program’s final guidance looming, servicers continue to seek activity. wasn’t released until less than 12 hours additional government support to help Libra, which was announced in June 2019, before PPP went live, giving banks minimal them cover advances for the forbearances was conceived and developed by Facebook, time to prepare. And the guidance leaves the rescue bill obligates them to provide. the world’s largest social network. It’s now room for interpretation as well as confusion. “We’re in effect being asked to be the governed by a 24-member independent Most banks have developed their own bridge facility or the lender for those coalition of companies and nonprofits, though practices for how PPP loan applications are advances until such time that we can be the group has changed since the project handled. The Small Business Administration reimbursed, and the number of those is was launched. Levey will assume the role and the Treasury Department have issued going to be a big number,” said Brungardt. sometime this summer, and will be stationed seven interim final rules about the program “That could be very consequential later this in Washington. The Libra Association, based in its first month, many of which required y e a r.” in Geneva, said last month that it aims to have lenders to make changes to their processes. its coins ready in late 2020. Meanwhile, business owners claim they are getting repeated requests from banks

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 12 for the same information to support their — and the lack of a safe harbor protecting applications. Thousands of bank employees banks processing new customers — most WORKFORCE MANAGEMENT have been diverted to process PPP banks initially elected to serve only existing applications, creating operational risks. customers, inviting criticism for excluding The PPP lending period is so far set to otherwise worthy applicants. Capital One expire June 30, and funds might run out What’s more, smaller businesses are less well before then. But the consequences of likely to have the required documentation to keep most mistakes made now could be felt for years to readily available. And they’re more likely come. to need bank guidance on the loan process, Consider what happened with the Troubled creating an additional operational burden. staff home Asset Relief Program, launched in 2008 to The period after loan origination might be help rescue the financial system during the even trickier. Loans in the PPP are subject to until at least Great Recession. A special inspector general full forgiveness if used for eligible expenses for the TARP (Sigtarp) was appointed to make in the first eight weeks, including payroll sure the funds were being used according to costs and some rent or mortgage payments, September the program’s design, emphasizing fair and provided borrowers supply documentation unbiased processes. demonstrating appropriate use of funds. By Bloomberg News More than a decade later, the Sigtarp So far the regulatory guidance indicates May 05, 2020 still issues semiannual reports. So far, it has that banks don’t need to confirm the accuracy Capital One Financial, potentially setting a launched criminal investigations leading of documents provided and can rely on standard for the U.S. financial industry, plans to numerous convictions of bankers for borrower certification that funds were used to keep most employees working at home outright fraud and fines from the Justice as intended. But the coronavirus relief bill at least four more months as it waits for the Department and Securities and Exchange still requires documentation, leaving banks coronavirus pandemic to ebb. Commission for mistakes made in the fog of with open questions. The lender’s offices in the U.S., Canada and war. The coronavirus relief bill actually has Is there an expectation that banks will the U.K. will remain shut to all nonessential three oversight bodies. Unlike Sigtarp, these perform basic due diligence on the documents staff at least through the Labor Day holiday on oversight bodies will wind down in five years’ submitted? How should banks handle cases Sept. 7, Chairman and CEO Richard Fairbank time. in which a borrower’s certifications conflict wrote in an internal memo. He promised There are three areas of concerns in PPP with known information? employees that the McLean, Va., company that the finance industry will face: loan Loan guarantees are another potential will give them at least six weeks’ notice once applications, loan forgiveness and loan hornet’s nest. Many PPP loans will require it decides to reopen those sites. guarantees. servicing for the unforgiven balance. That’s one of the strongest signs yet that In applications, the issue of fairness has Maintaining the 100% SBA loan guarantee legions of industry employees using makeshift cropped up in lawsuits lodged by small shouldn’t be taken for granted. workstations at home may have to wait much businesses against banks. The rules say PPP What responsibilities do lenders face in longer to return to their offices, even as many applications should be processed on a “first- cases of borrower fraud? While the SBA has states begin lifting restrictions on public life. come, first-served” basis. noted that lenders can rely on borrower Capital One, which earns most of its revenue But the definition of first-come, first-served affirmation, much interpretation has been from its massive credit card business, said in isn’t straightforward. Processing times will left up to lenders. If a lender processes a late March it had more than 40,000 people inevitably differ by bank. Even within banks, significant volume of fraudulent transactions, doing their jobs remotely online, accounting processing time depends on the application would the SBA still pay out principal for more than three-quarters of its workforce. channel, geography and the business unit forgiveness guarantees? And lenders have Many major financial firms have yet to in the bank responsible for the customer, several responsibilities in the event of publicly set dates for reopening offices as among other factors. default. What scrutiny will lenders face when they grapple with numerous challenges, such Larger businesses are more likely to collecting payments on delinquent loans? as how to help employees safely commute, have dedicated relationship managers Given the uncertainties surrounding ascend elevators and navigate shared at their bank, making it easier to contact the PPP, banks need both better guidance workspaces. And those that have weighed the institution and submit applications. and more reassurance from the financial in on the topic have expressed caution. Regulatory guidance so far doesn’t require regulators. Otherwise, the ghosts of 2008 Citigroup President Jane Fraser said last that banks have the same processes and could continue to haunt bankers as they try month that the firm will conduct its own serve all customers equally through the same to carry out government policy at a perilous analysis of risks and won’t necessarily reopen channels. Such a requirement would be moment in the nation’s economic history — offices just because local authorities issue all- enormously difficult to meet. and small businesses could pay the price. clears. The PPP also requires that participating Goldman Sachs Group executives told lenders comply “know your customer” Vivian Merker, Tammi Ling and Daniel employees on Tuesday the firm is “carefully requirements. Given the burdensome Tannebaum are partners in Oliver Wyman’s thinking about a gradual ‘return to office’ nature of compliance with these standards financial services practice. framework” for operations around the world,

For up to date and complete coverage go to AmericanBanker.com FRIDAY MAY 8, 2020 AMERICANBANKER.COM PAGE 13 noting staff in Hong Kong, mainland China, stockholders, customers and community in Stockholm and Tel Aviv have started going today’s challenging banking environment,” back. Credit Suisse Group AG employees Menzo Case, the company’s president and were told to expect to return in four phases. CEO, said in the release. Jefferies Financial Group CEO Rich Plans for the second step were underway Handler and the company’s president, Brian before the coronavirus pandemic hit, said Friedman, said this month that employees Michael Reed, the company’s marketing had proved they can work efficiently at home director. and should have the final say on whether to “By the time the [stock sale] is actually return. On that basis, “our offices will not complete, we’re hoping the economy is in be open and full again when the president, recovery,” Reed said. “We can’t get the growth governor, mayor or the two of us say they are,” we want with the capital we have.” the executives wrote in a memo. Working The $349 million-asset Seneca-Cayuga from home, they noted, is hardly a break. completed its first-step conversion in March “Each day blends into the next,” they wrote. 2000. Generations was founded as Seneca “Each of us are running at a million miles an Falls Savings Bank in 1870; it adopted its hour, without ever leaving our home-office current name in 2012. caves. We recognize this reality and are Seneca-Cayuga’s profitability peaked in deeply appreciative.” 2013, when it earned $2.4 million. Capital One, for its part, has spent years The company lost $214,000 in the first investing in technology and was among quarter after earning $87,000 last year. the first U.S. banks to announce it would Generations’ core capital ratio has fallen transition to cloud computing. Those moves from 9.78% at the end of 2013 to 8.20% earlier helped the firm operate more effectively this year. during this crisis, Fairbank said in the memo. The company has been participating in the Decisions to return will vary by location, federal government’s Paycheck Protection dependent on local conditions, he said. Program. In a letter to shareholders reporting Meanwhile, most of the lender’s branches first-quarter results, Seneca-Cayuga said it have remained open, serving customers with made more than 170 Paycheck Protection drive-through or from behind glass. loans for $6.4 million. The bank is continuing to process PPP loans, Reed said. Seneca-Cayuga bought the $55 million- COMMUNITY BANKS asset Medina Savings and Loan Association in October 2018. In December 2018, it opened Generations Commercial Bank to New York provide services to municipalities. Pursuing a separate charter for the commercial bank was mutual plans necessary because mutuals in New York are prohibited from working with municipalities. Generations Commercial Bank had $43.6 second-step million in deposits on Dec. 31, according to the Federal Deposit Insurance Corp. conversion Stilwell Group, a well-known activist investors, owns a 9.9% stake in Seneca- By John Reosti Cayuga. q May 06, 2020 A New York mutual with thinning capital © 2020 Arizent and American Banker. ratios and an uneven record of profitability is All rights reserved. planning a second-step conversion. Seneca-Cayuga Bancorp, the parent of the 150-year-old Generations Bank, said in a press release Wednesday that its midtier holding company, Seneca Falls Savings Bank, would sell its 60% stake. The move will make Seneca-Cayuga a fully stock-traded company. “We feel a second-step transaction is the best way to serve the interests of our

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