Credit Pipeline Open But Clogs Interfere
By Blanca Venegas
Although banking industry experts say the availability of credit has improved significantly in the past year, banks continue to deal with adapting to a changing regulatory environment that distracts them from the business of making loans.
"All of us are dealing with an increased regulatory environment," Rob Bowlby, BB&T Miami-Dade County market president, said during an interview with Miami Today.
"Every year the banks figure out how these models work, how they tweak our underwriting, so that we can fully serve the small business community and support the models that we have to submit to the regulators," he said.
"But I think as an industry we are still not there yet."
During the Greater Miami Chamber of Commerce’s Goals Conference last month, Mr. Bowlby said that, despite a healthier banking industry, access to credit was not doing so well, citing information by the Atlanta Fed 2012 annual report.
According to the report, Mr. Bowlby said, "of the one-third of small businesses that sought loans in the third quarter, 39% of mature firms reported securing the full amount of requested financing. In comparison, just 25% of young firms received the entire amount."
"The 39% number is the most concerning of the two numbers," he said. "Although I believe there is room for improvement in both statistics, as an industry I suspect the norm is in the 35% to 60% range, depending on the economy, for young firms receiving the entire amount they request."
"But for mature firms it should be much higher," he said.
"I think in a healthy economy you are always going to have a percentage of less experienced businesses that don’t receive the full amount of credit they asked for, and that’s just normal underwriting risk," he added.
However, as banks learn to adapt their business models to this increased regulatory burden, he said, credit availability should continue to improve from where it is today.
According to Mr. Bowlby, the changing regulatory environment has demanded that banks hire more individuals dedicated to compliance with regulations.
"This continues to distract banks from the business of making loans," he said.
"In the industry, as you experience change the first couple of years are the toughest, then you figure out how to adapt to the change and make it work for your model. We are in that middle part of the change cycle as an industry."
On a more positive note, Mr. Bowlby said, the competition has increased in 2012 versus 2009 and 2010. Banks are making loans again, whereas in 2009 and 2010 there were certain banks that were focused on "keeping the bank going" and didn’t have the capability to go out and make loans.
"As a banker I see all of my fellow banks out there making loans, offering credit to small and larger companies," he said.
"There is still a lot of uncertainty, and still not much confidence in the economy as I would like there to be, but there’s more in 2013 than in 2011."To read the entire issue of Miami Today online, subscribe to e-MIAMI TODAY, an exact digital replica of the printed edition.