Area bankers cautiously back bank

The turmoil in the nation’s economy in the past year has led many to believe the nation’s financial system needs more regulation.

Some local bankers agree that regulation is needed, but they worry that unnecessary regulation could cause even more problems down the road.

“We like (regulation) to be well thought out, with a purpose and a result that is good for all involved,” said W. Keith Sanford, executive vice president of First Tennessee Bank in Chattanooga.

If there had been more oversight of mortgage lending in the past 10 to 15 years, there would be much less turmoil in the housing market, he said.

As a result, regulators currently are looking first at construction and development portfolios. The housing downturn has turned many of those loans into delinquencies, said Craig Holley, president and CEO of CapitalMark Bank & Trust.

“Examiners are requiring banks to assess real estate deals more thoroughly before making loans to determine who the borrowers are, which projects they have done in the past, the exact nature of their current project and how likely it is to succeed,” he said.

But the increasingly present guidelines serve a purpose, bankers say.

Bank regulations are needed rules to keep the banking system and the consumer safe from fraud and unscrupulous people, said Frank Hughes, president and chief operating officer of Cornerstone Bank.

Unfortunately, however, Mr. Hughes said, it is not that simple.

“What is difficult is the interpretation of these rules and regulations, and training and retaining regulators sophisticated enough to monitor the highly complex banking strategies that the major banks use,” he said.

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