Current banking conditions remain “mostly stable, but there are concerns over the longer term given current economic conditions,” members of the Federal Reserve’s Community Depository Institutions Advisory Council said during a meeting that took place earlier this year, according to newly published minutes. Loan demand was mixed, with business and consumer lending demand growing but mortgage and construction lending slowing, according to committee members. Commercial real estate lending held steady.
Members also discussed a number of banking policy issues, including central bank digital currencies, which one member called “the single most important issue for the future of community banking . . . because it has the potential to fundamentally change [the]financial system.” Members generally agreed that the potential benefits of a CBDC “were often overstated and would be hard to realize.”
The council also raised concerns about a lack of clear direction from regulators regarding the evaluation of climate-related risk. Among other things, they expressed concern that guidance for large institutions that have been proposed by the OCC and FDIC would have the effect of “steering financing of industries toward smaller banks, which would then lead to regulators applying the guidance on smaller institutions.”
Turning to the issue of overdraft, council members emphasized that overdraft services are valued by bank customers, and that placing additional restrictions on overdraft fees could ultimately curtail banking services.