From the Top

Too-big-to-fail—telling the facts and figures

By Bill Loving, Chairman of ICBA

In my travels, I’ve confirmed that regardless of where you live, the lifeblood of each and every community is its community banker and his or her desire to make their community a better place to live and work. This means that, as community bankers, we want to stand up for what is right, and we determine what is right based on a host of criteria—core values, beliefs, facts, common sense, morals and a higher purpose. Our conscience is with our community, plain and simple.

Community bankers by their very nature are evaluators, taking in all perspectives of a situation to come to a final conclusion. That’s how we make loans. We look at the facts surrounding the request and determine if a loan makes sense for us and the borrower. We don’t simply rely on a formula. This same strategy is employed when we are analyzing important policy issues, such as too-big-to-fail.

That’s why I am dismayed when others say that my fury against too-big-to-fail simply comes out of emotion—nothing could be further from the truth. Community bankers’ plates are full, and mine is no exception, so I don’t have time to simply get emotional over a topic. I need clear and hard facts to help me determine if it’s a case worth fighting for. And guess what—it is!

So here are some facts for anyone out there who might want to know more about how ending too-big-to-fail will support free markets and help our economy. I encourage you to share these facts with members of Congress, your regulators and the media so you can continue to enlighten stakeholders and average citizens about how too-big-to-fail affects them and their community.

Too-big-to-fail distorts free markets, incentivizes risky behavior, leaves taxpayers on the hook for bailouts and creates unfair competitive advantages for the largest banks.

Many studies show that too-big-to-fail financial firms do enjoy a funding advantage over the smaller institutions that do not have a government guarantee against failure. Both a study by two economists at the International Monetary Fund and a Bloomberg View analysis estimated their funding subsidy at approximately $83 billion a year. To bring the point closer home, the competitive advantage has been estimated at 20 to 80 basis points by another study. That’s clearly an advantage.

›› FDIC data show that while megabanks have the lowest credit quality in the banking industry, they also have the lowest cost of funding.

›› Large or interconnected institutions are still too-big-to-prosecute for fear of destabilizing the economy, and their executives remain, for all practical purposes, too-big-to-jail. The very firms that have inflicted the most abuse on consumers and the most damage to our financial system and economy are effectively immune from being held responsible for their actions.

But there is perhaps no greater reminder of the too-big-to-fail impact than the constant, oppressive regulatory burdens that community banks face on a daily basis.

For more facts and clarity, I encourage everyone to read the ICBA study on ending too-big-to-fail. You can find it at

With all of these facts stacked against too-big-to-fail, it’s hard for anyone not to see the clear direction we must take for the sake of our economy and the communities we proudly serve.

Bill Loving is president and CEO of Pendleton Community Bank in Franklin, W.Va.