payment methods just as debit and credit cards in the future, I asked how community banks are supposed to replace the lost revenue that this will create with the loss of interchange fees. Their response was a predictable one that talked about how the new system will bring efficiencies to financial institutions leading to cost savings rather than replacing the income source. I fail to see how those offsetting items could possibly be equal. Second, and perhaps the most frightening aspect of FedNow creating a funds transfer system that operates 24/7 is the liquidity risk it creates. While the Fed does have controls in place to help manage this risk, I asked the group to think about what would have happened had the FedNow system been in place at SVB and other failed institutions this past March. As quickly as deposits ran out of those banks without FedNow, imagine how drastically the speed of withdrawals would have been magnified, giving customers the ability to transfer funds out to other banks via an app on their phones. I stated that my greatest fear of the product was how fast a rogue social media post could spread like wildfire and cause an exodus of deposits that would be absolutely crippling. The way George Bailey (the local banker in the movie It’s a Wonderful Life) calmed his customers’ panic during a bank run may be a thing of the past, but with this product, we could be thrown so far into a modern-day immediate gratification run that no institution could retain any level of response time whatsoever. The Fed’s response to that question was that they would be monitoring anomalies in real-time in the background and would reach out to a predetermined officer at the bank to see if the bank wanted the FedNow connection shut down, at which time they could turn it off. While there are so many concerns I have with this statement, the biggest one is that small community banks would then be relying on the Federal Reserve to monitor and manage their deposits at all hours of day and night, seven days a week. By the time the systems were to be shut down, it could already have been too late. We have much to do as an organization here to stand strong and continue to advocate for what’s in the best interest of smaller community banks. I look forward to discussing this in further detail with you and so much more at our upcoming convention. I realize that although I am writing this beforehand, you will not be reading my words until after we have met. Know that I am very much looking forward to spending those few days with you, building even greater connections, brainstorming new solutions and carving out a better direction together, and I can already promise you that we will have had yet another memorable time. Until then … Tim Schreiber Member FDIC 38368 Whether your loan is large or small, get faster turnaround from our experienced correspondent team. Whatever Loan Amount You’re Looking For, We Can Help. Partner with Bell for: • Purchase and selling of participation loans • Bank stock and ownership loans • Holding company loans and lines of credit • Reg. O loans to bank employees, insiders or directors Craig McCandless Call me at 406.850.3790 Based in Billings, Mont. Serving, Montana, Wyoming and Idaho We have much to do as an organization here to stand strong and continue to advocate for what’s in the best interest of smaller community banks. Community Banker 7
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