Minnesota district meetings focus on issues, opportunities

Northwestern Financial Review, Oct 15-Oct 31, 2005 by Bengtson, Tom

The Minnesota Bankers Association concluded a late-summer ritual on Sept. 21 when it hosted the last of seven District meetings. The Bloomington meeting for Districts 3 and 4 featured presentations on health savings accounts, technology examinations, and community development lending. Legislative updates came from State Sen. Steve Kelley and Jim Chessen, an economist with the American Bankers Association.

"There are a lot of people out there who present themselves as bankers, or would like to be bankers," commented MBA Chairman Greg Burger, Minnwest Bank, Luverne, Minn. "The question for us is, how serious are we about preserving who we are?" Burger said that everincreasing competition from credit unions is a threat to the banking industry and he urged bankers to participate in the association's "Day at the Capitol" (March 14, 2006) and its annual trip to Washington, D.C. (April 26-28, 2006) to communicate with lawmakers about the situation.

Chessen described the ABA's "contain and convert" strategy regarding credit unions. Part one of the strategy, Chessen said, depends on preventing passage of credit union legislation under consideration in Congress. Called the Credit Union Regulatory Improvement Act, or CURIA, the bill would allow credit unions to devote 20 percent of their loan portfolio to business loans. Credit unions would not be required to count loans of less than $100,000. Current law allows credit unions to devote up to 12.5 percent of their loans to businesses, and loans of less than $50,000 are not counted toward that cap. CURIA also would lower capital requirements.

"We want to contain the credit union subsidy," Chessen said.

Part two of the strategy seeks to make it easier for credit unions to convert to a mutual savings bank. Under such a charter, the institution would pay taxes and compete on an even basis with banks. Chessen said ABA eventually would like to work with lawmakers to propose legislation that would force credit unions to change to a savings bank charter if they grow beyond certain thresholds.

"But stopping CURIA is essential," he said. "If CURIA passes, there won't be any reason for credit unions to convert."

IT exams

Jerry Piatkiewicz, a security consultant for Perimeter Internetworking, told bankers the number one reason to be concerned about the security of their information is customer retention. Regulatory concerns are important, but a bank will lose customers if they perceive their information is vulnerable, he said.

Complete security is unrealistic, Piatkiewicz said, so the goal is to make information secure enough to withstand 90 percent of possible attacks, increasing the likelihood that a hacker will move on to some other target.

Hackers have developed sophisticated ways to gain access to proprietary data; in some cases, they actually seek employment at the bank. "What does an employee get?" Piatkiewicz asked. "A password, use of the company's computer and access to information."

Third-party services should be available to their bank partners when the bank is being examined for IT compliance, Piatkiewicz said. "They should even be ready to come on site, if necessary," he said.

Companies should have policies for employee Internet usage. Piatkiewicz said viruses and other computer glitches are often introduced through peer-to-peer file sharing.

Notes:

* MBA is considering its options for office space. The association moved to its current office in Edina from downtown Minneapolis seven years ago. Brad Meier, First Commercial Bank, Bloomington, is heading an MBA task force to consider the organization's current lease, which expires in 2008, and its facilities needs. "Do we want an education space?" MBA President and CEO Joe Witt asked. "We had education space in Minneapolis, but we don't have it in Edina. Maybe what we need is a studio where we can broadcast educational programs all over the state. Maybe we should buy a building rather than lease. We are trying to determine the best use of our members' resources."

* The MBA Image Task Force is developing materials for its members to use in industry promotional efforts with media. Burger said members can expect to get the new materials in a few months.

* Gail Mikolich, Northeast Bank, Minneapolis, is heading up the MBA Emerging Markets task force, which is developing tools for bankers to use in efforts to reach out to recent immigrants. The task force was formed last year after 2004-2005 MBA Chairman Gary Geiger, Heritage Bank Willmar, Minn., encountered information that showed Minnesota's minority populations rank 30th in the nation in home ownership even though the state's population overall has the nation's highest rate of home ownership.

* As of Sept. 21, the joint effort to raise money for Hurricane Katrina victims had netted $150,000 from more than 100 Minnesota banks.

By Tom Bengtson