After all the blood, sweat and tears that has gone into the Dodd-Frank financial reform bill, a new survey revealed that almost half of all bankers do not think it will help prevent risks to the financial system.
On Thursday Grant Thornton LLP released its 18th Bank Executive Survey, which found that although 48% of bankers believe financial reform will not prevent or reduce a subsequent bank bailout, bankers are increasingly optimistic about the U.S. economy going forward.
“Though we hear the majority of bankers commenting about the challenges Dodd-Frank imposes on institutions, they are agreeing that they see some positive impact,” says Nichole Jordan, national banking and securities industry leader at Grant Thornton, in a press release. “The positive impact they refer to includes increased attention towards risk management and compensation frameworks that reward executives for long-term performance rather than short-term gains.”
Meanwhile, just 39% of bankers say they believe that financial reform will be effective and only 1% of those believe it will be “very effective”. Thirteen percent of respondents think it’s too soon to tell, the survey reported.
The good news is that bankers’ optimism is surging, with 39% reporting that they feel that the U.S. economy will improve in the next six months, up from just 15% in August 2010. Only 9% believe that the economy will get worse, down from 25% in August 2010.
Local bankers also see a silver lining, with 44% saying that they believe their local economy will improve in the next six months, up from just 18% in August 2010. The number of bankers that believe their local economy will do worse in the coming months dropped to just 6%, down from 20% in August 2010.
“It is a time of major change for the banking industry,” says Jordan. “The survey reveals increased optimism, albeit cautious at times. And as the economy recovers, one of the greatest assets of any bank is confidence — confidence from consumers and regulators, and confidence within banks themselves to jumpstart hiring. Banks will have the opportunity in the coming months to help shape not only their own recovery, but that of the economy as a whole.”
Another bright spot: 32% of bankers report that they plan to increase hiring in the next six months, while the number of bankers saying that they plan to decrease hiring has remained stable at 16%.
Grant Thornton's national online survey was conducted in April and May of bank CEOs, CFOs and audit committee members. Thirty-eight percent of the respondents were from small banks (those with less than $500 million in estimated assets at the end of 2009), while the remaining 62% were from large banks (those with more than $500 million in estimated assets at the end of 2009). Regarding ownership structure, 51% report that they are public institutions, 39% are private and 10% are mutuals.