In a world where mega-banks dominate the financial landscape, community banks stand as vital lifelines for local economies and businesses.
At the helm, representing community banks in Texas, is Chris Williston, the President and CEO of the Independent Bankers Association of Texas (IBAT). The organization has over 2,000 member banks and branches across 700 Texas communities. Williston’s experience and passion are palpable.
Williston’s journey into the world of banking and associations began in his early years, influenced by his family’s legacy.
“I grew up around associations,” Williston says. “My grandfather was an association executive with the Texas Medical Association for 33 years, and my dad actually ran IBAT before I got the opportunity to do so as well.”
According to Williston, community banks are an integral part of local communities. They are the very institutions that keep local economies thriving and resilient.
“If you think about idealizing or kind of creating an ideal local community, you would also include a local lender,” he says. “That’s a local source of consolidated capital that’s then able to be leveraged for the good of that community to meet the lending needs and to grow small businesses.”
Unlike the mega-banks, Williston says that community banks make decisions with their customers based on more than just numbers on a computer screen.
“Community banks lend not just based on pure creditworthiness but based on relationships, based on trust,” he says.
Williston believes it is those personal connections that often lead to innovative solutions that larger banks simply cannot provide. For example, in many rural Texas communities, trust can transcend traditional credit metrics behind any given loan request. Community bankers might take into consideration a family’s history in the community.
The impact of community banks on local communities is immense, according to Williston, reinforcing the bank’s role as both a financial institution and an integral part of the social fabric.
“They invest back in the communities, not only through direct support from the bank’s owners but also by supporting local nonprofits, booster clubs, and everything else,” Williston says.
Even with this incredible impact, Williston believes that community banks face significant headwinds by having to compete with mega-banks in a much more difficult regulatory landscape established after the Great Recession. Unlike those much larger institutions, community banks don’t have the resources to navigate the complicated and vast regulatory requirements.
“Since the 2008 financial crisis, we lost a third of the banks in the state and just over a third of the banks in the country,” Williston says. “Those banks didn’t fail because of the financial crisis – they went away because the Dodd-Frank Act was so burdensome.”
Many of the regulations created at the federal level to try to prevent a repeat of the 2008 Great Recession had the unintended consequence of making it much more difficult to operate a local, community bank, especially in rural areas of Texas.
Williston gives an example, saying, “A few years ago, one of our rural banks called us and said, ‘our compliance officer just left to go work at the funeral home across the street. You think about what you do in a rural community when that highly-specialized job function walks out the door.”
Williston explains that this is why it is so critical that organizations like IBAT exist to represent the interests of community banks, especially when the banks themselves don’t have the resources to monitor changing regulations and effectively advocate for their interests at all levels of government.
“We do a whole lot of education,” says Williston. “We try to be creative. We listen to our members, we hear what they need.”
One of the current threats to community banks that IBAT’s members are very concerned about legislation going through the Texas Legislature right now, including Senate Bill 2026 (Senator Campbell), Senate Bill 2056 (Senator Hancock), House Bill 4061 (Representative Patterson) and House Bill 4124 (Representative Darby). IBAT has joined a coalition of community banks and small businesses to advocate against the proposed legislation.
According to a press release by the coalition (Guard Your Card), Brad Schweig, Vice President of Operations for Sunnyland Furniture (Dallas), said, “taken together, these bills lead to massive amounts of red tape for the 3.2 million small business owners like me that are the lifeblood of the Texas economy. If we want to be seen as a player in the global economy, we shouldn’t be rewinding the clock to a time when people need to pay with cash and checks and business owners need to go back to absorbing the cost of doing business in cash.”
The legislation aims to remove “swipe fees” charged to merchants on tips and taxes by payment card networks, such as Visa and MasterCard, for processing their credit or debit card transactions. Opponents, including Donna Finley, a restaurant operator from Nagodoches, said these bills “invite confusion and inconvenience into every transaction, replacing a seamless process with a fragmented system that will fail people at the moment of payment.”
Williston, however, takes a more nuanced approach, understanding the potential motivation of these elected officials pushing the legislation. Though, he also urges extreme caution because he believes the new regulations are unworkable for small businesses across Texas.
“These bills would exempt the portion of taxes and tips from swipe fees,” he says. “It’s part of a discussion that’s been going on for years…small businesses hate paying swipe fees; everybody does.”
However, Williston says, it’s a complicated and technical issue due to “all those parts and pieces and players” in the payments system. “It would cost small businesses hundreds and hundreds of millions of dollars to implement a solution that works.”
While the legislation may be well-intentioned by some, Williston believes that the impact would be far more consequential for small businesses than having to pay swipe fees on taxes and tips.
“I think we could have a pretty disastrous, chaotic reality for most small businesses,” he says.
And who really benefits? “This is the Walmart Initiative… The only people that really benefit from this legislation are the largest retailers,” says Williston. He believes it’s the large companies with massive resources required to navigate and handle the new regulatory burden, a dynamic that Williston understands well.