The states of concentration risk

The concentration of risk.  Essentially, nobody likes it and everyone wants to get rid of it.  Regulators frown on it.  Well, we’ve taken a look at it by state and by a couple of products to see what it looks like across the United States.  This graphic is for credit unions.  There are some similarities between the two portfolios, but it is clear that the concentration of credit cards within the aggregate portfolio is quite small.  As we all know, credit unions spent a great deal of time selling off portfolios some years ago.  Pricing has a been low-priority issue for regulators when it comes to credit cards.  Pricing tends to fluctuate as market rates fluctuate, thereby keeping institutions insulated from interest rate risk.  First mortgages, however, have been a growing concern for regulators.  On our next blog entry, we’ll take a look at concentration risk by asset size.


Concentration Risk by State

All data provided by SNL Financial.  Data visualization courtesy of Tableau Software.  Click here to enlarge.

Purposeful development

Begin with the end in mind.

Dr. Stephen Covey’s oft-quoted Habit #2, which I heard for the first time more than fifteen years ago, resonates with me today. I had the occasion to use it yesterday during a presentation.  I was presenting, along with a client, to a group of individuals involved in the development of projects for low- to moderate-income families as well as the homeless.  We made one thing very clear from the beginning:  What we are talking about today starts and end with a purpose.  This purpose is to house the homeless.

Purposeful development.

With public funds drying up and ever-increasing gains in regulation, all the players involved in the development of projects for those that are less fortunate find themselves bound to more paperwork and seemingly less reward.  Reward.  That’s an interesting term in this entire game of bricks & mortar, services, and dollars.  What is the ultimate reward?

Purposeful development.

The work is the reward.  Collectively, the continuum of care – and the continuum of development – must steadfastly strive to focus on the purpose, letting go of the notion that the purpose is the financial fruit of the programs and projects implemented. Now, there has to be financial reward to keep everyone satisfied during the process and so they may come back to the scene for the next project and the next.  That’s not what I speak of here.  The attitude is what I speak of today.  The approach to the work.  The driver.  The raison d’être.

Purposeful development.

Digitization drives me to drink

Well, not really.  However, the almost one-sided debate over where banks and credit unions should head, whether they want to or not, just doesn’t seem to want to slow down. I get it.  I do.  The industry is facing a daunting task of providing a high-fixed-cost, commoditized service to an audience that wants customization and lives on, seemingly, narcissism alone.  Furthermore, this task is based on the premise that individual industry players provide unique approaches to client service, service delivery, and pricing.  It’s a sublime thought, but it’s a bit farfetched, don’t you think?

So, enter digitization.  It’s a wonderful thing, the digital world.  I’ve long given up on fighting it.  With my smartphone at my side, I, too, have succumbed to the marketing:  It’s lure of efficiency and scale economics and it’s sleek, sexy sounds and sights.  Is life really better?  I don’t know. Define better.  Is the gauntlet run through life’s trials and tribulations any easier?  I think we could make an argument that it is the exact opposite (making my payment online versus mailing it does not, by any stretch of the imagination, portray a run without the gauntlet).  Is the financial services industry ready for the tumult yet to come? There is the widely-held belief that more consolidation and consecration are in our future.

If we were working in a commoditized industry before, then we will certainly be more steeped in the same going forward.  If at the end of all this we are seeking a world where we are free from work and swimming in riches, then my guess is we will all be shocked.  Whereas digitization was just the silent paramour in days gone by, today it is the front-and-center fascination of our financial lives.  But it’s not the purpose of our lives, financial or otherwise.  This, my friends, is the real journey:  fulfilling purpose.

Cheers. <clink>