The implementation of the US program to support small businesses highlights challenges in the cultures and behaviours of banks. On the positive side there is the rapid support for small business clients by community and regional banks. As noted in an earlier post regarding Southern Bancorp, these banks continue to be leaders in how that program should be implemented. As noted in the Washington Post, Union Bank in Lincoln, Nebraska quickly got to work providing support to their clients. Like many similar banks, “(t)hey did this by planning round-the-clock, shifting hundreds of employees to the effort, and cranking out approvals as soon as the program opened, even as the government was still clarifying the rules.”
Contrast that approach with that of larger banks as reported in the New York Times. “(S)ome of the nation’s biggest banks, including JPMorgan Chase, Citibank and U.S. Bank, prioritized the applications of their wealthiest clients before turning to other loan seekers,” essentially providing a “concierge service” as noted in the article headline. And Key Bank provided lending to two real estate trusts focused on luxury projects as noted in another New York Times article. As further noted in that article “Mr. Mnuchin, who said this week that the program was not intended to aid big companies that have access to capital, urged firms that received loans to return the money if they did not meet the eligibility requirements. If they did not, he said, the loan would not be forgiven and those firms could face ‘severe consequences.'” That of course leaves open the question as to why these large banks are not thinking through the reason for this program before they extended the credit.
I suspect that as we look back on the implementation of this program and more facts surface regarding its implementation, the behaviour of large banks and large corporations will not look positive. Whilst community and regional banks with their strong relationships with smaller businesses and the communities where they operate will shine in their performance.
