Systemic Rules Magnify Regional Banks’ Risk
By Karen Shaw Petrou

Large regional banks’ solid second-quarter earnings suggested to some that this critical sector is set for smooth sailing. But systemic rules are complicating the outlook for regional banks by making them harder to resolve and less able to lend. Some regional banks are throwing off operational weight to increase their profitability, but by now the excess cargo is pretty much gone. Any more cost-cutting and banks’ competitiveness could suffer. Good seamanship now means charting a course through regulatory obstacles that not only threaten regional banks but also enable many of their most assertive, aggressive competitors.