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Regulators force banks to play defense

By   /   Monday, November 9th, 2009  /   Comments Off on Regulators force banks to play defense

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Largely innocent bystanders in the financial meltdown that gripped Wall Street a year ago, community banks have been walking around with targets on their backs.

A severe crackdown by regulators, including threats to get capital ratios up, shrink loan portfolios or face seizure, has put bank executives on the defensive. “We’re getting speeding tickets for going 30,” Community West Bank CEO Lynda Nahra quipped at a recent panel discussion on banking hosted by California Lutheran University.

Defensive banking has effectively shut down bank lending to small- and medium-sized business ­— not something that’s conducive to growing jobs or helping the economy recover. It has led to hundreds of millions of dollars in loan write downs just in the Tri-Counties, to the failure of one major bank and to frantic efforts toraise capital or shrink balance sheets at others.

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