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Regulatory reforms, interest rates among bankers’ top issues in 2015

In 2015, Nevada banks and credit unions likely will continue to benefit from a recovering economy.

Coming off a year that provided significant gains in loan and deposit growth, Nevada’s financial institutions will continue to monitor the effect of federal consumer-safety and other guidelines established under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Bankers also are monitoring the direction of long-term interest rates, the effect of new technologies and the local and state economies that could adversely affect their performances this year. They also will continue to strengthen their compliance teams to deal with state and federal banking rules.

“As the new rules continue to evolve, the biggest challenge is trying to stay on top of them,” Plaza Bank CEO Gene Galloway said. “We don’t know who we work for. We are regulated by the Federal Deposit Insurance Corp., state of California, even the Department of Justice.”

Galloway said new banking reforms continue to challenge Plaza Bank. He said of the bank’s 85 employees, six are in compliance.

Meanwhile, Nevada banks are expected to report positive earnings for 2014 despite the challenges of extended low interest rates.

Bankers generally expect the Federal Reserve to start raising interest rates this year. Although a major boost in rates seems unlikely, any uptick will increase rates on savings and borrowing costs for consumers and businesses.

Galloway said higher interest rates will give consumers and businesses more “options for savings.” He said higher interest rates also will come at a time when “loan volumes are picking up” for Plaza Bank and other local lenders.

The Federal Reserve last raised the federal funds rate in 2006. Since then, the rate has declined to a target range of zero to 0.25 percent, where it has stayed for the past six years. The prime rate, used as a benchmark for a variety of consumer loans, has stayed at 3.25 percent.

After the Federal Reserve’s two-day meeting in December, Chairwoman Janet Yellen said the Fed is likely to hold rates near zero at least through the first quarter. She said rates might not return to more normal levels until 2017.

For now, the outlook is for the Federal Reserve to approve a couple of quarter-point rate hikes in the second half of 2015.

“We are trying to make sure our customers are prepared for any interest rate hikes in the future,” said Edgar Velazquez, a consumer market manager in Las Vegas with Bank of America.

Velazquez said Bank of America has increased its staffing going into 2015 to deal with the increase in demand for both business and consumer loans. He said things are turning around in Southern Nevada, illustrated by more demand for mortgage loans.

Those interest rate increases will come as the economy in Southern Nevada continues to make slow progress.

“2015 looks to be a good year,” Galloway said. “Las Vegas looks like it will continue to recover on a lot of fronts. Over the last few weeks I spoke with eight to 10 clients who are optimistic. It cuts across all (businesses). There is more and more positive energy levels.”

Galloway said the positives include a population that’s growing again. Also, lower gasoline prices have had some effect, giving consumers the illusion of having “free money” for more spending. Galloway said his take on the economy has moved from “slightly optimistic” to “optimistic.”

Nevertheless, he continues to worry about hackers targeting financial institutions. In 2014, JP Morgan Chase &Co. was targeted by hackers who infiltrated the company, siphoning off gigabytes of data, including checking and savings account information.

“We are all vulnerable, and we don’t know from where,” Galloway said.

He said attacks on Sony, Target and Home Depot have raised awareness about the possibility of being hacked.

Velazquez said in 2014 technology was the top story at Bank of America in Las Vegas.

“We’ve seen such an increase in the use of technology,” he said. “We expect even more growth … this year.”

He said consumers continue to move toward using mobile banking, remote deposit capture and even Apple Pay, which has more than 1 million users. Velazquez said locally the reaction to Apple Pay has been “very positive,” but he did not have local user numbers.

Bank of America this year will roll out its new ATMs with Teller Assist in Las Vegas. The ATMs, which were first tested in Boston in 2013, offer a feature that lets customers video chat with a remote teller.

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