Analyst Timothy Coffey of FIG Partners says that First Republic Bank (FRC) is an example of how Western banks are dealing with the current regulatory environment. He explains the strategy First Republic is executing in terms of complying with regulations.
“The best example of that is First Republic. First Republic is going to be getting close to $50 billion, and in the second quarter of this year decided to get very, very aggressive and to set up the compliance infrastructure to support assets well in excess of $50 billion,” Coffey said.
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Coffey says that for a lot of shareholders and market players, and likely for First Republic itself, they were surprised at how much was needed to get done to ensure compliance issues were met.
“First Republic, for a bank of its size, is very simple. They don’t have a bank holding company, and they don’t do esoteric product offerings. It’s very, very vanilla, and yet the regulators apply the same rigid structure of compliance that they would have to put on a bank that had a prop trading desk or was heavily involved in forex,” Coffey said. “As a result, you’re seeing banks take the regulatory responsibilities that come with higher assets much more seriously than I think they did before.”
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