Too much money to lend: Banks must tackle a new problem of the Eagle Ford Shale
BEEVILLE South Texas banks continue to flood with money thanks to Eagle Ford Shale and local landowners who have leased their land and mineral rights to energy companies.
While the amount of growth and new wealth in the area is undeniable, can too much money be a bad thing? Many of the banks that are based in the core of the Eagle Ford Shale are now having trouble finding ways to lend the influx of money.
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Renato Ramirez, CEO and chairman of the board at International Bank of Commerce (IBC), said that many banks in the Eagle Ford Shale area became undercapitalized after the money started pouring in, as regulators increased the required capital to as much as 12% of assets, and banks saw historically low interest rates on investment alternatives.
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Ramirez said that seasoned loan officers are no longer available and loans have become more difficult. Banks in rural America have very limited loan demand and must rely on government agency or government guaranteed bonds for the majority of their investments, he said.
More at
http://mysoutex.com/view/full_story_progress/24062921/article-Too-much-money-to-lend--Banks-must-tackle-a-new-problem-of-the-Eagle-Ford-Shale?instance=local_area (subscription required).
[font color=green]Now that the farmers and ranchers in the area are flush with royalty money there isn't a market for loans from the banks; therefore, they have to rely on funding from the government to meet their profit margins. Who would expect that in that in this conservative area of the state that the bankers are "damn socialists!"[/font]