Bankers are worried about the effect of a Democratic takeover of the House.

Seventy-three percent of respondents saw a Democratic takeover of the House of Representatives to be a serious concern for their bank, according to the Bank Executive Business Outlook Survey from the Promontory Interfinancial Network.

Other findings from the survey demonstrate:

• Seventy-three percent of respondents saw a Democratic takeover of the House of Representatives to be a serious concern for their bank. Asked to rate their level of concern on a scale of 1-5 (5 being the highest level of concern), 41% chose a rating of 5 and another 32% gave a rating of 4.
• Despite growing market turbulence, almost eight in 10 respondents (78%) see Wall Street’s bull market continuing until at least the second half of 2019.
• A majority of respondents (65%) have some level of confidence in the U.S. regulatory system’s ability to manage a future crisis on par with 2008’s financial crisis. Larger community banks (banks with assets between $1 and $10 billion) expressed a higher level of confidence than smaller community banks (banks with assets of less than $1 billion).

The survey showed some interesting regional differences.

On the question of how big of a concern the Democrats taking control of the House was to community banks, the strongest level of concern was found among respondents in the South and the West (with 84% and 75%, respectively, rating their level of concern as a 4 or a 5), closely followed by the Midwest (72%). The rating scale runs from 1-5, with 5 being the highest level of concern

Bankers in the Northeast were the least concerned with only 50% rating their level of concern as a 4 or a 5. Bank size also factored in responses; 75% of smaller community banks (less than $1 billion in assets) said they had serious concerns about a Democratic takeover of the House, compared to larger community banks (banks with $1 billion to $10 billion in assets) of which 60% of respondents rated their level of concern as a 4 or a 5.

Turning to other questions, banker views on how overall economic conditions affected their business in the previous 12 months remained mostly positive from last quarter’s report. But when looking ahead, bankers were less bullish on continued improvements—those who expect conditions to improve dropped by seven percentage points, while those who expect conditions to stay the same increased by seven percentage points.

“Bankers continue to hold a cautious view of future overall economic conditions, despite continued positive economic news,” said Mark Jacobsen, cofounder and CEO of Promontory Interfinancial Network.

On the metrics that make up Promontory Interfinancial Network’s proprietary Bank Experience Index (access to capital, loan demand, funding costs, and deposit competition now compared to 12 months ago), the survey results showed a negligible half-point increase from the second quarter (to 46.2).

According to the forward-looking Bank Confidence Index (access to capital, loan demand, funding costs, and deposit competition expectations for 12 months from now), the survey results showed a significant 1.4-point drop from last quarter, bringing the Bank Confidence Index to its lowest level recorded (43.5) since its inception in 2015. (Charted on a scale of 0-100, a score of 50 represents the baseline expectation.)

Regional differences on several “look-back” measures (experience) were noteworthy. Community banks in the Northeast and South saw a significant increase (15 and 18 percentage points, respectively) from the second quarter on the question of improved access to capital. At the same time, 33% of banks in the Northeast reported a decrease in loan demand—the most of any region and an 11-point increase over last quarter.

There were some variations on expectations for the future as well, especially when it comes to bank size and region. Among community banks with $1 billion-$10 billion in assets, the survey results showed a 17-point drop since Q2 in expectation for increased loan demand over the next 12 months. The results also showed a 12-point drop (from Q2) in the percentage of Northeast banks foreseeing an increase in deposit competition 12 months down the road.

More than 3,000 financial institutions participate in the Promontory Interfinancial Network’s balance sheet and liquidity management solutions to acquire and retain large-dollar customer relationships, purchase funding, reduce collateralization costs as well as buy and sell bank assets.