Earlier this week, Jan B. Brzeski, managing director and chief investment officer of Arixa Capital Advisors and Crosswind Financial, questioned whether non-bank lending platforms, which have tremendous growth in recent years, should be regulated like a bank lending platform. Now, we sat down with Brzeski to take a closer look at bank lending. In this exclusive interview, we ask Brzeski how bank lending is regulated, what regulators focus on, and why banks are so heavily regulated today.

GlobeSt.com: Earlier this week, you questioned if non-bank lending platforms should be regulated the same as banks. Can you give us a closer look at how bank lending is regulated?

Jan B. Brzeski: By all accounts banks have faced tough regulation in recent years. The best argument for regulating banks has to do with their special role in our economy: banks accept deposits that are guaranteed by taxpayers. Let's take an example of a community bank that is started by a group of investors with $10 million of their own money. They open an office and let's say they offer a 1.5% interest rate to local residents on their savings accounts. This rate is higher than most banks offer, so they attract $90 million of deposits from a wide range of households and businesses. They now have $100 million in cash, which they lend out to local businesses and consumers in the form of credit lines and mortgages on various types of real estate. Suppose the bank charges a 5.5% interest rate on their loans. They make a 4% spread on every dollar they lend, over and above what they pay their depositors. Using rough numbers, they have $5.5 million of interest income (5.5% x $100 million) and $1.35 million of interest expense (1.5% x $90 million). Their income before costs such as payroll is $4.15 million.