Back to the Future
Posted by Larry Doyle on March 24, 2009 4:02 PM |
Are we returning to the days of white picket fences, hot dogs, Mom, baseball, and apple pie? Perhaps some people never got away from those endeavors so there is no need to return. However, given forces within the banking industry far outside our control, perhaps we will be returning to the days of community and regional banking.
Our nation experienced the development of a handful of mega-banks given the economies of scale with that model. The leverage created by combining systems, cross-selling products, and outsourcing labor allowed these institutions to redeploy capital into higher risk securities and situations often housed in off-balance sheet vehicles. Pardon my cynicism, but that model does not put a lot of emphasis on customer or employee loyalty, despite what management at many of those institutions may say. That model promotes the concept of volume and efficiency over individual and relationship. Regrettably, that model never fully developed the risk management and risk managers to control those behemoths.
Where is our financial system headed? Back to the future. The return to community banking may not happen overnight or within the next few quarters, but new regulatory controls and market forces will push the banking industry in that direction.
The lead bank analyst on Wall Street, Meredith Whitney, has been calling for growth in regional and community banking: Regional Banks Are the Future. In my neck of the woods, Peoples United in Bridgeport and Hudson City Savings are two of the top regional banks. In fact, those two banks are regarded as two of the strongest regional banks in the country.
Let’s take a walk down into the neighborhood. Maybe we’ll get a haircut, pick up an ice cream, and go say hello to our friendly banker.
Sense on Cents strongly encourages people to develop relationships with your local banks and bankers as rates and fees are moving higher at the large national banks.