ABA Banking Journal - February 2010 - (Page 32)
COMMUNITY BANKING REPORT COMMUNITY BANK COMPETITIVENESS SURVEY Moderate cost-of-funds increase seen T Deposits still growing; competitive. Regulatory pressure felt by some fter a brief hiatus, the Community Bank Competitiveness Survey has returned to the pages of ABA Banking Journal, with a new look. A joint proj- An electronic questionnaire was completed by 197 bankers in the early part of February. Respondents had primary responsibilities in seven areas closely related to funding and management of interest rate risk. Specifically, 85% considered their primary job to include “executive management,” while 90% included “asset/liability management.” In terms of asset size, 46% of respondents fell into the $100-$499 million-asset range, one of six size ranges capped by $10 billion or more. Only eight respondents came from banks with more than $10 billion, whereas 34 came from banks of under $100 million. ect of the publication and the ABA America’s Community Bankers Council, the long-running survey will now consist of several targeted surveys during the year, instead of one, wide-ranging survey. In this first installment, we probed community banks about several funding-related issues including overdraft rules, sources of funding, cost of funding, and rate risk management. Overdraft effect uncertain he new federal rules governing overdraft protection plans take effect July 1. Going by the survey results, the impact of the changes is far from certain. A little more than half the responding bankers, as shown in Exhibit 1, did not anticipate a change in deposit strategy and pricing as a result of the rules. (See Compliance Clinic, p. 38, for details on the rules). Of those who did anticipate changes, 30% said they will restrict availability or terms of free checking, but only 6% plan to actually eliminate free checking. Comments from the 16 bankers who checked off “other,” include: changing By Bill Streeter, editor-in-chief overdraft offering and/or its fee schedule; “More closures of mismanaged or abusive accounts”; “Few checks presented against NSF funds will be paid.” Regulatory pressure hits about one in five s shown in Exhibit 3 (pie chart), one fifth of the banks responding are operating under a regulatory enforcement action. Such actions normally include requirements to reduce both cost of funding and reliance on wholesale deposits. Among this particular group of community banks, there were also a handful who had received some form of restrictive funding instruction from their regulators even without any enforcement action. As shown in Exhibit 2 (bar chart), about three quarters had not been told to make changes. Sixteen percent had been told to reduce reliance on brokered deposits within the last six months. One banker, referring to the proprietary CDARS deposit placement program, operated by Promontory Interfinancial Group and endorsed by ABA, expressed the frustration felt by 32 February 2010/ABA BANKING JOURNAL Subscribe at www.ababj.com
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