Meeting the challenges : community bankers' views

Dramatic changes are occurring in our financial system and the pace of change is increasing. These changes provide opportunities for community bankers, but they also create new challenges. To explore how community banks will respond to these challenges, we asked Tenth District community bankers for their views on how their banks will be affected over the next five years. ; Our survey focused on four broad areas--bank and nonbank competition, operational matters, ownership and human resource concerns, and banking regulation's impact. In the first area, survey respondents expect to face strong competition from bank and nonbank firms, with some nonbank firms being viewed as some of their strongest competitors. To answer this competition, District community bankers plan some operational changes, e.g., emphasizing service charges and fee income and expanding investment services. However, most will continue to rely on traditional loan and deposit products. In the area of ownership and human resources, many respondents do not see ownership and management changing at their banks in the next five years. They also do not anticipate difficulty in attracting and retaining qualified nonofficial staff. However, a majority do expect problems in attracting and retaining qualified directors. Regarding regulation, many bankers indicate they have made operational changes to accommodate the current regulatory environment. In addition, many note that regulatory compliance costs are growing and hurting profitability. They see increased regulation making it harder for them to compete against less regulated nonbank firms and ultimately hampering their ability to survive.