Change? No change is necessary.
That is what some bankers thought when their institutions began to suffer the first shocks of a quake that started rattling the financial industry in the mid-1980s. These bankers figured that if they just hunkered down and minded their own business the tremors would subside.
Bank Failures Since 1979, Source: SNL Financial and FDIC
Number of Failed Banks in 2012 is annualized based on 23 failures as of 5/1/12
Instead, many banks – and bankers – vanished. From 1988 to 1992, the U.S. banking industry witnessed more bank failures than ever before, especially in any comparable five year period.
The reasons were complex. Massive change hammered the industry. New banking laws and regulations altered how financial institutions could do business and increased base-line costs. For banks that were already on shaky financial footing, new capital requirements dictated cutbacks and/or injections of hard-to-find investment dollars. The debut of interstate banking intensified price-cutting campaigns to win market share, and margins began to shrink.
Sound familiar? It’s de ja vu all over again! “Same events, different time.” The earthquakes returned in 2008, and the financial world began to come undone once again.
For survivors of repeated quakes, reality has arrived. If we hope to retain our jobs and help our institutions withstand external pressures, we had better prepare for life in an earthquake zone. Strategic Planning is needed today more than any time since the 1980’s. Through strategic efforts, banks can intelligently re-engineer their institutions to gain the resilience and strength needed to absorb shocks – and even expand – in our unstable economy.
Strategic Planning is extremely challenging in this environment, since it requires looking at the future and making assumptions. Today, about the only given is that more massive change lies ahead. Yet, an outline is emerging of the future that banks will face. Over the next four or five months, we will comment on dealing with specific trends.
