January 13, 2015
Collaboration Can Facilitate Community Bank Competitiveness, OCC Says
WASHINGTON — Collaboration can help community national banks and federal savings associations compete in today’s marketplace says the Office of the Comptroller of the Currency (OCC) in a paper published today.
The paper, entitled “An Opportunity for Community Banks: Working Together Collaboratively,” describes how community banks can pool resources to obtain cost efficiencies and leverage specialized expertise. It explores the benefits of collaboration, outlines how community banks can structure collaborative arrangements, and emphasizes the need for effective oversight of collaborative arrangements.
“Community banks play an important role across the country supporting the financial needs of business, communities and families,” said Comptroller of the Currency Thomas J. Curry. “But they face challenges in providing the competitive products and services their customers expect, while they compete with larger banks, credit unions, and nonbank firms that are expanding their banking activities. Collaboration can help unlock opportunities.”
The OCC recognizes that many community banks need to control expenses in response to reduced profit margins. Community banks also have expressed concerns about mounting regulatory requirements that have increased the need for specialized expertise. Community banks can, and already do, collaborate in many ways that include:
- exchanging information and ideas;
- jointly purchasing materials or services;
- sharing back-office or other services;
- sharing a specialized staff member or team;
- jointly owning a service organization;
- participating in disaster mitigation agreements; and
- jointly providing/developing products and services.
While not exhaustive, this list illustrates a few ways community banks have collaborated in the past and arrangements community banks are currently considering.
Banks should take care to ensure their collaboration with third parties are subject to effective strategic planning, risk management, and oversight.