May 5-7, 2004 how do banks compete? Strategy, regulation, and technology.

The 40th annual Conference on Bank Structure and Competition will

be held May 5-7, 2004, at the Fairmont Hotel in Chicago. Since its

inception, the conference has fostered an ongoing dialogue on current

public policy issues affecting the financial services industry.

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This year’s conference focuses on how financial institutions

compete–the strategies they use, and the central roles that technology

and regulation play in the formation and implementation of those

strategies. Over the past two decades, commercial banks have

aggressively repositioned themselves to compete under new conditions. No

longer protected by regulatory entry barriers, and confronted with sea

changes in telecommunications and computer technology, banks and other

financial institutions have invested huge amounts of resources in the

search for new competitive strategies. The most successful of these

innovations have set new competitive standards for the industry. The

manner in which commercial banks currently underwrite their loans,

finance their activities, expand their franchises, distribute their

services, and market their images would be barely recognizable to a

banker from the 1970s.

Regulation, however, continues to shape the way banks compete.

Strategies and innovations are often driven by, and in some cases

succeed because of, the regulatory environment. Federally insured

deposits are a cornerstone of the community bank business strategy.

Portfolio investment decisions are influenced by capital regulations,

and Community Reinvestment Act (CRA) loans are a requirement for any

bank that wishes to grow by acquisition. Statutory limits on national

market share will require the very largest banks to deemphasize growth

via acquisition and reemphasize internal growth. Our system of multiple

regulators and bank chartering agencies can affect the organizational

form that banking companies choose. Terrorist threats and governance

scandals have led regulators to make increased demands on banks for

information.

Similarly, technological advances both accommodate and constrain

the competitive strategies of banks. New financial technologies have

dramatically altered the way mortgage loans and consumer credit are

produced, but these impersonal, transactions-based approaches to retail

lending can leave banks at a disadvantage at raising core,

relationship-based deposits from households. Information and

communications technologies have created new strategic possibilities for

delivering retail banking services, but while electronic delivery of

financial services can substantially reduce banks’ overhead costs,

abandoning bank branch offices can alienate core customers. New

financial instruments have transformed risk-management at large

commercial banks, but in application these new techniques have created

unforeseen risks.

As in past years, much of the 2004 conference will be devoted to

the main conference theme, but the program will also include additional

sessions on other issues important to the financial services industry.

Here are some of the highlights of this year’s conference:

* A Thursday keynote address by Federal Reserve Chairman Alan

Greenspan (live, interactive presentation via satellite).

* A Friday keynote address by U.S. Treasury Secretary John W. Snow.

* The conference theme panel on “How Do Banks Compete?”

Scheduled panelists include:

* J. Alfred Broaddus, President, Federal Reserve Bank of Richmond;

* Leslie M. Muma, President and Chief Executive Officer, Fiserv,

Inc.

* Mark W. Olson, Governor, Board of Governors of the Federal

Reserve System;

* David Rhodes, Senior Vice President, Boston Consulting Group; and

* Douglas W. Roeder, Senior Deputy Comptroller for Large Bank

Supervision, Office of the Comptroller of the Currency.

This year’s conference will also include special panel

discussions on innovative competitive strategies in banking, and the

appropriate scope and regulation of government-sponsored enterprises

(GSEs)in mortgage markets. Scheduled panelists include:

* Franklin D. Raines, Chairman and CEO, Fannie Mae;

* Edward B. Rust, Jr., Chairman and CEO, State Farm Insurance;

* James H. Hance, Jr., Vice Chairman and CFO, Bank of America;

* William Poole, President, Federal Reserve Bank of St. Louis;

* Joseph D. Reid, Chairman and CEO, Capitol Bancorp;

* Alex J. Pollock, President, Federal Home Loan Bank of Chicago;

and

* Susan Wachter, Professor, University of Pennsylvania.

As in past years, the Wednesday sessions (May 5) will showcase more

technical financial research that is of primary interest to research

economists in academia and government. The Thursday and Friday sessions

(May 6 and 7) are designed to address the interests of a broader

audience.

Additional information about the conference program, registration,

and hotel accommodations is available at our website at

www.chicagofed.org. If you are not currently on our mailing list, or

have changed your address and would like to receive an invitation to the

conference, please contact:

Ms. Regina Langston

Conference on Bank Structure and Competition

Research Department

Federal Reserve Bank of Chicago

230 South LaSalle Street

Chicago, IL 60604-1413

Telephone: 312-322-5641

Email: rlangston@frbchi.org

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