The correspondent bank seminar used to be one of American banking's grandest traditions.
Thousands of bankers would show up for one or two days of education, fellowship, and networking. And correspondent bankers who could generate a few new accounts in a year would be heroes.
The traveling banker was a jack-of-all-trades. He could help in trust and operations, clear up transit problems, approve overlines on the spot, and generally be a true asset to the banks he would visit.
At home he would be a continuous supply of theater and sports tickets and free evenings of wining and dining.
All he wanted in return were the balances of the respondent banks. With many nonmembers of the Federal Reserve required to keep reserves at a major bank, these balances could be substantial and profitable.
But times changed. Most banks have found that there are cheaper ways of getting lendable funds than catering to respondents. As for the community banks that relied on the services of large correspondents, they are turning to service bureaus and often to the Fed.
A recent conference run by First National Bank of Maryland shows that correspondent banking is not dead. Directors and executives from First National's 250 bank, credit union, and thrift respondents showed up in full force to discuss the economy, portfolio and risk management, the Internet, and other topics.
First National of Maryland is a happy sponsor of this event. As major competitors in its region have given up correspondent service, it has been able to work "like a wolf pack," as senior vice president Thomas Swindell and vice president Michael Bateman put it. They estimate that 50% of First National's respondents formerly banked with competitors. Cash management, clearing, trust, international, and overline service are the main attractions, they add.
What about the fear that once the First National gets hold of the data on a respondent's customers, it will try to steal them away?
(I remember bumping into a student of mine in Kalamazoo, Mich., who said that as an employee of a money-center bank he would call on correspondents on Mondays, Wednesdays, and Fridays and try to steal their customers on Tuesdays, Thursdays, and Saturdays.)
"We have a history of being honorable," Mr. Bateman said when asked about this. "If cheated once, it would kill our whole department, for word of mouth works rapidly."
As for the recent meeting itself, the most interesting topic was senior vice president Mark Furst's discussion of where community banks fit into the Internet.
His warning to the respondents: Get on it fast before your customers go elsewhere. And he comforted them by reporting that handling Internet operations can easily be outsourced today.
Though I am a Luddite who feels that the Internet can offer nothing more than depositors can get today through telephone transfer and direct debit bill paying, Mr. Furst opened my eyes to the most important cost saving the Internet can provide: bill presentment.
If the electric company can send your bill by electronic mail and have it paid in the same way, the cost of bill preparation and mailing can be eliminated.
"Competition is steadily reducing the fees banks can earn in handling automated payments," Mr. Furst concluded. "So getting income from the other side, the presenter, is the key to Internet profitability."
True, correspondent banking may be a dying art. But at a few banks, like First National Bank of Maryland, it is still alive. And the varied talents that correspondent bankers need shows why the correspondent division used to be such a valuable training ground for presidents of many community banks.
