In times past, the lawyers, doctors, business owners, and others who serve as outside bank directors never had to confront anything like the year-2000 problem or hostile takeover bids.

But as banking has become more complex, directors once valued for their general business acumen have been forced to become quasi bank professionals who must weigh in on a host of specific, often technical matters.

In turn, trade groups have devised education programs to bring outside directors up to speed.

"Education is a major issue," said Gregory Golembe, executive director of the American Association of Bank Directors in Bethesda, Md. "There is so much more going on in banking now, that directors simply need to know more."

Mr. Golembe's association-which compiles a course guide for bank directors-recently surveyed banks' educational needs and found technology to be the unanimous top concern. The group is planning a new program by yearend to help fill this gap.

State banking associations have also instituted directors programs. The American Bankers Association has revised its materials for directors, turning one volume into five books with accompanying videos.

Some organizations will tailor a workshop for directors at specific banks.

"Even as consolidation increases and there are fewer banks, we still get more and more calls from bankers who say, 'Please help us educate our boards,'" said Roger W. Raber, executive director of the National Association of Corporate Directors in Washington. Until recently, he was director of member services for America's Community Bankers.

"It was one thing when you just had mortgages and deposit products," Mr. Raber said. But modern banks have become such diverse institutions that "people are buying up publications" that offer guidance.

Banks regulators continue to demand more accountability for the decisions directors make. One sign of this is in the area of compensation, where retainers and stipends for meeting attendance are being replaced with stock and options tied to an institution's performance.

Jerome J. Whalen, chief executive officer of First National Bank of Litchfield, Conn., said he asks directors to commit to at least 30 hours a month and do voluminous background reading.

"Years ago-in community banks especially-going on the bank board was kind of like going on the library board," said Mr. Whalen, whose bank is the lead subsidiary of First Litchfield Financial Corp. "Today when you go on a bank board, there is a lot of work to be done. You have to make people very much aware of what's expected of them, educate the person in the technical aspects of the job."

Mr. Whalen listed some issues bank directors seldom used to worry about: selling mutual funds and annuities; efficient use of capital; stock buybacks; weighing independence versus a merger.

"You have the technology issues facing the industry, and the fact that you're going to have one-stop shopping," Mr. Whalen said. "Our little $220 million bank is about to offer Internet banking."

Director education dates back to the late 1980s, experts say. In the wake of the savings and loan crisis, the Federal Deposit Insurance Corp. Improvement Act of 1991 formally assigned accountability to directors for institutions' performance and condition.

FDICIA was "the end of directors showing up and just rubber-stamping things," said Julie Feuling, director of associate membership at the Independent Bankers Association of America.

The IBAA created a director education program in 1989 and has been updating it continuously. It now posts year-2000 conversion tips on the Internet, Ms. Feuling said, and runs seminars for directors at its conventions.

The most popular seminar topic, she said, is mergers and acquisitions.

Directors are "successful businessmen in their own field, but sometimes running a bank looks a little different from running their own business," Ms. Feuling said.

Not all banks-or directors-are eager for edification from outsiders. Mr. Raber said some bank presidents prefer to teach their boards their own way of doing things-or to keep them slightly in the dark.

Some bankers fear that well-informed board members "are going to come back and start asking questions they may not have the answers for," Mr. Raber said.

B. Wylie Anderson, an economics professor at the University of Northern Iowa and a bank director for 23 years, advises senior bank officers to conduct half- or full-day seminars for new directors and give them subscriptions to industry publications.

"Banks are run a little bit differently from other businesses," Mr. Anderson said. "Quite often, people don't want to appear like they don't know what's going on."

Mr. Anderson, 65, who has posted his suggestions on the Internet in an article titled "Confessions of a Bank Director," said he started out on the board of a community bank. It was taken over by Norwest Corp., which in turn has merged with Wells Fargo & Co., where he is now a director.

"It's almost a full-time job," he said. "I've gotten to the age where I may decide that I don't want to devote the time."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.