Consolidation Looms for Multitude of Trade Groups

In the vast and diverse world of financial institutions, there has never been a shortage of clubs to join.

From full-service trade associations to single-minded specialty groups, there are 201 national and state organizations for banks, thrifts, and their employees. And every single one thinks it has something unique to offer.

But as mergers and economic woes force financial institutions to tighten their belts, the associations are feeling the pinch.

The industry's drift toward austerity is raising a touchy question: Niche or no niche, aren't 201 banking associations just a trifle too many?

In a word, undoubtedly.

"My God, they're everywhere," said Ronald Burke, president and chief executive of the Bank Administration Institute in Rolling Meadows, Ill. "There are too many of them, they are too costly, and they add a lot of confusion to the banking scene."

Where's the Beef?

Once, back and thrift executives joined associations out of a sense of obligation or fraternity. Now bankers are pressuring associations to deliver more value to their members, and find ways to contain costs.

"All of the bankers I know are holding associations to a higher standard of service, because it's coming from their bottom line," said James B. Watt, president of the Conference of State Bank Supervisors.

Banks and thrifts are applying pressure with their checkbooks. Almost all trade associations - groups that represent institutions and typically lobby Congress or state legislatures on their behalf - have watched membership slip in recent years, and not just because the industry has shrunk.

The American Bankers Association counted more than 90% of commercial banks as members in 1981. By 1986, its market share had drifted down to 75%, where it remains today.

"The banks are lining these groups up, and making long lists of what they cost and what they do," Mr. Burke said. "They're making these decisions more systematically."

The professional associations - which provide training, research, or technical services to individual members, but don't lobby Congress or state legislatures - aren't immune to the pressures. One trend: Fewer financial institutions are picking up dues on behalf of their employees, according to Marsha S. Henderson, president of Financial Women International.

The industry's hard-nosed appraisals have already claimed one casualty. The Bank Capital Markets Association, formed in 1972 to lobby for securities powers for banks, shut its doors last October after membership dwindled.

That ominous event wasn't lost on other industry associations. Many are scrambling to adapt, lest they perish too.

* In April, declining membership and financial woes prompted exploratory merger talks between the two leading national associations for thrifts -the U.S. League of Savings Institutions and the National Council of Community Bankers.

The latter group is trying to reposition itself, even as talks continue. Last month, it changed its name from the National Council of Savings Institutions.

* The National Automated Clearing House Association will feel a jolt when two of its members - Chemical Bank and Manufacturers Hanover - merge. NACHA's membership will drop to 41 clearing house organizations. Currently, 29 are multibank clearing house associations; 13 are one- or two-bank associations.

Other NACHA members will immediately feel the pinch, because dues are divided evenly among the members. "It's safe to say that we're going to change," said Elliot McEntee, NACHA's president and chief executive. "It's hard to believe any organization in the banking industry will remain the same."

Part of NACHA's strategy is to inform bank officers and directors "how banks can benefit, save money, and provide better services through greater use of electronic services," he added.

Some associations with sharply defined personalities will strengthen their position mainly by rethinking ways to serve members.

Nobody thinks a merger between the ABA and, say, the Independent Bankers Association of America is even remotely likely. But plenty other permutations do come to mind, and some broad, guiding principles are emerging:

* Small banks and thrifts have a lot in common.

"The positioning is coming down to the community financial institution versus the large commercial bank," said Thad Woodard, president of the North Carolina Alliance of Community Financial Institutions.

In this area, the states are holding on to their vaunted status as the laboratory of change. Mr. Woodard's North Carolina Alliance, formerly a savings and loan league, is the pioneer. It has admitted 20 community banks since it broadened its membership base last year.

And on January 1, 1992, community banks and savings institutions in Pennsylvania will seal the first full-fledged merger of associations representing the two industries. Their new banner: The Pennsylvania Association of Community Bankers.

* Two halves make a whole.

Some associations that share similar philosophies and serve complementary constituencies will gravitate toward one another.

One potential match: the Bank Administration Institute and Robert Morris Associates.

Both are well-regarded independent research and educational organizations; neither is involved in lobbying. The BAI, based in suburban Chicago, caters to bank managers and administrators at midsize and large banks. RMA serves bank loan and credit officers. Their membership bases overlap.

RMA is "frequently brought to our attention" as a potential partner, said Mr. Burke, president of the Bank Administration Institute. "They are such a comparable organization." At some point, he added, merger talks "would be worth the attention" of both organizations.

Other potential pairings: the Conference of State Bank Supervisors, which counts 3,500 state-chartered commercial banks as members, could swallow up the American Council of State Savings Supervisors, which has 134 members, including 103 state-chartered thrifts. Both groups advocate the dual banking system, and 38 out of 54 state bank supervisors regulate both banks and thrifts.

Two small but potent organizations - the Association of Bank Holding Companies and the Association of Financial Services Holding Companies - have often been allies on policy issues and have flirted with marriage.

* Stay flexible about who can join.

Financial Women International caught this wave early. About five years ago, the group - then called the National Association of Bank Women - saw its roster sagging. The culprit: a rule specifying that bank and thrift employees were no longer eligible for membership if they moved to credit unions, accounting firms, insurance companies, even subsidiaries of their institutions.

A charter change and a new name helped the group diversify. Still, membership has dropped to 17,000, from 25,000 three years ago. But because FWI is managed by a consulting firm, it was able to downsize quickly by assigning fewer people to its account.

* Make more money from fees.

The associations that will fare best are those that pull in a healthy share of revenues from fees. That means associations will be trying to sell more products and services at higher prices to members and nonmembers.

The reason is simple: "It's virtually impossible to raise dues," said Mr. McEntee. "Banks are looking at their costs very, very carefully."

There are other changes blowing in the wind. Waning attendance at national conventions puts the costly annual gatherings high on the casualty list.

"It's tough to get people out of their offices," said Sean Kennedy, president and chief executive of the Electronic Funds Transfer Association. "I think the era of the three-day convention is over."

Likely to take its place: one-day or two-day gatherings, or perhaps regional meetings.

Also endangered are the halfdozen or so banking graduate schools run by various associations. "Most bank are hiring people with MBAs. They're beyond that level," said Mr. Watt.

Although the number of industry associations is sure to diminish, there is bound to be room for plenty of survivors.

"I think some of the trade associations are still necessary, because the industry is still fragmented," said Ms. Henderson of FWI. "And there are still professions within our industry - lending, computer services - that will need support groups."

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