Private-label relationships between correspondent banks and their customers are proliferating.
As in other correspondent relationships, the larger banks share technology and products that most big banks have.
What's special about private labeling is that the ultimate customer isn't tipped off that a big bank is involved.
That's a relief for the smaller banks, which often fear that their customers will decide to just deal directly with the bigger bank.
"We're making more of an effort to mask our name, so that the brand name is the other bank's, not ours," said Michael Cannon, vice president at Chase Manhattan Corp.
"It's not terribly apparent to the user that it's Chase behind the scenes."
The rising interest in private-labeling is being driven by a trend toward global cooperation among banks, particularly a growing acceptance of outsourcing and bank partnerships, said Yawar Shah, senior vice president of correspondent banking at Chemical Banking Corp.
Also, the technology that new products require is often too costly for small banks.
Many private-labeling efforts involve sophisticated services, such as international trade finance. As their small-business clients do more foreign business, community banks and midsize regionals are eager to expand with them.
But these banks would prefer that their customers not know the products came from a big bank, said John Sampson, senior vice president in charge of correspondent banking for Norwest Corp. of Minneapolis.
Chase's Mr. Cannon said his bank is expanding its international private- label efforts because of strong demand. The bank even established a department to deal exclusively with outsourcing and private labels.
Norwest created its Town Square Mortgage Network to help small banks that lack the expertise or processing capability to originate mortgages for sale on the secondary market.
Although Norwest eventually takes over the servicing, the closing takes place at the community bank, and the loan is Town Square paper.
Also, payments can be made automatically through the local bank's account, further concealing Norwest's involvement.
Customers "get to do business with familiar people," said Rick Ernst, vice president of Town Square. "We do all the work behind the scenes."
St. Louis-based Boatmen's Bancshares is planning to market its two-year old Pilot Funds to community banks as private-label funds. Consumers would get no clue that a big bank was involved; in that sense, the funds would seem no different than those of Putnam or Merrill Lynch.
For many correspondents private labeling has its roots in credit card operations, in which a community bank markets cards as its own though a larger bank does the processing.
Such arrangements have been expanded recently into bond accounting and image processing for account statements, which require more technology than many community banks can afford.
Almost all small and start-up banks that want to offer such statements are going to third-party vendors and correspondent banks for the processing, said Jim Kratzer, Boatmen's vice president for correspondent banking. "This is still going to be a good area for correspondent banks."