There's a new trend in our industry: calling cutbacks "rightsizing" instead of the immediately preceding buzzword, "downsizing."

To the people who have lost their jobs, this switch has sad implications. It suggests that when they were employed, the bank was bloated - and that now, without them, things are much better.

No one wants to have such a perspective when looking back on a banking career.

But undoubtedly, rightsizing is the better term for the rationalization taking place in our industry.

To be honest, we have been spending too much money simply taking the deposits of some people and converting them into the loans and investments that finance others.

Competition has forced banks to recognize that they must improve their efficiency ratios by curbing noncredit expenses.

This in turn has led to the sharp decrease in opportunities for bank employment.

The specifics of what has happened to reduce the need for bankers are easy to pinpoint.

*Check handling has been ever more intensely automated, and now image processing is likely to bring even more automatic handling - without people.

*Credit card operations are now so efficient that approval of a transaction involves no human intervention. This is a far cry from the phone call and personal approval of each transaction and, still in the memory of many bankers, return of the signed slips.

*Credit approval for credit cards has been completely automated with credit scoring techniques and credit bureau on-line data.

*Many other decisions are made at the computer terminal and need no further human intervention once entered in the system.

*Electronic data interchange and centralized credit granting have further lessened the need for people.

*Finally, with fewer staff, banks need fewer middle managers to supervise them.

So just as the Industrial Revolution in manufacturing sharply lessened the need for production workers, today we are getting the same in white- collar work, and banking in particular.

What are the implications of rightsizing?

The most immediate, of course, is that many former bankers will never work in the industry again. (And many of those who go into business for themselves will have trouble adjusting to the 90-hour work weeks a lot of single proprietors must endure.)

In banking, the number of new hires will be far smaller than in the past, and those hired will need far more diversified skills.

The number of bank training programs and schools will have to decline, to match the smaller number of people employed in the industry.

A smaller bank industry with fewer employees means less clout in legislatures and local communities, because the body politic will rely less on bank payrolls for its economic strength.

What about community banks? Will they be exempt from this white-collar equivalent of the Industrial Revolution?

I fear not.

First of all, the public has come to expect the efficiency and speed that new automated techniques provide. Few would accept the time-consuming process that my wife and I endured only four year ago in opening a custodian account - a procedure that took longer to complete than the Treaty of Versailles.

Second, banks will be far more likely to farm out back-office work and other procedures that do not involve direct contact with the public.

And community banks will be motivated by the need to keep costs in line with those of larger rivals. Friendly service and personal recognition can only go so far in offsetting higher fees and lower interest payments on balances.

So banking must rightsize. But to be fair to those who have to run the industry up to now, what is right today was not right in the past.

To those losing their jobs, it is little comfort that they happened to be in banking when the revolution took place.

But for the bank as an institution, the changes bode well.

Mr. Nadler is a contributing editor of the American Banker and professor of finance at Rutgers University Graduate School of Management.

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