Vantage Point


Working with competitors can help community banks thrive

By Donna Deale

Can collaboration among banking competitors benefit all parties involved in such arrangements? Can shared operations lower the cost of doing business and improve the value for customers and stakeholders?

While working with your community bank’s competitor might seem an odd notion at first, a new paper from the Office of the Comptroller of the Currency says the answer to both questions is “yes.” Written in response to questions posed by community bankers, the paper, entitled “An Opportunity for Community Banks: Working Together Collaboratively,” explores the potential for collaboration among competing banks and savings associations.

The paper stresses that such arrangements in the banking industry are not new. Informally, community banks network and exchange ideas, but they can take the concept of working together to the next level by, for example, jointly owning a service organization or sharing specialized staff.

The OCC believes that community banks can thrive when they collaborate with appropriate strategic planning, strong risk management and effective oversight. Because this approach can pool the strengths and resources of others, community banks can achieve better outcomes for customers at a lower cost, increase their range of services, and build upon their own expertise. Community banks should take appropriate steps to ensure that their joint activities do not violate antitrust laws.

Areas where collaboration might occur include loan documentation, contingency planning, loan participation alliances, compliance, audit, appraisal reviews and multibank community development financing. Additionally, some community banks and thrifts may have excess capacity or a particular expertise that enables them to provide shared services to other community banks that may not have sufficient resources or demand to do so. Others may look to partner with fellow community banks and thrifts that share their core values as a cost-effective way to meet growing demands while retaining their individual identities.

Administrative and back office operations also offer opportunities for collaboration in areas such as accounting, advertising, clerical support, data processing, internal audit, marketing, procurement, records management and data storage, and research and surveys.

The OCC also points out that its regulations specifically authorize banks and thrifts to invest in operating subsidiaries and pass-through investments as other options to structure their operations, as well as federal savings association service corporations (including their subsidiaries or joint ventures) and bank service companies.

Service corporations allied with federal savings associations can engage in, among other things, accounting and internal audit, data processing and storage facilities, remote service unit operations, and credit-related activities such as credit analysis and appraising. A bank service company may perform the following services only for other depository institutions: check and deposit sorting and posting; computation and posting of interest and other credits and charges; preparation and mailing of checks, statements, notices and similar items; and other clerical, bookkeeping, accounting, statistical or similar functions.

With so many opportunities to collaborate, the OCC encourages community banks and federal savings associations to explore this as a means to improve efficiency, achieve economies of scale, enhance service to communities, and strengthen the future vitality of community banking across the country. Such advantages of collaborating with like-minded organizations might just turn competitive challenges into shared business opportunities.

Donna Deale ( is deputy comptroller for thrift supervision, Office of the Comptroller of the Currency.