Twenty-five years ago the financial industry was still a highly regulated, relatively simple business. Bankers' hours prevailed, and the old story of 3-6-3, gather funds at 3%, lend funds at 6%, and be on the golf course by 3pm, was alive and well. Many of the products offered and the rates charged and paid were controlled by regulation. In addition to the limitations on the number and types of product offerings, there was also strict regulation and control on geographic expansion.
Most CEOs had a pretty good idea of the relative performance and profitability of the various areas of their institution and didn't need much, if any, management accounting assistance or information to perform their day-to-day and longer-term tasks. Spread-based products were the predominant offerings of all financial institutions, and fee income was largely relegated to service charges. Accounting, data processing and marketing personnel stayed in their own silos and avoided each other like the plague. Lenders were King, and the branch network and staff were a necessary evil.
How things have dramatically changed since those halcyon days of twenty-five years ago! This change is the result of deregulation, reregulation, rapidly advancing technology, traditional and non-traditional competitive forces, disintermediation, and industry convergence.
An example of how things have changed was evident at a Pennsylvania Bankers Association (PBA) Annual Convention in the late1980s. Every year the PBA honors individuals who have spent 40, 50, or perhaps even 60 years in the banking industry. This particular year they asked each of the honorees to respond to one question, "What is the biggest change you have seen in your 40, 50, or 60 years in banking?" The first distinguished gentleman's response was "air conditioning." The second banker's response was "technology," and he added, "I'm not so sure for the better." A Philadelphia banker commented, "Can you imagine trying to process 70,000 demand deposit accounts or operate a bank without the computers or technology we have today?" Maybe equally important, can you imagine trying to perform your various day-to-day work duties without the technology and work tools we now have available?
The PBA episode brought my thoughts back to my bank management trainee days in 1977. 1 recalled our Chief Financial Officer telling a group of thirty eager recent college graduates that the financial industry requires each of us to embrace two areas of discipline, "technology and accounting." His point was that technology and accounting would be forever entwined in the industry and each of our respective areas of focus, and whether or not we were partial to these subjects we would need to learn them, understand them and accept them. …