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Interview: W. David Roddey, Sovran Bank.

Interview: W. David Roddey, Sovran Bank

What are some of the factors responsible for the growing number of bank closings and how will these closings affect the banking industry and consumers?

MR. RODDEY: The major culprit in bank closings has been the relaxation of loan policies and subsequent downturn in the real estate market. Fortunately, at Sovran we have maintained a very careful balance between lending conservatively while still meeting the financial needs of the various customers we serve. Overall, I think the banking industry will come out stronger and wiser than we've ever been, and consumers will likely see a healthy, but not prohibitive, tightening of credit policies. Deposit insurance reform is on the government's agenda. What changes do you foresee the government making in this area?

MR. RODDEY: The debate over deposit insurance reform is still underway, with a variety of opinions on what should be done to improve the deposit insurance system. I think that, at this point, it's too early to make any predictions. I will, however, make a few observations on the issue.

First, the Treasury Department and the General Accounting Office, in conjunction with a number of other groups, will be conducting a major study to the depository insurance system over the next year; and I expect the study to form at least part of the debate over deposit insurance. The study will cover everything from the scope of insurance to risk management techniques to the feasibility of establishing a deposit insurance premium rate structure assessed on an institution-by-institution basis. I believe that this study will have tremendous impac on any future congressional action.

Secondly, the FDIC has already been given increased authority due to legislation brought about the S & L crisis. One of those expanded authorities allows the FDIC to-override state laws governing the operation of state-chartered savings associations. If that override were to be extended to commercial banking, the dual banking system--which is comprised of commercial banks and S & L's and has long been a cornerstone of our financial system--would be in jeopardy.

Thirdly, increases in deposit insurance premiums are already causing banks to tighten their belts in order to remain competitive against foreign institutions.

Whatever the result of the deposit insurance debate, it will need to be a solution that continues to protect the smaller depositors without crippling the industry as a whole. The solution is going to have to be very carefully balanced to be effective. How effectively has the banking industry embraced service orientation toward customers?

MR.RODDEY: Service orientation toward customers has been an area where the banking industry has excelled. We have managed to maintain the core tenent of banking through the personal relationships that many customers enjoy while simultaneously utilizing technology (i.e., Automatic Teller Machines, computerization, telephone banking services, etc.) to provide new ways to make banking more convenient for customers who are not as interested in personal contact with their banker. Specifically at Sovran, we are centering our entire banking approach on developing and providing products, services, and long-term relationships that are driven by segmental customer needs. Almost every week, the media reports that Americans must spend less and save more for the country to compete globally. How would you motivate a class of high-school students to spend less and save more?

MR. RODDEY: First, I would encrourage discipline. Our research shows that people want to save money but find it difficult because they either don't put enough into savings or they take too much out. The first step in overcoming this problem is self-disciplene--deciding how much a person wants to save, finding a reasonable amount within a person's budget that can be put into savings on a regular basis, then refraining from withdrawing from savings until the goal is reached.

Second, I would show young people the power of compound interest and how easy it is to accumulate a large sum of money by putting small amounts into savings over a long period of time. Thirdly, I would encourage them to understand the function of savings in our economy and how personal savings volumes are linked to the cost of capital for industry in the U.S. In the meantime, what strategies are American banks taking to compete globally?

MR. RODDEY: American banks are doing several things to compete globally. American banks, particularly the superregionals, are strategically aligning themselves with the geographic regions they serve and carving a strong niche for themselves through acquisitions, asset/liability management, and aggressive marketing.

American banks are also positioning themselves to be technologically linked to global networks that will allow them to serve international markets without giving up local identities or having to make the capital expenditures that international branches require. The operating banks in such a network would be indigenous units joined together by a network manager. Each bank linked to the network would be able to offer any of its products and services to customers at all locations served by the network.

Others are aggressively marketing themselves as banks that know, respect, and have the ability to serve foreign customers conveniently and effectively.

How has bank deregulation affected the industry and your institution?

MR. RODDEY: Deregulation has made banking a much more competitive industry. With reduced regulation, the industry has been opened up to new efficiencies and new opportunities to offer innovative products and services. How have changes in interstate banking and bank mergers affected the industry and your institution?

MR. RODDEY: Changes in interstate banking and mergers have not had the negative effect that many people originally feared. Instead, banks have used the interstate banking concept and mergers to combine resources to better serve their customers. Sovran's kacquisition last year of the First National Bank of Colliervile is a good example. With Sovran's resources and the Collierville delivery system, the community of Collierville benefits from the products, services and resources of a $25 corporation while maintaining an institution with a local focus.

Will Japanese banks play a larger role in the future of banking in the Mid-South?

MR. RODDEY; I think Japanese banks will play a larger role in banking in the Sourtheast in the future. Japan's largest banks already have a presence in the region's larger cities such as Atlanta, and we continuing to see additional direct investment in southern states by the Japanese.

Japanese companies tend to finance their direct investments in the U.S. through Japanese banks and use domestic banks for their executives. As long as Japanese investment in the Southead continues. I think Japanese banks will increase their presence here.

What new trends do you see for the banking industry?

MR. RODDEY: I envision a number of trends for banking in the future. For one, with interstate banking becoming more prevalent. I foresee continued consolidations, mergers, and acquisitions, Banks with complementary strengths are finding that they can increase their product and service delivery through combining resources. A good example is the pending merger between Sovran and Citizens & Southern of Atlanta.

We also have to remember that banking is a mature industry, and one of the ways banks will increase market share in the future is to consolidate with other banks.

Given the recent S & L crisis and the environment resulting from numverous increases in loan reserves that have been caused by a downturn in real estate, it is likely we will also see tighter regulatory countrols over banking. We are already seeing some of this in regulatory investigations at various Tennessee banks. By the year 2000, what changes would you forecast for Mid-South banking?

MR. RODDEY: I expect continued consolidations, particularly as more and more banks try to establish the size necessary to compete successfully on a national or international scale. I believe that utilization of techonology and non-traditional banking facilities will increase to expand convenience for customers.

I also expect an increased comphasis on research and the development of new, innovative products. As we become more competitive, the banks that prosper will be the institutions that define and address customers' needs most quickly and with the right products and services.

And, I think we will continue to see a blurring of the lines between banks, brokerage hosues, insurance companies, and other service providers. Legislative changes will likely be made to allow banks to literally be full-servive providers, and the financial services industry will become a more level playing field.

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Title Annotation:chairman, president and CEO
Publication:Business Perspectives
Article Type:interview
Date:Jun 22, 1990
Previous Article:Trusts: still going strong after all these years.
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