San Francisco Fed President Says

Less-Conventional Banking Will Grow

By JEFF WONG Associated Press Writer

Oct. 03, 1996

LONG BEACH, Calif. (AP) - As mergers and cost-cutting remove traditional bank branches from many neighborhoods, banks are turning increasingly to less conventional means of serving communities, the president of the Federal Reserve Bank of San Francisco said Thursday.

Robert Parry, speaking at a conference on community investment, cited the growing number of bank offices in supermarkets and the use of mobile bank offices at county fairs and events like football games.

"Many banks are finding the expense of operating standard full-size branches too costly and are actively exploring ways to reach customers through other means," he said.

The Fed-sponsored conference attended by bankers, community development officials and local government representatives is being held following a round of mergers that not only have changed the rankings of the nation's biggest banks, but also has shuffled ownership of many small institutions.

Parry said he believes the trends toward consolidation in the banking industry will continue for several years, although at a slower pace.

"We understand that consolidation presents a challenge for many communities, especially low-income communities where the loss of traditional branches is most keenly felt," he said.

"I wish I could tell you there exists a sure-fire alternative method for delivery to replace lost brick-and-mortar bank branches. But I cannot. Those mechanisms are still being tested and developed out in the field."

He said the banks that do survive in the industry mergers and retrenchments will be better able to compete. Parry also said the Federal Reserve, in reviewing bank expansion and acquisition plans, continues to expect strong ratings on compliance with the Community Reinvestment Act, the federal law which requires banks to lend to neighborhoods in which they take deposits.

"While I know many of you are concerned about the impact of consolidations on our communities, those concerns must be balanced by the potential for more competitive and efficient banks that are better able to serve their overall markets in this rapidly changing environment," he said.

Parry also lauded redevelopment efforts being made in Long Beach, saying the city was "an excellent model" for other communities with similar demographics.

"Long Beach's efforts over time have created new jobs, new business opportunities, new retail development and better housing options," he said. "... With the support of its many partners - banks, non-profit organizations, private corporations, government agencies - Long Beach has given itself a tremendous economic boost which will help sustain the city as it approaches the year 2000."

Parry praised Marin City USA, a new development in Northern California, as an example of what collaboration among community organizations and institutions could accomplish.

"This whole community approach is the wave of the future," he said.