| Most bank directors are successful people. They have excelled in their own fields, such as business, law, medicine, sports, or public service. They have dealt with banks as borrowers and lenders. However, they may not understand banking to the degree that is required of them as bank directors. Banking is a dynamic, complex, and regulated industry. |
| Banking is dynamic because banks are consolidating through mergers, acquisitions, and failures. The number of commercial banks in the United States declined from 14,147 in 1985 to about 10,000 banks in 1995. Some experts predict the number of banks will decline to about 3,000 or fewer in the years to come. Banking is dynamic because banks are offering new products to complete with nonbanking firms that offer financial services. Mutual funds, cash management services, and derivative products such as caps, collars, and floors are a few examples of new products. Banking is dynamic because of changes in technology. They are just beginning to do retail business on the internetthe worldwide communications network. |
| Banking is complex for a number of reasons: much technical knowledge is required to understand financial instruments such as collateralized mortgage obligations, swaps, futures, and forwards. Banking is complex because of the securitization of loans. Securitized home mortgage loans, for example, have lower risk-based capital requirements than other home mortgage loans. It is complex because of lender liability. Banks are being sued by borrowers who claim that banks loaned them too much money and by others who claim that the banks lent them too little. |
| Finally, banks are regulated by federal and state banking authorities. Many bankers would argue that they are overregulated. Moreover, compliance with the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Truth in Lending Act, the Right of Privacy Act, and dozens of other acts is excessively costly and counterproductive. |
| Bank directors are expected to be familiar with all these issues and more. This book is designed to help fill that information gap. It provides |
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