The 41st Annual Conference on Bank Structure & Competition

The theme of the 41st Annual Conference on Bank Structure & Competition was "The Art of the Loan in the 21st Century." Indeed, the core function of financial institutions—making credit available to businesses and households—is an ever-evolving endeavor that requires both financial and regulatory genius.

For most of the 20th century, lending channels resembled silos: Businesses borrowed at commercial banks, home buyers borrowed at thrift institutions and consumers borrowed at finance companies and credit unions. Lending was an on-balance-sheet activity, and for nearly all lenders the chief source of profit was the interest income generated by these loans. Banks had an important advantage in business finance because they had private information about their borrowers. Only the very largest corporations could borrow in public markets.

By the 21st century, the lending landscape had been indelibly altered by advances in information and financial technologies. Broader and deeper financial markets have provided even moderate-sized businesses with expanded access to credit via publicly traded bonds and loans. Credit scoring and loan securitization have provided households with greater access to mortgage finance and consumer credit. As banks' informational advantages have eroded, relationship loans to small businesses are the last vestige of pure portfolio lending. Bank profits are increasingly dependent on fee income from originating and servicing loans, providing back-up credit facilities and arranging loan syndications.

These ongoing changes have important implications for the structure and performance of the financial industry, for innovation and risk in the financial system, for the creation of credit and its distribution and for macroeconomic growth and stability.

We gathered some of the most qualified and respected members of the financial community to consider these issues. The discussion began on Thursday with a keynote address by Federal Reserve Board Chairman Alan Greenspan. The Chairman has used the conference as a forum to present his views for over a decade, and we were pleased to continue this tradition. Wewere honored to have U.S. Representative Michael G. Oxley, Chairman of the U.S. House Financial Services Committee, deliver the keynote address to open the proceedings on Friday. And we were especially fortunate to be hearing luncheon addresses from Jerry Grundhofer, Chairman and Chief Executive Officer of U.S. Bancorp, and Julie L. Williams, Acting Comptroller of the Currency.

The discussion continued with an impressive group of experts on Thursday and Friday. On Thursday we explored the conference theme in depth, with two theme panels on "The Art of the Business Loan" and "The Art of the Retail Loan." We concluded the Thursday program with a discussion of bank regulatory issues important to commercial bank lending. On Friday we strayed from the conference theme to discuss a timely financial issue facing the economy: the state of our public and private pension funds.

Michael H. Moskow
President and Chief Executive Officer