- The Washington Times - Monday, January 10, 2000

Kathleen Murphy is leading the local banking industry into the new year as executive vice president of the Maryland Bankers Association.

She came to the association in October, entering a state with plenty of banking choices for consumers, she said. She believes those choices won't decrease, since there's a demand in the area for services that both large and small banks provide.

Ms. Murphy came to the Maryland group after 13 years with the national trade organization, the American Bankers Association, where she ran the community banks division. She welcomed the chance to get to a more local level.

"I've always had a dream of returning to a state association as CEO… . You get to know not just the CEO of the bank but all the level of employees and the future of the industry, really," she said.

The new job, in Annapolis instead of the District, also shortened her commute.

"The fact that it was a mile from my home certainly was an added feature," she said.

Ms. Murphy said a few weeks ago that the banking industry was putting all of its energies into addressing the millennium bug. Otherwise, 2000 looks to be a fairly quiet year, as banks digest the recent passage of the financial modernization bill. That bill repealed Depression-era laws that prohibited banks, brokerages and insurance firms from getting into each other's lines of business.

Question: What is the character of the banking market in Maryland?

Answer: We have $55 billion in deposits in banks and savings and loans. There are 80 commercial banks and 55 thrifts. Those institutions have 1,867 branches. Even though we see consolidation in the industry, the opportunities for consumers to interact with their bank have actually increased in the last five years.

Q: There are not many large, Maryland-based banks with assets over $1 billion. How does that affect the competitiveness of the market? And there are not many national banks based here. Does that give Maryland banks an advantage, disadvantage?

A: As I said, there are 80 commercial banks and four or five of them are headquartered out of state. We have some very competitive community banks.

I think what it is, it's really a reflection of the market they're in. The larger banks tend to be headquartered in the metropolitan areas and they're coexisting very nicely with the community banks in those markets. What it comes down to is that consumers have different preferences for banking. And some say who have a very transient lifestyle want to be with a bank that has presence in multiple states so they can have access to financial services and, let's say, ATMs in multiple states through that particular bank.

Others want to have a personal relationship with their banker and that's where the community bank concept comes in. And I don't think that one feels threatened by the other. I think that they do coexist well because what it shows is that consumers have different needs and there are a variety of financial institutions in the state to help meet those needs.

Q: How is financial modernization going to affect banking in Maryland?

A: Well, we are right now looking at specifically the impact on Maryland financial institutions and we're doing a program with the state on it in mid-December. We'll be able to discuss that definitively at that point.

But just in general conversation during these recent meetings we've had with bankers, I think the feeling is that financial modernization legislation really codifies what the banks have already been doing… . Consumers' financial needs have been evolving, and for the banks to remain competitive in their communities, they've had to offer the services the customers wanted. So they have been involved in insurance and securities products for their customers for a number of years, so in a sense this bill is the law catching up with reality.

I think the wonderful thing about this legislation is that banks are not going to have go through all the incredible gyrations they have in the past to get into other businesses.

One example I heard this week was a bank that wanted to get involved in the insurance business. How it used to be, national and state-chartered banks had to sell the insurance from a town of 5,000 people or less. So a bank might have had an operation in a pretty good-sized market but they had to set up a completely separate operation with all the overhead and expense that you need to do that in a town of 5,000 so that they could sell insurance. What they [the bank] have estimated because they're not hamstrung like that in the future, they save $50,000 a year to their customers.

Q: Also because of financial modernization, are banks here going to see more competition from, say brokerages that are going to set up transactional banking?

A: I think we will continue to see a melding of securities and insurance in banking because that's what the law allows. But as I said banks have been involved in this business for many years, and in a sense they've got a jump-start on how those types of services work together and interrelate together and how their customers are asking for one-stop shopping. And I really think it continues to leave the banks in the driver's seat, which is really exciting. We'll see how it evolves. But I think right now the banking industry feels very well-poised in this new world.

Q: What are some of the top priorities for your organization this legislative session?

A: As it stands right now, we're not anticipating that we're going to be introducing any legislation, we're going to be in more of a defensive posture, that is a fairly typical year for us. The issues that we do expect to see come up here in the state … tend to be perpetual. We do expect them to be looking at requiring banks to offer basic banking accounts to their customers.

Regarding that issue, we have done our own research with our members, the commissioner of banking has as well, and we have determined that basic banking accounts are available to consumers in the state of Maryland.

Q: And basic banking accounts are …?

A: [They] would require a very low minimum balance to open the account and very low fees, if any, to maintain the account. We have determined that those services are already available and that they do not need to be legislated.

… We do understand that the legislators are looking at the ATM fee issue as it's been moving across the country, and specifically what's been happening in California. We have not heard anyone specifically say that they're going to introduce legislation this year, although we do understand some are on the fence and watching it.

I think on that issue, we're opposed to price fixing. Competition is good for consumers and keeps prices down. To say you're going to ban the ATM access fee, I think we'd to take a look at what happened in California, where the unintended consequences were that it really reduced consumer choice. The larger financial institutions out there shut off their ATMs to non-customers.

And I think that's what the unintended consequences would be of legislation like that. The great thing about the ATM access fee is if you use your own bank you never have to pay for it or if you cash a check or use your ATM card at a point of sale terminal and get cash back, you never have to pay for it.

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