Bankers are concerned about the rising cost of funds and cyberattacks, according to the Conference of State Bank Supervisors’ 2023 annual survey of 462 community banks.
More than 86 percent of bankers cited cost of funds as “extremely or very important” this year, much higher than the 48 percent who said the same in 2022.
Banking industry deposits are expected to fall by $1.6 trillion this year before dropping another $1.4 trillion in 2024 as pandemic-era savings continue to dwindle and consumers continue to spend more because of inflation. Eighty-three percent named core deposit growth as being either “extremely” or “very” important, more than doubling the 38 percent who said the same in 2022. To cope with the deposit loss, bankers are expected to try to spark growth by focusing on wholesale funding sources and new products.
The majority of bankers listed cybersecurity as their most pressing internal risk, followed by liquidity. Nearly 83 percent said liquidity was especially important following the failures of Silicon Valley Bank, Signature Bank and First Republic, up from 35 percent a year ago.
Eighty-one percent listed regulations as a pressing issue while 80 percent citing economic conditions as a risk. Though the majority of bankers viewed inflation as likely to continue, 75 percent see rising costs as manageable.
A nearly even split viewed current banking technology as being either a liability or opportunity. Half viewed future technology as posing both a threat and opportunity.
“Bankers cited several other technologies as extremely important for their banks, which varied from consumer online account opening and mobile banking apps to solutions for fraud mitigation, risk management and regulatory technology,” the report stated.
Forty-eight percent named other community banks as their primary competitor, up nearly 11 percentage points over 2022. Fifty-two percent said other banks with less than $10 billion in assets were their primary competitor for commercial real estate loans, up from 44 percent in 2022.
Nearly 70 percent cited internal compliance risks as being either “extremely important” or “very important.” The share of banks offering e-signature verification increased to 56 percent from 50 percent in 2022.
Community bankers were more wary of cryptocurrencies. More than 70 percent said addressing their customers’ crypto needs was not important, up from 51 percent in 2022. Nearly all banks were not offering crypto services and didn’t plan to in the next 12 months.