Banking started with money lending, years ago. But over years, it has continuously changed and evolved by benchmarking. It first benchmarked itself to transportation companies. It started moving money quick and faster. It then benchmarked to hospitality companies, providing welcoming interior and environment at bank branches. It then introduced drive- through of McDonald and CVS, and is now benchmarking itself to digital commerce of Amazon and the like. New age customers want everything quick; quick loans, quick deposits, quick balances, quick transfers, quick responses. Speed and Service with Smile (3S) is the latest game in the banking town.
So whom would the banks benchmark now?
Drone companies? Spacecraft companies?
I would say Peers. Isn’t that smart? Remember that story, where a Wolf had suddenly appeared to attack two friends relaxing in the hills. And one friend started scrambling for running shoes, while the other started running without shoes, advising the scrambling one looking for shoes, ‘Run and forget the shoes. You can’t outrun a Wolf’, and the other replied, ‘I have not to outrun the Wolf; I have to outrun you, my friend.’
Benchmarking found its place on The Malcolm Baldrige National Quality Award (MBNQA) in 1989. The Financial Services and Banking Benchmarking Association has been now serving the community for over quarter of a Century.
Today, American Bankers Association (ABA) Bank Performance Benchmarking Tool allows you to compare your bank’s performance against a custom peer group. You simply enter your certificate number and the criteria for your peer group and the tool creates a custom report. You create a custom set of peers against which to measure your performance. This group can be determined by asset size and geography, or you can hand select up to 10 competitors as your benchmark. Once the peer group is established, the tool compares your bank’s performance in a number of key measures associated with the balance sheet, income, capital and asset quality, charting your performance against your peer group.
You have another free resource for benchmarking your bank performance. It is the Federal Financial Institutions Examination Council (FFIEC). The FFIEC provides the Uniform Bank Performance Report (UBPR) for every commercial and savings bank insured by the FDIC and 41 sub-groups that may serve as good peer groups, perhaps one for every bank. The FFIEC data sets also permit developing and printing custom peer group reports, if you like to work with something beyond and different from the pre-formed 41 sub- groups. The performance and composition data contained in the reports can be used as an aid in evaluating and benchmarking the earnings, liquidity, capital, asset and liability management, growth management and accomplishing superior bank performance, on an on- going basis.
The data for Peer- to- Peer (P2P) financial and other outcome benchmarking is, thus, virtually, free of cost available to US banks. What they need are inclination, time and talent to implement. For small banks with budget constraints, hiring experts or outsourcing can be smart. But not doing is certainly at one’s own peril.
For bank benchmarking consulting, services and support, you may contact the author at md@safeandsoundbanking.com
Center for Safe and Sound Banking 