Balance Sheet Management Top List of Banker Concerns

Posted: Oct 11 2023

The basics of balance sheet management have returned to the fore of bankers’ attention as interest rates have climbed, according to the Conference of State Bank Supervisors’ 2023 Survey of Community Banks. Nearly 89% of bankers said net interest margins were an extremely or very important external risk factor, followed by 87% for cost of funds and 84% for core deposit growth.

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Above-target inflation drove concerns over costs of deposits, with nearly 64% saying inflation had an “extreme” impact on cost of funds. However, three-fourths of community bankers said that inflation—whether temporary or persistent—is manageable. Seven in 10 bankers expected inflation to persist, with nearly half projecting that year-on-year inflation would not decline to the Fed’s 2% target until 2025 at the earliest.

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Balance sheet concerns trumped regulatory burden, which 81% rated as extremely or very important, and the cost of technology, at 74%. Just 14% said climate risk was an extremely or very important risk to the bank, with 31% saying it was slightly important and 29% saying it was not important at all.

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When it came to operational risks, cybersecurity remained on top, consistent with trends over the past several years. More than 90% rated cyber an extremely or very important risk. Other top-rated internal risks included liquidity (84% extremely or very important) and staff retention and technology implementation (tied at 77%).

To view the survey, visit: https://www.csbs.org/sites/default/files/2023-09/CSBS%202023%20Community%20Bank%20Survey%2010.04.2023.pdf