More Debate On Bank Organizational Structure

Bank Organizational Structure

We published an article on whether a centralized or decentralized banking model was best (HERE) last month that generated many comments both for and against. One such rebuttal, from a well-respected bank CEO of a $1B community bank, summed up the counter argument nicely. 


Thanks for your provocative article about centralization. That said, I disagree with your conclusion. I can think of a number of high-performing banks (importantly, over an extended period of time) which operate with highly centralized models.


Being a truly centralized bank, by definition, almost forces senior management to be active in the marketplace as they are seeking constant deal flow. Also, due to advancements in technology, being centralized no longer means being physically located together. Although my CCO and I sit next to each other, we could be located in different continents and still be equally effective. One of the unique characteristics of lending is that we are selling a product which involves substantial risk post-closing of the sale. Many bank failures involve a decentralized model with regards to credit risk management (see Security Pacific Bank).