30 JULY / AUGUST 2019 At the end of the 1970s, the U.S. banking industry faced enormous challenges as deregulation and an explosion of new financial products forced bankers to rethink the way they did business. At the same time, Federal Reserve Chairman Paul Volcker launched an unprecedented tight money campaign in order to fight inflation, which reached 13.3% in December of 1979. Suddenly, interest rate volatility soared, and bank balance sheets were thrown into disarray. In the midst of this turmoil, the Baker Group (then James Baker & Company) began to help community bankers adapt to those changes through a new concept called “asset/liability management.” Dr. James V. Baker’s best-selling book of the same name was published two years later by the American Bankers Association. The book became the academic and industry standard for a new practice in interest rate risk management. The concept of a “systems approach” to asset/liability management, which Dr. Baker pioneered, remained foreign to many bankers in the post-Volcker era and early years of the new firm. At the time, banks watched in horror as their short-term liability rates climbed to 15% to 20%, while their long-term assets locked into single-digit rates. This unique drama begged for a system-wide solution to more effectively define, measure and manage the interest rate risk positions of community banks for all environments. What seems common practice today “The pace of change has quickened dramatically in the banking industry within the past few years. Economic conditions and the regulatory environment, for example, combined to increase significantly the challenges facing bank management. In addition, policies and procedures that had worked well for what seemed like an eternity were destroyed by events over which bank management had little or no control. Bank managements needed an approach that focused on the total bank; and that approach became known as asset/liability management.” – Dr. James V. Baker Jr. “Asset/Liability Management” 1981 Forty Remarkable Years, and Just Getting Started The Baker Group celebrates 40 years in business was, in fact, revolutionary at the time. Early Baker clients had a front row seat to a historical shift in the industry. In 1981 Baker released one of the first asset/liability software models designed specifically for community banks. Its introduction to the industry helped the young firm grow rapidly. As the firm grew, Baker was constantly on the road, ever committed to educating banks about how to optimize their investment decisions within the context of a robust asset/ liability management system. By the end of the 1980s, the Baker Group had secured its place as a top-tier provider of interest rate risk management solutions and investment services for community banks. It was this early success that propelled the firm into a new era of banking … and brought a new perspective to the investment management process. Baker in the Next 40 Years In the subsequent four decades, the Baker Group has grown, evolved and continued to innovate as industry and market conditions have changed. The firm has focused intensely on serving its clients every step of the way. As clients’ needs have changed, the Baker Group has responded – a cultural instinct embedded in Baker’s DNA. Baker’s success as a business has been built entirely from the relationships it has forged and fostered over 40 years of commitment to its clients. There is no doubt Jeffrey F. Caughron President and CEO The Baker Group jcaughron@GoBaker.com The Baker Group is a Preferred Service Provider of the Indiana Bankers Association and an IBA Diamond Associate Member. PSP SHOWCASE
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