national banks. Credit unions are viewed as prime competitors for deposits. While many bankers see fintech firms as competitors in the provision of several financial services, an increasing number of community banks are entering partnerships with fintech firms to offer these products and services. Prior to 2017, regulatory burden was a dominant issue in survey responses, likely due, in part, to the changes brought about by the Dodd-Frank Act. But regulatory burden reduction legislation and so-called regulation technology, or regtech, appear to have eased the burden. Regtech consists of several applications to assist banks in meeting their compliance responsibilities, using technology such as automation, advanced analytics and cognitive computing. The cost of compliance appears to be stabilizing in light of these developments; median personnel costs related to regulatory compliance as a percentage of total personnel expenses dropped to 7.1% in 2017 and has remained below that level since. Looking Ahead In addition to conducting the annual survey, CSBS polls a panel of community banks quarterly and uses the data to create a Community Bank Sentiment Index (CBSI), which debuted in the second quarter of 2019. The latest reading for the third quarter of 2022 showed continued negative sentiment among community bankers, although the index number was up from its record low in the second quarter of 2022. In the latest CBSI poll, community bankers expressed ongoing concerns over high inflation, economic growth and the possibility of a more burdensome regulatory environment. Although the annual survey provides a more comprehensive look at the opportunities and challenges facing community banks, the quarterly CBSI provides an important snapshot of how our nation’s smallest banks view the outlook for the U.S. economy. Taken together, we get a clearer picture of the economic conditions that banks face today and where they think challenges will persist in the future. ■ “Cybersecurity concerns, once again, dominated a list of internal risk issues, with 65% of respondents indicating it was extremely important. Cybersecurity also ranked as a top risk in current and future technological challenges.” Turn heads. Advertise in this magazine and let the entire industry know who you are. 801.676.9722 | 855.747.4003 thenewslinkgroup.org sales@thenewslinkgroup.com 1. Core processing systems allow banks to support a variety of services ranging from loan origination to automated clearinghouse transfers. The systems can be provided internally or delivered through external vendors. December 2022 | 31
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