The market, as well as bank supervisors, assesses the quality of management, and bank management has clearly won a vote of confidence in the market. Bank stock prices have increased sharply, beginning in 1990. The stock market has traditionally discounted bank earnings when compared to other industries. Let's look at another factor in assessing management. For example, analysis of Call Report data shows that the industry has become more productive by being able to increase its size without adding new employees.
Technology enables banks to be more efficient and effective.
While it is clear that larger banks are taking advantage of technology, it is not clear that many smaller banks have accepted the benefits technology can bring. There is more to management, however, than creating organizational efficiencies. Management must also prepare for the future and seek to shape events, rather than simply react to them. In this regard, the continuing consolidation of the banking industry is likely to test whether bank management can sustain the industry's performance. The number of banks, as well as thrift institutions, has been shrinking for the past 10 years, with mergers being the main cause.