Case 12 Saving a Savings Bank
Setting: Bank; Your Position: President and Chief Executive Officer
You are CEO of a small, local savings bank. Deregulation in the financial institutions has posed difficult challenges, and many of your former competitors have closed their doors due to insolvency or been taken over by much larger institutions. The bank examiners have just left, insisting that many of your commercial real estate loans be written off, thereby depleting an already precarious capital position. As you were aware, your bank is in serious danger of being closed by the regulators.
When the financial problems first surfaced, some of the top executives left to pursue other interests, but fortunately, you were able to replace them with three highly competent younger managers. They had no prior acquaintance with one another, although each is a product of a fine training program of a much larger bank in which they rotated through positions in each banking function. Since you have been busy exploring solutions to the bank's financial plight, you have had to give them a great deal of autonomy, and they have responded admirably. In fact, they seemed to resent the few attempts that you have made to give them close direction.
Your extensive experience in the industry leads you to the inevitable conclusion that the only hope is a two-pronged approach involving reduction of all but the most critical expenses and the sale of assets to other banks. The task must be accomplished quickly since further deterioration of the quality of the loan portfolio could result in a negative capital position, forcing regulators to close the bank.
The strategy is clear to you, but you have many details that will need to be worked out. You believe that you know what information will be needed in order to get the bank on a course for future prosperity. You are fortunate in having three very knowledgeable executives to help you out. While they have had little or no experience in working together and are accustomed to independence, you know that each is dedicated to the survival of the bank. Like you, they know what needs to be done and how to do it.