Whither the Community Bank? Relationship Finance in the Information Age

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Whither the Community Bank? Relationship Finance in the Information Age

In the article "Whither the Community Bank? Relationship Finance in the Information Age," Robert DeYoung, William C. Hunter, and Gregory F. Udell explore the extent to which the community banking sector is shrinking and the cause and consequences of its diminution, and question whether the community bank business model is still viable given the financial deregulation and innovations of recent decades.

What do the authors mean by “community banks” and “relationship finance?”
Identify and explain the effects of regulatory and technological changes that have combined to reduce the number and market share of community banks.
Do you think community banks will continue to exist in the future? If so, explain why and discuss how their business model will differ from that of larger banks. If not, explain why.

Source: “Whither the Community Bank? Relationship Finance in the Information Age.” Robert DeYoung, William C. Hunter, and Gregory F. Udell, Federal Reserve Bank of Chicago Fed Letter, No. 178, June 2002, pp. 1-4.

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