Where Have All the Commercial Banks Gone?

February 25, 2016 | By More
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Federal Reserve Bank of St. Louis and FDIC provides facts on bank trendsToday we are going to visit a discussion that I thought you should be aware.  Of late, I’ve done a lot of reading about banking trends, particularly as it relates to how and where consumers are performing their bank transactions including lending.  It prompted me to take another look at the number of FDIC commercial banks that are open today relative to closings. Back in 2013, I wrote the Stats Behind the Bank Failures Since 2007 that discussed the issue.  Needless to say, the interactive statistical graph reporting on the number of commercial banking entities in the U.S. to date is quite interesting.  We will get to that in a moment.

At the time of the Great Recession (2007-2009), I was still working in corporate, specifically at a community bank.  Although it’s been over eight years at this point, I do clearly recall watching the number of banks that closed during that time.  For those working in the banking industry, as it was for everybody, it was a scary time.  As I look in my backyard today – Chicago – over 60 banks have closed between the periods of January 2009 – May 2015 according to a BankRate.com list.  I also checked the FDIC’s Failed Bank List and Federal Reserve Bank of St. Louis websites. Between the periods of January 2008 – December 2009, 165 banks failed. Of course, we are looking at a narrow span of time. What’s the picture look like over decades?  Consider the following gleaned from the above resources:

√  543 banks have closed since 2000

√  In the first quarter 1984, there were 14,400 commercial banks.  As of fourth quarter 2015, there were 5,309.

When considering trends, and in this case banking trends, it is always worthwhile to look back a bit. For many consumers, they may not recall the implementation of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 signed by U.S. President Bill Clinton. The Act:

√  “Removed many of the restrictions on opening bank branches across state lines.”

√  “Allowed banking organizations to acquire banks in any other state under a uniform, nationwide standard.”

The point of today’s Post is just to bring to your attention that the volume of commercial banks has been on a decline and continues the downward trajectory. Why does it matter?  As a money smart consumer, it’s important to keep your thumb on the pulse of the banking industry.  Banking is changing and is continuing to go in new directions, some changes hardly noticeable as they occur over time.  You want to be aware of those changes to maximize the management of your personal finances.  And, most importantly, so you are in the know about money matters.

If you are curious about the largest banks, check out the report issued last year from the Federal Reserve listing the large commercial banks with assets of $300 million or larger.  The aggregate number of banks on the list at the time was 1,767.

News to Read:

The Federal Reserve Bank of St. Louis website provides statistical data regarding the number of commercial banks in the U.S. since January 1984.  You can review the data via an interactive graph by visiting the Commercial Banks in the U.S. landing page.

Optional Homework:

The following is an 88 page report.  But, it provides an inside look at what is happening in the arena of community banks.  The report, Community Banking in the 21st Century: 2015 is a publication which reflects the collaboration between the state bank supervisors, community banks, the Conference of State Bank Supervisors and the Federal Reserve System.

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Category: Banking, New to Banking, Personal Finance News

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