The Shrinking U.S. Banking Sector: On Balance, Who Benefits? - 0 views
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There were 157 bank failures in the country last year, the most since 1992, according to the Federal Deposit insurance Corporation (FDIC)
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6,529 commercial banks and 1,128 savings institutions by the end of this year. That is a 4.4% decline from the previous year, and it leaves the country with nearly half as many institutions as it had 20 years ago
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U.S. federal government rolled out various laws in 1784 to encourage multiple banks in individual states.
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swing of the pendulum last year, consolidation returned to 1994 levels. But in contrast to previous times, much of the consolidation has been due to failures
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"In the short term, I thInk consolidation will pick up as weaker banks go through mergers and acquisitions, and stronger banks take time to get their capital shored up" In their pursuit of greater efficiency and economies of scale,
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experts expect consolidation to continue, and predict that the trend will leave the banking system better off in the long run. "We don't really need as many banks as we used to,"
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Their plight hasn't been lost on the FDIC, which has launched various initiatives to give community banks some relief.
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guidelines that lighten requirements for how these banks manage customers whose accounts are consistently overdrawn.
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community banks play an important role in local economies. They typically have close relationships with individual customers
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"Smaller firms and local individuals trying to get loans from larger banks could be a subset of the population that is worse off because of consolidation,
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Four "mega banks" -- Wells Fargo, Bank of America, JPMorgan Chase and Citigroup -- now hold three-fifths of the home mortgage market, which limits consumers' choice of products and their ability to shop around for competitive pricing. "It's a textbook issue of a concentration of power," Guttentag says. "A limited number of firms control the market, and they will engage in implicit collusion."
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borrowers with low incomes or bad credit are significantly less likely to default on loans if they borrow from a local bank than if they receive a loan from a distant bank or mortgage company.
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Pittsburgh metropolitan area, PNC Bank has 47% of the deposit share, according to the FDIC. The second-largest bank in the area is Citizens Bank of Pennsylvania, which has 8.5% of the deposit share.
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no limits on deposit shares in certain markets, 1994's Riegle-Neal Act imposes a 10% cap on nationwide deposits for a single bank.
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In the last 10 years, the number of bank branches nationwide has Increased 15%, although that expansion has primarily Involved banks with $500 million or more In assets. The number of branches dropped slightly for the first time In a decade In 2010.
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the number of banks will continue to shrink, but he doubts the U.S. will ever look like, say, Canada -- which has just 22 banks. indeed, if consolidation continues as it has over the past 20 years at the average annual rate of 3.3%, it would take 60 years for the total number to fall below 1,000 banks and nearly 130 years to get below 100.
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if the number of banks shrinks from 6,000 to 100, if those 100 are operating in all market segments and if consumers have many options, there is no reason for concern," Guttentag