St Casimirs Mortgage Minute

What Dearth of New Banks Means for the Industry's Future

The U.S. House Oversight and Government Reform Committee recently examined the fact that only three banks have been organized since 2009 and what that means for banking in this country. Prior to 2009, between 100 and 200 new banks were formed every year, according to the Federal Reserve Bank of Richmond. The Richmond study analyzed whether this pattern was similar to prior recessions and found it was very unusual. In all prior periods, the quantity of new bank applications dipped during the recession, but quickly rebounded to normal levels during the recovery. Following the last recession, however, the numbers dropped virtually to zero and remain flat-lined today. One outcome will be a lack of sufficient services for small businesses and consumers, with rural areas particularly harmed. Another concern is that a dearth of new banks will lead the industry to become even more concentrated in a few very large banks, eventually undoing the fundamental structure of the U.S. banking system. The Richmond study and other analysis suggest regulatory policies have a significant role in the dearth of new banks, not just economic conditions. Regulators tightened their standards during the recession, but the time may have come to readjust for the good of the economy.

From "What Dearth of New Banks Means for the Industry's Future"
American Banker (08/17/16) Sutton, George