Number of Banks in United States at Lowest Levels

December 13, 2013

The number of banks in the United States is at its lowest level since the Great Depression, says the Wall Street Journal.

  • The number of federally insured institutions in the United States was at 6,891 in the third quarter of this year.
  • This is the first time that the number has dropped below 7,000 since the federal government began tracking these numbers in 1934.
  • At its peak, there were 18,000 banks in the United States.

Most of the decline is due to the exit of small banks -- those with less than $100 million in assets. More than 10,000 left as a result of mergers, consolidations or failures. Despite the dwindling number of banks, actual bank assets and deposits have grown.

But community bank supporters argue that small banks are more likely to make small business loans and are critical to the economy. But new startup banks have not emerged, as bank profits are low and regulatory costs are rising.

At the beginning of December, the Bank of Bird-in-Hand opened in Bird-in-Hand, Pennsylvania -- the first new bank startup in the United States since December 2010. The process of securing federal approval shows why Americans may be hesitant to start new banks:

  • The Bird-in-Hand group raised $17 million from investors to prove their viability to federal regulators. They then spent $800,000 preparing applications for a charter as well as in consulting and legal fees, office rent and salaries.
  • The bank was required to describe, in detail, all of its internal policies and procedures, including plans for cyber-attacks.
  • Nick Bybel, the bank's attorney, said of the application: "You are talking perhaps anywhere from 8 to 16 inches of paper."

Source: Ryan Tracy, "Tally of U.S. Banks Sinks to Record Low," Wall Street Journal, December 3, 2013.

 

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