Mortgages

What Happened to My Bank?

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In the old days, we used to have big banks, medium banks, and small banks.  This is going to be a generalization, but the big banks used to handle big businesses like international corporations, the medium banks handled regional companies, and smaller banks served their local communities. The “big city” banks had no interest in trying to serve the needs of small users.

A number of things happened. The first was the “Financial Services” movement. Instead of focusing on their core business of banking, investment banking, savings and loans, stocks, life insurance, etc., these big companies converted to “Financial Services Companies” to do it all. Some of the giants are in more than 100 different businesses. This raises the question, “Can they properly manage all of those different businesses?” Given the financial mess, I’d have to answer, “I guess not.”

Second, when computing power hit the banks, it meant that they could provide more services to more people at lower costs. This trend was compounded and expanded by the Internet which gave banks another level on which to relate to customers, the world we find ourselves in today.

This allowed a transformation that resulted in one bank having over 100,000,000 – yes, that’s one hundred million – credit card holders. It allowed banks to set up servicing departments to service 10,000,000 loans. And they got into many other businesses beyond their core business – aircraft leasing, and on and on.

According to the Federal Deposit Insurance Corporation (FDIC), there are still a total of 7,760 banks in operation today. This is down from more than 12,000 banks in 1990. Unless you were one of the behemoths, it’s been a rough twenty years for banks.

It is interesting to look at the breakdown according to assets.  There are four banks that have assets totaling more than $1 trillion, another three with assets of more than $500 billion and another 16 with assets of more than $100 billion.  You can find a list of the top 50 banks here.

Community banks with assets of $50 million, $100 million, or even $500 million – are just in a different league. These community banks simply cannot do what these gigantic banks can do. However, it doesn’t mean the smaller community banks can’t do offer even better services than the big banks – services that are genuinely appreciated in their own communities by their customers.

Image by LoneStarMike, via Wikimedia Commons

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