ARE WE WRONG?

For some time there has been a belief that the regulators had a goal of reducing the number of banks in the United States.

In a previous Blog we commented that through mergers, forced closings, it appeared as if the goal was slowly being met.

Lo and behold, in a February 9, 2017 article, The Wall Street Journal pointed out that theapplications to start new banks has surged and that in 2016 we have seen the most since the regulators clamped down duringthe financial crisis.

Although the number of applications is nowhere near the number filed pre-crisis - it is a sign of resurgence.

It now appears as if the regulators are encouraging new start-ups by reducing or mitigating the application requirements.

The article points out that there were about 5,100 commercial banks in the U.S. last year and 9700 of them in 1996.  Hence, the financial crisis and the regulators crackdown did have a major impact on reducing the number of banks.

Now it seems the regulator (FDIC) is taking the position of assisting the application process by proposing a handbook to help smooth the way.

Why the shift?  It may be, as pointed out in The Wall Street Journal, that there is recognition of the role that community banks play.  Specifically, providing loans to start-ups and small businesses.

Let’s hope the new banks are being formed by entrepreneurs for long-term growth rather than an opportunity to position them to be acquired.

I guess we were right, but now we may be wrong.  Time will tell.

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