June 21, 2023

The decline of commercial banks

 USA Facts - The century-long decline in the number of US commercial banks reveals shifts in industry dynamics and regulations. This article has the data and history on how the United States has lost 71% of its banks over the last four decades and what that means for the industry’s stability. In 1921, the US had 30,456 commercial banks; in 2022, it had 4,135 (down 86%)

Bank failures explain some of this decline. Still, mergers are increasingly common — particularly after such deregulation acts as the Depository Institutions Deregulation and Monetary Control Act of 1980.  The repeal of the Glass-Steagall Act in 1999 paved the way for commercial and investment banks to merge, consolidating the banking industry further. Since 2003, most banking sector losses have been community banks, either through bankruptcy or, more commonly, acquisition by larger institutions.

Over the past decade, more banks have closed than opened. While the Federal Deposit Insurance Corporation, an independent agency that maintains stability and public confidence in the nation’s financial system, says it doesn’t want to prop up poorly managed banks, it’s indicated that policymakers should avoid the temptation to prescribe more regulations.

See more about the decline in banks here, then see the facts on the history of US bank failures.





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