Hester Peirce and Robert Greene from the Mercatus Center at George Mason University have put together a series of charts entitled “The Decline of US Small Banks (2000–2013)”. These charts do a good job of showing the recent concentration of the U.S. banking system — small banks are disappearing and large banks are growing in number.
The article points out that the number of small banks has dropped dramatically over the years including failure during the recent financial crisis, organic growth, or consolidation. While a consolidation is not always bad, it can be when it’s driven by regulatory burdens that make it hard and expensive for banks to compete. Peirce and Green explain:
“Regulatory compliance can be a particular challenge for small banks with limited compliance expertise. Regulatory expenses absorb a larger percentage of small banks’ budgets than of their larger counterparts’ budgets. Although correlation is not evidence of causation, as financial regulation has increased since 2000, so has banking concentration. The Dodd-Frank Act, passed in 2010, imposes a new set of regulations that are disproportionately burdensome to small banks.”
This is one of the reasons I started Quantivate with the goal to deliver cost effective solutions to banks and credit unions that help them do what they do best – serve their customers and local communities. Regulatory Compliance is getting more burdensome every year. However, Quantivate is dedicated to helping our customers manage regulatory requirements with solutions such as our Regulatory Compliance Manager module, which is part of our GRC suite.