[The 12th Chairman of the FDIC wholeheartedly supports the 21st Chairman in her efforts to streamline the FDIC’s applications processes and to encourage the formation of new banks throughout the country. Community banks are essential to economic growth and we need more of them, not fewer. Bill Isaac]
Recently, I went to a small community bank to open a checking account. I drove away from Washington and entered a branch of a small bank. It’s a transaction I easily could have made from home — over the phone or online — but I wanted to experience firsthand what consumers across the country experience when they visit a community bank. Community banks are characterized by their relationship-based practices. And my visit was no exception.
I was greeted with a smile and an offer of candy. While the patient branch manager went through the requisite paperwork to open my account, a customer walked in with his 3-year-old daughter. Mary ran up to the teller to give her a hug. The father said that, as they drove by, Mary insisted on stopping by the bank to say “hi.” The bank manager smiled and told me, “She has been coming here since she was born.” It felt like I just entered a Norman Rockwell painting.
Small banks like these are slowly disappearing from America’s landscape. Today, 627 counties are only served by community banking offices, 122 counties have only one banking office, and 33 counties have no banking offices at all.
The banking landscape in the United States has changed dramatically in the last few decades. After remaining fairly steady for more than three decades, the total number of banking and thrift charters declined from around 15,160 in 1990 to 5,670 at the end of 2017. The share of industry assets held by the top 10 banking organizations rose from 19% in 1990 to 51% at the end of 2017.
I do not profess to know what the right number of banks in the U.S. is, but I recognize that, like many competitive industries, a dynamic banking sector needs new startups entering the marketplace. De novo banks are a key source of new capital, talent, ideas, and ways to serve customers. Most de novos are traditional banks that offer services and products to underserved communities and fill gaps in overlooked markets.
Over the past decade, de novo activity has screeched to a historic halt. As FDIC chairman, one of my key priorities is to encourage new bank formation. The FDIC needs to do its part to make that happen.