Banking and Finance Law Daily Wrap Up, BANKING OPERATIONS—FDIC finds community banks resilient despite consolidations, (Apr 9, 2014)

By John M. Pachkowski, J.D.

Acknowledging that consolidation is a long-term trend that has significantly reshaped the banking industry over the past 30 years, the Federal Deposit Insurance Corporation has released a study analyzing how these trends have affected community banks. The study, Community Banks Remain Resilient Amid Industry Consolidation, is based on data from the past 30 years and finds that community banks have remained highly resilient amid the long-term trend of banking industry consolidation.

For purposes of the study, the FDIC used the functional definition of community bank used in the agency’s 2012 FDIC Community Banking Study. In that study, “community banks” were defined in terms of balance-sheet characteristics that reflected a focus on lending and deposit-gathering activities, and on a limited geographic scope of operations.

A key finding of the study is that institutions with assets between $100 million and $10 billion—most of which can be considered community banks—have increased in both number and in total assets since 1985. The number of banks with assets between $100 million and $1 billion increased by 7 percent between 1985 and 2013, while the number of banks with assets between $1 billion and $10 billion increased by 5 percent. These groups of institutions also experienced growth in terms of total assets.

Commenting on the study, FDIC Chairman Martin J. Gruenberg stated, “The FDIC study clearly demonstrates the strength and resilience of the community bank sector and supports the conclusion that community banks will continue to play a vital role in the financial system of the United States for the foreseeable future.”

The Independent Community Bankers of America®, through its chairman, John Buhrmaster, and president and chief executive officer Camden R. Fine, issued a statement thanking the FDIC for commissioning the study. However, the ICBA noted that “it cannot be overlooked that consolidation sheds much-needed light on the current regulatory environment that community banks face and the continued need for tiered regulation.” The trade group called legislation like the CLEAR Relief Act, which aims to limit regulatory burden on community banks, as “essential for community banks and the communities they serve.”

The ICBA added the study also “highlights the alarming trend of increasing financial concentration among the nation’s largest financial institutions” and expressed its support for reforms to limit systemic risk and taxpayer support of too-big-to-fail financial institutions, such as the Terminating Bailouts for Taxpayer Fairness (TBTF) Act, introduced by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La).

Companies: Independent Community Bankers of America

IndustryNews: BankingOperations FinancialStability Loans