Oh my goodness, despite the fact I am home sick today on one of my vacation days (sigh), I feel compelled to comment on Bank Lawyer’s Blog’s post today Add Community Bankers to the Endangered Species List? Bank Lawyer expresses skepticism about Reuters columnist Rob Cox’s column today describing why he thought the community banker is endangered. Cox apparently thinks it would be good for everyone involved if there were like just a handful of big banks and he points to some important reasons (regulators, compliance costs, operating economies of scale , etc. – yawn, yawn). Interestingly he mentions how well this works in Canada. And he also points out that big banks have been the beneficiary of small bank failures. Bank Lawyer filed this under the “bad idea fairy” and I couldn’t agree more.
Cox didn’t mention how small banks were the beneficiary when some of these larger banks were on the ropes just two short years ago when depositors got very nervous and almost caused a run on the banks before the government and Citibank and subsequently Wells Fargo stepped in. He also does not mention how small business owners leave big banks because of high fees and poor service. Barlow Research Associates cites the number of small business entities (sales between $100K and $10MM) in the US, at 7,967,716, was almost 70 times the number of middle market entities (sales between $10MM and $500MM). Some survey results: the lack of personal attention continues to outweigh fees, rates or credit as the reason given most often for leaving a large bank. In addition, 73% of small business owners claim to be very satisfied at small banks, while only 50% are very satisfied at large banks. Twenty percent of small businesses at large banks plan on changing banks in the next 12 months as compared to 9% of small businesses at small banks.
So it seems to me any discussion of community banks disappearing in the next few years would be turning a deaf ear to the needs and wants of most American business owners. The elimination of choice and alternatives is the elimination of competition and the creation of an oligopoly. Heck, if we wanted that, we’d move to Canada.