Academic journal article ABA Banking Journal

Are Banks Getting Too Big?

Academic journal article ABA Banking Journal

Are Banks Getting Too Big?

Article excerpt

Several months ago, I was asked to write an opinion piece on the subject of bank mergers and what they mean for the consumer. The exercise forced me to think about the issue of bank mergers more seriously, and to develop an opinion that I could defend rationally.

Recently I've been giving this question still more consideration. For this subject has importance not just for consumers, but also for bankers. There are also those who, no doubt, think that banks are becoming too large and would like to raise the discussion to the level of public policy.

It's pretty clear to me that in a great free market economy like ours, there is a place and a need for banks of every size and type. Consumers seem to value choice and convenience today. We've given them both. The number of bank branches have actually grown in number each year since 1993, even as the number of banks has declined. Today there are more than 83,000 bank and thrift branches in the U.S. Automated teller machines have grown as well, from about 80,000 in 1990 to more than 150,000 today. Only one-in-six people in ABA's 1997 consumer study agreed with the statement, I often find it difficult to locate an ATM when I need one." Two-in-three of the consumers in the study disagreed with that statement.

There are nearly four times more deposit-taking institutions here than in the 15 nations of the European Union, Switzerland, Canada, and Japan combined. (In addition to our 11,000 banks and thrifts, the U.S. has some 12,000 credit unions, 8,000 securities brokers, 3,000 mortgage companies, and 2,000 finance companies.) And more than 500 new banks and thrifts have been chartered in the U.S. over the past four years. It's getting so that you've got to be living on an Alaskan mountaintop to be very far from a financial institution these days, and PC and telephone banking are making even that unlikely.

President Clinton remarked recently that technology has so changed the world that even his cat, Socks, has a web page on the Internet. (No word yet on whether Buddy, the Lab, has found his spot in cyber space.)

Banks aren't just for consumers, of course. There is that all-important business customer to consider, as well. And the fact is, large international firms need banks with global reach to serve them. It is in our own vital national interest that the United States have banks of such size and stature that we are able to maintain our preeminent position among world economies. …

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