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Only Consolidation Will Save American Community and Regional Banks


Over my thirty-five years in the banking sector, I’ve witnessed the number of FDIC-insured depositories decline from approximately 15,000 to approximately 4,600 today. I’ve also seen the market share of the largest banks rise from approximately 30% to over 50% in the last decade. Despite consolidation in the banking industry and the pandemic-accelerated adoption of digital banking tools such as mobile depositing and person-to-person payments, the existential threats to traditional banking products and services from nonbanks and fintechs have never been greater. I believe community and regional banks must continue to consolidate to build scale and improve efficiency, as well as invest in the technology, products, business lines and people that allow them to compete with the largest banks. Further, I believe that product specialization in financial services, combined with the acceleration in the pace of change in the banking sector, requires consolidation to avoid irrelevancy; scale matters.

In the July 7 issue of Barron’s, my colleague Brian Graham passionately conveys a sense of urgency that “ . . . policymakers should act decisively to permit the formation, through consolidation, of a cadre of somewhat larger, more viable community and regional banks” and that consolidation will create community and regional banks with “. . . . the scale to survive and the flexibility to tailor their services to consumers and small businesses . . . .”.

I wholeheartedly agree with Brian and encourage regulators and policy makers to learn from other industries that have been transformed by technology and broadly adopted by consumers and small businesses. As a forward-thinking bank CEO said to me recently, “You don’t want to be a buggy whip manufacturer in an Uber world.”

Image by Warren LeMay via Flickr.


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