Why are smaller banks going the way of the dinosaur ?

The end of the road for smaller banks in America. Seeking Alpha was reporting the decline in the number of banks with assets under $100 million dollars in the 4th Quarter of 2012 from 100 in September to 80 in January 2013. Remember, around 1000 small banks control only 2% of the deposits, but originate 40% of the small business loans in the United States. The reasons are a set of challenges that smaller banks are being consolidated, and the executives are looking at consolidations as the ticket out of the new normal in the banking world.

First, the Consumer Financial Protection Bureau (CFPB) has come to life with plenty of juicy regulation to run the gambit from small credit loans to mortgage lending. Smaller banks are unable (under $1 Billion) to handle the new regulatory environment with new administrative costs and capital requirements. Many bankers are not looking to the success of their credit union brethren for collaborator as a key to their success, but consolidation is the new fad in the phasing out of the smaller banks.

 The smaller banks are being squeezed by their bigger brethren, a narrow strategic view on consolidation, and regulators do not want 1000 banks to regulate. The impact is the small business owner being squeezed into finding or dealing with finding a new source of credit. These are trying times in our country and financial system.

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