Is the economy better off with bigger banks?  Many would answer with a resounding no, and they might be right.  By sheer size, large banks have scale and often have invested in good systems with a broad network of branches and ATM locations.  The top twenty banks control about 57% of deposits in the country, but only about 18% of their commercial loan portfolios are directed to small businesses.  The largest bank in the country has $3 trillion in assets.

Let’s put all that into perspective.

There are more than 4,900 banks in the U.S., with an average asset size of $4 billion and a median asset size of $241 million.  Small and midsize banks comprise about 99% of all banks and control about 25% of all bank assets.  These banks account for more than half of small business lending and 80% of agricultural loans.

It’s safe to say that smaller banks are providing an outsized economic impact to small business.

Small businesses account for 44% of economic activity in the United States and create two-thirds of new jobs.  Those numbers are reflected in our GDP and represent almost half of our economy.  Small businesses also lead the way in innovation, producing 16-times more new patents per employee than large patenting firms do.  The growth of the U.S. economy is driven by small business.

The Chicago Booth piece below discusses research on the effects of the breakup and eventual reconsolidation of the banking sector in post-war Germany.  The research shows the growth rate for corporate clients did not improve as banks eventually reconsolidated in the 1950s and for newer or smaller companies, it worsened.  The findings provide context to the lending statistics described above.

Also check out the FDIC Report Generator to see the market shares of banks in your state.  Enjoy- and tell me what you think about the benefits of bank size or the banking sector in general.

~ Brian Kasal- The Leadership Matrix

Click Here- Bigger Banks Are Good for Bankers but Not Customers

FDIC Report Generator- Deposit Market Share by State

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