Over 8,500 Banks Have Disappeared Since 1990 – “Too Big to Fail” Remains a Banking Reality

The latest FDIC Quarterly Banking Profile highlights the sharp decline in the number of banks over the past 24 years.

For the quarter ending September 30, 2014 the number of FDIC insured institutions totaled 6,589 down by 56 percent from a total of 15,158 in 1990.  Since December 1998 the number of banks has dropped from 10,464 to 6,589 as of September 30, 2014.

The number of banks in the United States has consistently declined during every quarter since 1999.

During the banking boom of the early 2000’s about 200 new banks were established each year.  During the peak year of 2006 a total of 194 new banks were formed but as the banking industry imploded during the financial crisis the number of new bank formations declined sharply.

From January 1, 2011 through September 30, 2014 a grand total of only 4 new banks were established.  Contributing to the decline in the number of banks, a total of 506 banks failed between 2008 and 2014.

Despite the reduction in the number of banks, assets of FDIC insured institutions have soared by almost $10 trillion since 1998.

Fewer banks and a huge increase in deposits have lead to an extreme concentration of assets in the banking industry.  There are only 108 banks (out of a total of 6,589) with assets in excess of $10 billion.

The 108 banks with over $10 billion in assets hold 81.3 percent of all banking assets totaling $12.5 trillion.

Regulators can talk about eliminating bailouts for too big to fail banks but that’s all it is – just talk.  When a handful of banks control virtually all of the banking industry’s assets, the concept of “too big to fail banks” remains an obvious reality.  The biggest banks in the U.S. are so large and interconnected that a failure of one large bank would represent a systemic risk to the entire financial system.  The new banking rules designed to prevent future bailouts will quickly be trashed during the next financial crisis.

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