Oct. 05, 2018 — Federal Reserve Vice Chairman for Supervision Randal Quarles offered context to the trend of consolidation in the banking industry in remarks at the “Community Banking in the 21st Century” research conference. Speaking in St. Louis, Quarles said that community banks continue to play an important role in both urban and rural markets despite changes over the past 20 years.
Quarles noted that while industry consolidation has led to fewer banks, most of the branches of acquired banks remain. Further, most mergers and acquisitions have involved expansion into new markets—rather than acquisitions of local competitors—which has allowed local communities to continue to enjoy a variety of providers despite consolidation.
The average community bank has maintained or increased its deposit market share since 2008, suggesting that community banks have successfully competed with larger banks since the start of the recent recession, Quarles said. Meanwhile, the average number of banks in rural markets has increased in the past 20 years as community bank numbers remain stable and more large banks enter these markets.
Nevertheless, consolidation has led to a doubling in the number of banking markets in which no banks are headquartered, almost all of them rural. Quarles noted that the Fed is conducting listening sessions to assess the effects of bank closures on rural communities.