With Barack Obama’s reelection and financial reforms, Wall Street analysts predict thousands of small banks will either close down or be bought up in the future.
Emmett Daly, a small bank specialist, said at a conference on Thursday that the number of banks will decline from the current number of approximately 7,000 to a few hundred.
Bill Egan, head of financial institutions investment banking at Bank of America Merrill Lynch, also believes there will be a great decline but it will take about a decade for the numbers to reach a few hundred.
According to some experts, factors such as low interest rates and the Federal Reserve System’s annual stress tests are making it difficult for small banks to cope. They believe most small banks crash because they make bad loans, which cannot be repaid.
The Federal Deposit Insurance Corporation has during the past couple of years spent tens of billions of dollars in an attempt to save small banks however small banks have mostly been pushed out of the mortgage market by large banks.