Despite fewer closures, changes in banking continue
April 06, 2012
Bank closings continued to slow in the first quarter of 2012, a welcome sign that the industry is getting stronger. However, this does not mean that customer banking relationships are necessarily going to be more calm and settled in the months ahead. A rising tide of bank mergers and acquisitions is replacing bank failures as an agent of change in the industry.
This will affect many customers -- both in positive and negative ways.
Bank closing and merger activity
According to the FDIC, bank closures slowed from 157 in 2010 to 92 in 2011, and this trend continued in the first quarter of 2012. There were 16 bank closures in the first quarter, which would project to 64 for the year. This would be the lowest number of bank closings since 2008.
Meanwhile, though, American Banker reports that there were 50 bank mergers and acquisitions announced in the first quarter. This would project to 200 over the course of a full year, up from 173 last year.
What these changes mean for customers
While perhaps more orderly than closures, mergers and acquisitions still mean change for customers. Here are some examples:
- Different policies may mean more fees. When banks merge, policies at one or both institutions involved may change, and this can result in new fees. Bank customers need to be vigilant in checking their statements for unusual charges, especially in the months following a merger.
- Personal service will decline at many banks. Banks continue to grapple with their cost structures, and in particular merging banks will look to eliminate overlap. On a local level, this may mean fewer branches available.
- Online banking's appeal should rise. With even branch-based institutions looking to cut back on their locations, the idea of online banking may become less of a leap into an impersonal relationship. MoneyRates.com studies have found that online banks often offer lower checking account fees and higher rates on savings and money market accounts, so at least you can get something in exchange for giving up a local banking relationship.
- Efficiencies could mean higher rates on savings accounts. If online banks are able to offer better account terms because of lower overhead, then it is possible that as traditional banks find efficiencies by closing branches, the result might be higher interest on savings accounts, or fewer charges on checking accounts.
- ATM locations will become a key in choosing a bank. As more banking can be done online, and as local branches become more scarce, ATM locations should be a bigger consideration than the branch network when choosing a bank.
The bad news is that this era of change makes it difficult for a customer to settle into a long-term relationship with a bank. The good news is that customers have more information than ever about banks available to them, so they can use this information to find the best deals on checking accounts and the highest rates on savings accounts.