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Promoting and Protecting the Community Bank Model: A Response to Calls for Consolidation

Ron Kruszewski, CEO of Stifel, recently made a statement suggesting that we should reduce the number of community banks from thousands to just around 10. At ICBB, our mission is to support, protect, and promote the community bank model. As such, we firmly disagree with this perspective. Independently owned community banks are not just financial institutions; we are integral parts of our local economies, and here’s why we believe our diversity is vital for our communities.

Local Roots and Personalized Service

Our community banks have deep roots in the neighborhoods they serve, allowing them to understand the unique needs and challenges of our community members and businesses. They are not just processing transactions; they are building relationships and fostering trust. If we were to consolidate all community banks into a few mega-institutions, decision-making would shift away from our communities, potentially diluting the personalized service and local commitment that define our industry.

Competition and Choice

A diverse array of community banks fosters healthy competition, benefiting consumers and businesses alike. When customers have choices, banks are motivated to innovate and improve their services. This healthy competition leads to better products, lower costs, and ultimately, more satisfied customers. Drastically reducing the number of community banks could stifle this competitive edge, impacting bankers’ ability to serve their customers effectively.

Supporting Small Businesses and Individuals

Community banks are known for being more willing to extend credit to small businesses and individuals who may not meet the criteria of larger banks. This flexibility is crucial for economic growth at the local level. By supporting entrepreneurs and small businesses, we directly contribute to the prosperity of our communities. Consolidating into a few large banks could limit access to credit for many local businesses and individuals, hindering economic growth and opportunity.

Investment in Community Development

Our community banks are deeply invested in community development. Whether it’s sponsoring local events, supporting charitable causes, or investing in infrastructure projects, we actively participate in the growth and well-being of our communities. This level of community engagement and reinvestment would be challenging to replicate on a larger scale with only a few mega-banks.

Stability and Resilience

The 2008 financial crisis highlighted the risks of relying solely on large financial institutions. A decentralized banking system, with numerous community banks, enhances financial stability. In times of crisis, local banks are often better positioned to respond to the needs of our customers and communities. By dispersing risk across many smaller institutions, we contribute to overall financial resilience.

In essence, the call for fewer community banks overlooks the intrinsic value that independent banks like ours bring to the table. We are not just numbers on a balance sheet; we are partners in community growth and prosperity.

Advocating for Community Banking

As community bankers, it’s our responsibility to advocate for the importance of our sector. We must continue to emphasize the benefits of localized decision-making, personalized service, and community reinvestment. Our goal is not merely to survive but to thrive as indispensable contributors to the well-being of our communities.

While the banking landscape continues to evolve, the role of community banks remains indispensable. Let’s continue this important conversation within our industry and reaffirm our commitment to serving our communities with integrity and dedication.

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