The friendly neighborhood bank is becoming rare and is being replaced by megabanks. America’s three largest banks, JPMorgan Chase, Bank of America, and Wells Fargo, have seen a 180 percent increase in deposits during the past decade, for a total of over 2.4 trillion. See the chart below:
Thanks to technology and online banking, consumers no longer open accounts at a convenient bank “down the block.” With online banking and online deposits, there are few reasons to physically visit a bank and stand in line. When it comes to choosing a bank, people are opting for a well-known name.
The top banks rake in the majority of consumer deposits, which gives them the money to provide cheap loans, while at the same time keeping interest rates low. Small banks are progressively being left out in the cold.Before the 1990s, regulations insured that consumer deposits were spread across thousands of different banks. In 1994, the government allowed national banks to hold deposits coast to coast. By 1995, the three major banks were holding 5 percent of all bank deposits. That was the beginning of the mega-bloated superbanks we have today.
Most of the deposits into these banks are into checking and savings accounts. These accounts tend to have greater longevity as depositors keep these accounts for years. At this time, the Big Three are continuing to open branches across the US, making the future of small, hometown banks increasingly more insecure. While smaller banks are still struggling to recover from the 2008 crisis, the Big Three are steadily gaining influence and power. All but forgotten, is the power of big banks and the damage of 2008.
The government is monitoring big banks that could affect global stability. JPMorgan Chase, with over $2.5 trillion in assets, tops that scrutiny list. Bank of America, Wells Fargo, and Deutsche Bank make up the second tier.