A report published by the National Community Reinvestment Coalition (NCRC), “The Great Consolidation of Banks and Acceleration of Branch Closures Across America,” examines bank branch closures across the U.S. between 2017 and 2021. During this period, 9% of all bank branch locations in the U.S. closed. The closure rate doubled during the years of the pandemic: more than 4,000 branches closed between March 2020 and October 2021, nearly twice the number of closures as occurred in the 20-month period preceding March 2020. The closures continue a longer-term trend in which the number of bank branches has declined from 92,394 in 2009 to fewer than 80,000 today. Residents in low-to-moderate-income and minority neighborhoods may be especially hard hit by branch closures, given fewer branches were located in these neighborhoods already. The decline in bank branches is partially the result of consolidation among financial institutions.
The researchers used data from the Federal Deposit Insurance Corporation’s (FDIC) Summary of Deposits (SOD) and the FDIC Institution Directory to examine full-service brick-and-mortar banks in 50 states and the District of Columbia. FDIC’s SOD provides yearly reports on the number of bank branches open on the day of June 30,, while the Institution Directory is updated weekly. The researchers used FDIC BankFind data to count branch openings and closings since the COVID-19 pandemic began in the United States.
More than 7,400 brick-and-mortar bank branches have closed since 2017, and one-third of the closures occurred in low-to-moderate-income and minority neighborhoods. Other research indicates that the lack of accessibility to bank branches leads low-income residents often to rely on alternative financial services, like check-cashing outlets and payday lenders, that can be more expensive and predatory. Branch closures also impact the effectiveness of the Community Reinvestment Act (CRA), which requires banks to equitably serve low-to-moderate income consumers and communities in bank services areas (which are currently defined by the locations of branches).
The authors recommend that bank regulators facilitate discussions between banks, communities, and non-profit lenders to mitigate the impact of branch closures on communities; that Congress modernize the CRA for an era of internet- and mobile-banking in which bank branches do not represent banking institutions’ service areas; and that banks work with small businesses to ensure the continuity of lending and other services on which companies rely.
Read the article at: https://bit.ly/3pa6ChO