The number of U.S banks has dropped to numbers unseen since the days of the Great Depression, a federal regulator said.
There are 6,891 banks insured by the Federal Deposit Insurance Corp., the regulator that insures banks against failure, The Wall Street Journal reported Tuesday.
As far as back as federal data goes, which is 1934, that is the lowest number on record, the FDIC said.
It is the first time since then that the number of federally insured banks has fallen under 7,000, the Journal reported.
The decline is closing in on one third of the peak number of banks, which was above 18,000, the Journal said.
The decline, due to mergers and bank failures, has included more than 10,000 since 1984. The headline-provoking large banks that failed during the 2008 financial crisis aside, the vast majority of deceased banks were firms with less than $100 million in assets, the FDIC notes.
The concept of a local bank has changed with the advent of Internet that allows banking without driving to the bank. In that sense, a healthy number of banks might be open to question.
"Seven thousand is still an awful lot of banks," David Kemper, the chief executive office of Commerce Bancshares Inc., a regional bank, told the Journal.
"There's no reason why we need that many banks, especially if those smaller banks have a much lower return on capital. The small banks' bread and butter is just not there anymore," he said.
That viewpoint, however, raises alarm among proponents of local lending, which some considered critical for supporting a healthy local economy.
"All too often, the large banks use their models and their algorithms, an if you don't fit in their boxes, you don't get a loan," said Pew Charitable Trust policy adviser Sheila Bair, the former head of the FDIC.