6 ms·

You are being downvoted but there are really people who think like this. Regional banks do not have a substantive underlying issue and do not deserve to die by

You are being downvoted but there are really people who think like this. Regional banks do not have a substantive underlying issue and do not deserve to die by a rotating regional bank panic.

toomuchtodo 4y ago
Credit unions will survive. Let banking regulators deal with the fallout of not permitting narrow banks. “No narrow banks so we can encourage fractional reserve lending, but be responsible!” “Okay, fine, we’ll cover everything.” “Systemic risk!” “Narrow bank now pls?” “No! Fractional reserve lending responsibly!”
- kasey_junk 4y ago
  How are credit unions different in that case?
  - antoniuschan99 4y ago
    There are still credit union failures but less compared to bank failures. Credit Unions are owned by the members instead of shareholders and are non-profit but yea seems very similar to a regional bank. What else are different? I do wonder though, why SVB became so large compared whereas a credit union like First Technology Credit Unit which manages 15 billion in assets. Wouldn't a credit union be a better fit since they are local at its core. And credit unions serve the financial needs of a specific group of people who share a common interest or affiliation (in this case Tech/VC firms in Silicon Valley). There's also the 250k insurance but by NCUSIF instead of FDIC
NikolaNovak 4y ago
I'm in Canada, originally from Europe; and to simplify, I never really "understood" regional banks. I was an exchange student in Minnesota and banked with... "Bank of Fairmont". Tiny city of 11k people, and it had its own bank. Seemed horribly inefficient and weird; and then when you left your home town you were in a load of headache. Of course that was 25 years ago, but still, when I hear there are 4,000 banks in USA (not branches; separate independent banks), I cannot help but ask... why?? Until recently, USA seemed way way way behind on convenience and efficiency; and the "fintech innovations" that are happening now seem built on ridiculously sketchy framework. Understood that small regional banks exist and it'd be senseless and disruptive to kill them off now, but if we take them as a historical artifact that we must live with, what actual advantages, in clean-sheet model, do they have, that would counter-act the poster's main point?
- riffraff 4y ago
  small regional banks exist in Europe too. They're historically related to having shareholders which are also local, or backed by local foundations, or have special relationships with the local businesses (like the ones in Italy that will take a wheel of cheese or balsamic vinegar as collateral). Not "bank of $city" tho.
- lotsofpulp 4y ago
  Because in before times, when you used to want to start a business or expand a business, or buy a home, and needed a loan, you had to go convince a bank employee to make that loan to you. In those cases, a relationship between bank employees and the local residents mattered to establish trust between both parties. Nowadays, a lot of high quality databases can do a lot of the work figuring out a borrower’s credit, so there is less need for those personal interactions, especially for something as simple as home mortgages.
  - NikolaNovak 4y ago
    Right, but is that different anywhere else in the world?
    - lotsofpulp 4y ago
      True, maybe it has something to do with state laws versus federal laws, or larger distances between population centers?
- dsfyu404ed 4y ago
  These days a regional bank will have robust online and call center services and probably refund any ATM fees. Unless you need a ton of cash real quick (which is rare and getting rarer) it's perfectly convenient to keep using your regional bank even if you've moved across the country. If you do need the cash you call them and have them raise your ATM limit for a day. The overall amount of inconvenience per year is equal or less than dealing with some big stodgy national chain.
- mcspiff 4y ago

You are being downvoted but there are really people who think like this. Regional banks do not have a substantive underlying issue and do not deserve to die by a rotating regional bank panic.

toomuchtodo 4y ago

Credit unions will survive. Let banking regulators deal with the fallout of not permitting narrow banks. “No narrow banks so we can encourage fractional reserve lending, but be responsible!” “Okay, fine, we’ll cover everything.” “Systemic risk!” “Narrow bank now pls?” “No! Fractional reserve lending responsibly!”

kasey_junk 4y ago
How are credit unions different in that case?
- antoniuschan99 4y ago
  There are still credit union failures but less compared to bank failures. Credit Unions are owned by the members instead of shareholders and are non-profit but yea seems very similar to a regional bank. What else are different? I do wonder though, why SVB became so large compared whereas a credit union like First Technology Credit Unit which manages 15 billion in assets. Wouldn't a credit union be a better fit since they are local at its core. And credit unions serve the financial needs of a specific group of people who share a common interest or affiliation (in this case Tech/VC firms in Silicon Valley). There's also the 250k insurance but by NCUSIF instead of FDIC

NikolaNovak 4y ago

I'm in Canada, originally from Europe; and to simplify, I never really "understood" regional banks. I was an exchange student in Minnesota and banked with... "Bank of Fairmont". Tiny city of 11k people, and it had its own bank. Seemed horribly inefficient and weird; and then when you left your home town you were in a load of headache. Of course that was 25 years ago, but still, when I hear there are 4,000 banks in USA (not branches; separate independent banks), I cannot help but ask... why?? Until recently, USA seemed way way way behind on convenience and efficiency; and the "fintech innovations" that are happening now seem built on ridiculously sketchy framework. Understood that small regional banks exist and it'd be senseless and disruptive to kill them off now, but if we take them as a historical artifact that we must live with, what actual advantages, in clean-sheet model, do they have, that would counter-act the poster's main point?

riffraff 4y ago
small regional banks exist in Europe too. They're historically related to having shareholders which are also local, or backed by local foundations, or have special relationships with the local businesses (like the ones in Italy that will take a wheel of cheese or balsamic vinegar as collateral). Not "bank of $city" tho.
lotsofpulp 4y ago
Because in before times, when you used to want to start a business or expand a business, or buy a home, and needed a loan, you had to go convince a bank employee to make that loan to you. In those cases, a relationship between bank employees and the local residents mattered to establish trust between both parties. Nowadays, a lot of high quality databases can do a lot of the work figuring out a borrower’s credit, so there is less need for those personal interactions, especially for something as simple as home mortgages.
- NikolaNovak 4y ago
  Right, but is that different anywhere else in the world?
  - lotsofpulp 4y ago
    True, maybe it has something to do with state laws versus federal laws, or larger distances between population centers?
dsfyu404ed 4y ago
These days a regional bank will have robust online and call center services and probably refund any ATM fees. Unless you need a ton of cash real quick (which is rare and getting rarer) it's perfectly convenient to keep using your regional bank even if you've moved across the country. If you do need the cash you call them and have them raise your ATM limit for a day. The overall amount of inconvenience per year is equal or less than dealing with some big stodgy national chain.
mcspiff 4y ago