While many have denounced the banking services provided by the biggest banks like Bank of America (NYSE:BAC), JPMorgan Chase, Citigroup (NYSE:C), and others -- the most recent evidence shows their actions don't match their words.
Over the last 20 years, there have been a number of dramatic changes in the banking landscape thanks to regulatory changes, paradigm shifts, and broad consolidation in the banking industry.
In the 1990s, the Reigle-Neal Interstate Banking and Branching Efficiency Act allowed banks to acquire other banks across state lines provided they met capital requirements, and the repeal of the Glass-Steagall gave banks the ability to have both commercial and investment banking operations.
The consolidation is no more evident than at the top, where of the five largest banks in 1994, the second bank acquired the first, and the third acquired the fourth in a dramatic example of the "bigger and better" mind-set that drove many executives at the helm of these largest banks.
|Then (1994)||Now (2013)|
|BankAmerica Corp||Bank of America|
|NationsBank Corp||Bank of America|
|Chemical Banking Corp||JPMorgan Chase|
|Banc One Corp||JPMorgan Chase|
As a result of this consolidation, the total number of banks in the U.S. has fallen from almost 13,000 in 1994 to approximately 6,950 today.
The end result of all of this is that the five largest banks went from having only 12% of total deposits in 1994, to almost 40% at the end of the second quarter of this year. Even more strikingly, the three largest banks in the U.S. had roughly 8.5% of deposits in 1994, to nearly 33% -- or more than $3 trillion -- today. The infographics below outline the dramatic changes in the banking industry over the past 20 years.
Although the ease by which a customer can switch from bank to bank has perhaps never been easier, the reality is that Americans are showing with their wallets -- even if they may not say it -- that they don't mind that their deposits are held by megabanks and not the smaller ones.