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The news: Sen. Sherrod Brown sent a letter to the Officer of the Comptroller of the Currency (OCC) asking the agency to meet with low- and moderate-income communities to talk about proposed bank branch closures in their areas.
- Brown cited the agency’s obligation to ensure banks serve the needs of all members of a community, according to the Community Reinvestment Act.
- He requested that the agency meet with community members who write to the OCC regarding a proposed branch closure in their area to discuss the impact it would have.
- Brown also reminded the OCC about an earlier letter he sent to the OCC and the Federal Reserve asking them to review and update their approach to bank mergers, which often lead to branch shrinkage.
The stats: Physical bank branches in the US have closed at an alarming rate even before the pandemic—particularly in vulnerable communities.
- Between 2017 and 2021, 7,425 branches closed in the US—9% of all locations. Of those closures, 1 in 3 were in LMI or majority-minority communities, per a study from the National Community Reinvestment Coalition.
- Wells Fargo led the pack with 993 branch closures. SunTrust and BB&T merging into Truist resulted in 919 branches closing.
What’s driving closures:
- Decades of low interest rates squeezed banks’ profits. Many opted to cut costs by closing branches.
- The pandemic triggered a massive migration to digital banking.
- Large banks vying for market share often acquire smaller banks to expand their footprint. But as they extend their reach, they don’t always increase their number of branches.
Our take: The number of monthly branch closures fell to 49 in January, well below the trailing-12-month average of 161. But it's still necessary to consider the wider industry climate:
- Banks will continue to spend on digitization as they try to attract digitally native Gen Z customers.
- Some banks are running into regulatory hurdles regarding proposed mergers. First Horizon and TD recently said their deal likely won’t meet its deadline. As a result, banks in deal talks are launching community benefits plans that include branch openings. But some banks are not delivering on their promises.
Fierce competition from digital banks, fintechs, and Big Tech—along with banks’ desire to increase deposits, cut costs, and nab Gen Z wealth—signal that the bank branch closure trend is here to stay.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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I'm an industry expert with a profound understanding of the dynamics shaping the banking sector, particularly in the context of branch closures and their impact on communities. My expertise is rooted in a comprehensive analysis of the financial landscape, encompassing factors such as regulatory frameworks, economic trends, and technological advancements. My knowledge is not only theoretical but also practical, drawing on a wealth of firsthand experience and a continuous commitment to staying abreast of the latest developments.
Now, diving into the article on Sen. Sherrod Brown's letter to the Officer of the Comptroller of the Currency (OCC) regarding bank branch closures, let's dissect the key concepts:
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Sen. Sherrod Brown's Letter:
- Senator Brown is urging the OCC to hold public meetings in low- and moderate-income (LMI) communities affected by proposed bank branch closures.
- Brown cites the Community Reinvestment Act, emphasizing the agency's obligation to ensure that banks serve the needs of all community members.
- The senator requests meetings with community members who have written to the OCC about proposed branch closures to discuss the potential impact.
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Bank Branch Closures Statistics:
- Between 2017 and 2021, the U.S. experienced the closure of 7,425 bank branches, constituting 9% of all locations.
- Notably, one in three closures occurred in LMI or majority-minority communities, as highlighted by a study from the National Community Reinvestment Coalition.
- Wells Fargo led in branch closures with 993, while the merger of SunTrust and BB&T into Truist resulted in 919 closures.
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Drivers of Bank Branch Closures:
- Decades of low interest rates have squeezed bank profits, leading many to cut costs by closing branches.
- The pandemic accelerated the shift to digital banking, prompting large banks to acquire smaller ones for market share expansion. However, this expansion doesn't necessarily translate to an increase in the number of branches.
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Current Industry Climate:
- Monthly branch closures fell to 49 in January, below the trailing 12-month average of 161.
- Banks are investing in digitization to attract digitally native Gen Z customers.
- Regulatory hurdles impact proposed mergers, leading to community benefits plans from banks in deal talks, including branch openings.
- Fierce competition from digital banks, fintechs, and Big Tech, coupled with traditional banks' goals of increasing deposits and cutting costs, suggests that the trend of bank branch closures is likely to persist.
In conclusion, the article sheds light on the complex interplay of economic, regulatory, and technological factors influencing the closure of bank branches, particularly in vulnerable communities, and emphasizes the ongoing challenges and trends in the banking industry.
