Regional banks, an essential link in the US economy

shaken by the banking crisis and the concern of their clients, the regional banks of USA they are an essential link in the economy by financing small businesses and individuals.

“My banker makes my life easier”sums up Barrett Hill, a farmer in central Illinois (northeast United States).

If you need a loan for land or new equipment, a simple call is enough. “I just have to go in to fill out the forms”he explained to AFP.

Barrett Hill grew up with who is now his account executive at Peoples State Bank of Newton, which has just eight branches. “I would never change banks”he assured.

“Human relations are at the center” of regional banks, considers Brad Bolton, president of Community Spirit Bank, which manages $195 million in assets and has six branches in Alabama and Mississippi (south). “My clients know me, and I know them, I know their financial situation”he detailed.

In the United States, regional banks are the source of 60% of loans to small businesses and 80% farmers, according to the federation representing the independent regional bankers (ICBA) sector.

The American banking giants with international projection, such as JPMorgan Chase or Citigroup, are the best known. But the United States has 4,706 banks and 4,760 savings banks, with deposits guaranteed by federal insurance, up to a certain amount.

Small and midsize banks provide all the basic services, though sometimes they can’t offer as competitive rates on home loans, for example, said Julie Hill, a banking sector specialist at the University of Alabama.

These entities are strong in loans to small businesses, “those whose risks cannot be analyzed by computers,” while the large banks base their models “on economies of scale and finance the largest companies,” he explained.

Open to experiment:

Another strength of regional banks, according to this expert, is that the authorities can allow them to experiment, as is the case with cryptocurrencies.

“If there were just a handful of big banks, the government would be hesitant to let them try potentially risky new things”he stressed.

The other side of the coin is that the regional banks are not considered too important to the system for the government to bail them out in case of difficulties.

“Even if they think their bank is in good financial health, well managed, customers with large deposits may worry,” exemplified.

After the bankruptcy of three medium-sized banks in less than a week in the United States – Silvergate, Silicon Valley Bank and Signature Bank – the fear that some clients will withdraw their money from smaller banks weighed heavily on entities with a similar profile that are listed on Wall Street.

First Republic stock lost like this 88% since March 8, and their fate is still on hold despite the aid provided by the authorities and large banks with deposits.

PacWest lost 62% in the stock market in the same period, and Western Alliance 55%, while Zions fell 35%.

Scott Anderson, the president of Zions, a bank that ranks 36th in the US banking ranking by assets, acknowledged Tuesday during an American Bankers Association (ABA) conference that the previous week had been “very busy” between conversations with employees and customers, and the implementation of emergency financing plans.

Silicon Valley Bank, on the other hand, focused on a particular clientele: entrepreneurs in the technology sector. In this sense, it was a “exception”argued Scott Anderson.

“We had a few calls but it wasn’t that bad,” said Dan Robb, CEO of Jonesburg State Bank of Missouri. “I think people really believe that the system is strong and that we are resilient”he added.

“Of all the regional banks I spoke to, no one had any major withdrawals,” said Brad Bolton of Community Spirit Bank. “In fact, in our case, we recorded deposit income,” held. “We have been in existence for 115 years, and I intend to exist for another 115 years. And my clients know it. finished off

Source: AFP