A sharp drop in the number of bank branches across the country is causing alarm among community advocates.
Most banks have been closing branches since 2007
In the wake of the Great Financial Crisis of 2007-09, millions of Americans saw their local bank branch close. Alarmingly, that trend has only continued since. In 2023, so far, bank branch closures are only accelerating. Through September of this year, banks had closed more than 3,000 branches across the United States while opening just 1,000 branches.
JP Morgan Chase led the country in branch closures this year, shuttering 144 branches despite gross profits of $128.7 B in 2022.
During the Financial Crisis, there was a spate of banking industry mergers and acquisitions, which explains many of the branch closures. In today’s more stable financial world, they are still making the choice to close branches while they continue to push consumers toward mobile and online services.
The rush to online banking leaves low, middle-income families excluded
The recent trend of favoring digital services accelerated during the restrictions of the pandemic. But as the world returns to pre-covid levels of public activity, the continuing bank branch closures are causing serious problems for underserved communities.
This March, Sen. Sherrod Brown, Chairman of the Senate Finance Committee, wrote to the Office of the Comptroller of the Currency (OCC), asking the OCC to meet with low-and medium-income households to discuss branch closures in their community.
A report last year from the National Community Reinvestment Coalition (NCRC) highlighted Sen. Brown’s concerns. The NCRC report found that one-third of all bank branch closures from 2007-2022 occurred in lower-income or majority-minority communities. The report also noted that local bank branches are key to community investment, by turning local deposits into financing for local development like homes, schools, and businesses. Without a local bank branch, there is a threat that local communities do not have enough access to community development financing.
The first wave of bank closures following the Great Recession hit rural communities particularly hard. NCRC found that, between 2008 and 2016, branch closures caused more than 80 rural banking deserts – communities with no local banks or financial services.
Clinton-era banking deregulation allowed banks to set up branches across state lines. Since then, the number of small community banks has dwindled. The country’s largest financial institutions increasingly dominate the country’s banking system. Following the Great Recession, the increasingly consolidated industry turned away from efforts to expand their branch network focusing instead on high-value services and, most recently, on digital services.
Postal banking would help the working class and minority communities
The impact of a bank branch closure is tremendous on a community. Lending to small businesses goes down. People are more likely to face high ATM fees. Closures also force people to turn to riskier and pricier alternative financial services like pawn shops and payday lenders. Whether in rural or urban areas, branch closures are more likely to hurt working class and minority communities.
Supporters of postal banking point to this ongoing trend of closing bank branches as another argument for why it’s time for postal banking. There are more than 30,000 post offices, located in most communities across the country; that’s why the postal network is well placed to serve as a valuable tool for financial inclusion.
We still need to fight for better regulation of the financial industry to stop bank closures from hurting our communities. But we should also keep up the fight for every community in American to be able to bank right there at their neighborhood post office.
