Where Have All The Banks Gone?

All of corporate America took a beating during the financial crisis. And yet, between 2010 and 2014, 831 new Starbucks stores have rolled out in the country, while CNN Money reports that only three new U.S. banks have come up during that time.

Sure, that analogy takes some creative liberties, but intended only to magnify the scale, it shouldn’t sound preposterous considering over 100 new banks set up shop every year before the financial crisis hit, as data from the Federal Deposit Insurance Corporation show.

And while that stat refers to entirely new banking institutions, the situation is further exacerbated by several existing banks shutting down branches. A healthy, robust economy is one which attracts more lenders but the Dodd-Frank regulation which was passed in the wake of the financial collapse not only mandated banks to hold more capital, but also placed restrictions on lending practices.

It would have been gloom and doom if only banks could lend. But the corollary to this is the steady growth in alternative lending platforms. What’s even better is the interest the U.S. Treasury has in it. Earlier this month, 19 Democratic lawmakers launched urged the Consumer Financial Protection Bureau (CFPB) to increase its efforts to draft rules to collect and disclose small business lending data. The Treasury in its report also mentioned research from Morgan Stanley, which found that in less than 10 years the marketplace lending sector has grown to an estimated $12 billion in loan originations as of last year.

According to data collected by Research and Markets, the P2P lending platform is expected to grow to $350 billion by 2025. This probably is reflective of a larger trend where investors don’t trust their banks to put their interests first.

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