Question

Over the past 10-15 years or so, we've seen a rapid consolidation of banks with some of the largest institutions acquiring smaller local and regional banks. We've also seen some significantly larger banks (e.g. Countrywide, Wachovia, and National City) acquired as well. At the same time, we've seen a lot of new, smaller "small business and retail depositor friendly" banks being created. What has driven this and what does it portend for banking?

Answer 1

This approach has emerged due to the domination of the private sector based financial institutions all over , in the field of banking. So many new private institutions having good financial background to support its rapid resurgence and expansion activities are originating at an increased rate. This is because the banking sector is considered to be the most profitable sector and favourable for intense growth.

The another most important factor that contributed to this trend is the decentralization of power by government sector , and withdrawal of ownership from public banks thus inviting the the private sector to invest and gain ownership.

The reason that overtaking of small banks is evident today is because of the concentration of power in few hands and highly competitive environment where survival of small and regional banks becomes difficult.

The reason that new smaller banks still get created is because of the banking sector seen as a means to attract huge revenue.

Moreover the economical needs , the money supply, the financial position of the country or a region and the huge returns from investment activities attract the new entrepreneurs to come in the banking sector.

Entrepreneurship activities have witnesses a huge hike since the economy has identified the importance of entrepreneurs in flourishing the country.

Banking sector plays a very important role in keeping financial condition of an economy stable.

Thus this trend results in flourishing and consistent development of this sector as well as the development of the economy.

Banking sector emergence result in fulfilling of financial needs of public whenever necessary and urgent by the way of providing borrowing and interest on deposit facilities.. It will make sure that economy yields revenue and nourishes the financial development.

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