SMALL IS BEAUTIFUL AROUND THE WORLD:
Farmers' markets are in vogue, neighborhood cafes abound and small breweries are on
the rise throughout the US. In cafes, huge portions are also no longer the norm, as
frequently small platters are offered in an attempt to help conscious patrons win the
battle of the bulge.
Consolidation has dominated the world of finance and perhaps even more so than in
other industries. The financial behemoths JP Morgan Chase, Citicorp, Wells Fargo and
Bank of America dominate the American landscape. But in the US, there are also more
than 5,700 other banks under $2B. While the percentage of assets this group controls is
dwarfed by the biggest banks, they still are a market force in almost every locale in the
Things are different though in other parts of the world. In Canada and Europe enormous
financial entities occupy center stage even more than they do in the US. Canada's "Big
6" banks control a startling 90% of the total banking assets in that country. In addition to
controlling almost all of the banking assets, these big banks swept up independent
investment dealers and trust companies during the 1980's and 90's. With these vast
managed assets and capabilities they have built wealth management divisions with
Banking in Europe has followed a similar trend. The five biggest banks in France control
86% of the monetary system there, and in England, the big four banks control 75% of
When financial institutions are this big and control this much of a market, they gain
many advantages. They can control product offerings and raise banking fees with
impunity. While big banks have consolidated a great deal of control, they haven't
completely eliminated their smaller counterparts. Personalized service and prudence
have kept smaller institutions alive even in the consolidated markets in Europe.
In France, for example, three small family banks (BAMI, Pouyanne, and Martin Maurel)
maintain very strong capital levels and almost entirely avoided the excesses and
problems of the credit crisis. Their small business customers love them because they
make decisions quickly and based on their familiarity with their dedicated customers.
There is almost no employee turnover and with that solid knowledge and dedicated
customer base, these banks have thrived.
Many small and medium-sized businesses in Canada likewise prefer local financial
establishments. According to a recent Canadian Federation of Independent Business
report, credit unions and smaller banks were seen as better serving the businesses with
questions regarding bank fees, willingness to lend, accessibility of staff and the
simplicity of bank statements.
So, when your bank struggles with a larger competitor, keep in mind some of the
advantages you have with a smaller sized organization. Remember also that it's
probably easier to be a community bank in the US than in most other countries.
Finally, it is good to know that small bank traits like good service and qualified
staff are valued everywhere in the world.
Charles W. Milazzo
President and CEO