Question

Discuss which factors have motivated the significant decrease in the number of commercial banks

Answer 1

Factors that have motivated the significant decrease in the number of commercial banks are as follows-

A.Large number of mergers and acquisitions which have happened between the banks that has led to reduction in overall number of banks operating to the financial sector.

B.introduction of more disclosure requirements and higher regulations has led to a shrinkage in the overall number of banks which are present the financial sector

C. Financial crisis of 2008 has led to closure of a lot of bank because as they could not survive the recession and they had a lot of bad Assets and they had to be ultimately bailed out or acquired by the government.

D. Large number of other investment class which is being preferred by investors and which also offers a significant tax advantage are always preferred over Bank deposits so that had also lead to reduction in the income of the banks leading to lesser income and forced closure of a few.

E. Bad lending and exposure into a risky assets have also costed them their existence and they have been forced to close down.

F.stringent laws and regulations which are forcing the banks for complete disclosure and regulatory authority like Federal Reserve had kept them in check so various banks which were engaged in fraudulent activities were not able to survive and sustain