So says Victor Nava, here:
Community banks are generally defined as banks with less than $1 billion in assets. There are approximately 6,800 community banks which represent about 8% of total assets in the banking sector, but they account for almost 40% of all small business loans. The proposed Basel III regulatory capital requirements are an immense and unnecessary burden that will actually threaten their existence. Community banks were already having a hard time re-establishing themselves in a period of weak loan demand, low interest rates, and thinning profit margins. In 2011, only 3 new community banks were chartered, down from 181 new charters in 2007.
But these new regulations will further drive consolidation between them into bigger banks. Community banks that can't find affordable ways of raising capital will be left without many options other than to find a merging partner. Some on Wall Street, like mergers and acquisitions expert John Slater, predict that Basel III's compliance costs will lead to a merger boom, and that in the next 3-5 years 20-30 percent of all banks will merge.
