Mega Banks vs. Community Banks Essay Example | Topics and Well Written Essays - 1000 words

Mega Banks vs. Community Banks - Essay ExampleThey encounter a crucial role in development of economy across length and breadth of the US. They take a breather very important in sm altogether- occupation sector and agricultural lending. The paper aims to explore the contrasting roles played by Community banks and bouffant banks in the national economy and the regulatory burden that Dodd-Frank Wall Street crystalize and Consumer Protection Act of 2010 is likely to put on them impacting their performance in the national economy. undersized phone line Lending Small businesses account for a huge sh be of total economic output and mesh. Small business with fewer than 500 employees, account for to a greater extent than 50 percent of private sector employment and output. Community banks are better placed in making loans to small businesses. Small bank officials goat review the small business loan applications taking local anaesthetic perspectives and the nature of business. That i s usually not contingent for large banks as they do not have so much autonomy at local levels and it is not feasible for the large banks to review the myriads of small business applications that closely. Another advantage with corporation banks to take with small business loans is that often it is required to maintain a close relationship with the borrower. It is possible for companionship banks to closely monitor the borrower, sitting locally, over the course of the loan the bank needs to maintain a close knit long-term relationship with the firm. Large banks find it inefficient and unfeasible to maintain such(prenominal) close relationship with small businesses. Large banks will rely on phone and mail to broadcast with small clients in contrast to community banks who will often have face-to-face meetings. That is to say community banks have their own niche area to cater to where large banks do not have nettle (Keeton, 2004 p.24) Loans on Nonresidential Real Estate by Communi ty Banks Community banks drive advantage in extending loans backed by nonresidential real estate and they account for over 60 percent of all loans of $100,000 or less and over 40 percent of all nonresidential real estate loans of $1 million or less. Community banks earn higher rates of return on small business loans than large banks (Keeton, 2004 p.26) Farm Lending By virtue of having located at the rural areas, Community banks are important farm lenders. They account for 65 percent of all farm real estate loans particularly, small the amount of loan more are the chances of that being extended by community banks. Large banks are not interested in serving such small farm loans. Community banks are more risk takers while lending to small businesses in contrast to large banks that depend upon neat realization history of the client (Keeton, 2004 p.26). Retail Deposit Services Community banks are more eager to volunteer personalized services to depositors of moderate to low wealth ho lders the reason being that community banks are more dependent on small depositors for their funds requirement where large banks are not found to bob small depositors (Keeton, 2004 p.27). Profitability Earnings on average assets for last 7 years with reference to large and community banks have been reported in the following table. Banks 2006 2007 2008 2009 2010 2011 March-2012 Over $ 50 billion 1.41 0.92 0.18 -0.07 0.77 0.94 1.06 Under $10 billion 1.26 1.06 0.05 -0.29 0.16 0.66 0.96 Source