Community Banking Institutions

Changes in the regulatory environment and technological advances have dramatically changed the competitive landscape for community banking institutions. While only accounting for a fraction of the overall size of the banking industry, community banks are predominant in numbers around the world for a broad range of depository institution types, including commercial banks, savings banks, cooperative banks, and credit unions. The steep decline in the number of community banks in recent times has attracted concern from policymakers, regulators, and academics, and has raised questions on the potential consequences associated with the gradual disappearance of these institutions. What contributed to the growth and resilience of community banks over the past century? Can they remain competitively viable in the current environment? This chapter surveys the literature and provides an institutional overview to understand the continued evolution of these institutions.