The ripple effect Featured

9:41am EDT February 26, 2004
People responsible for running businesses usually learn a couple of important lessons early on -- that the financial health of a community has a critical impact on local businesses, and that what other companies do affects more than just those individual companies.

For example, when two big banks become one even bigger bank, the result is often felt by many other businesses, their customers and their communities.

The Citicorp-Travelers merger made headlines a few years ago, as did the NationsBank-BankAmerica merger, the Banc One-First Chicago NBD merger and Bank of America Corp.'s announcement in October that it was buying FleetBoston Financial Corp.

According to Federal Reserve statistics, there have been about 7,000 mergers of financial institutions in the United States since 1980. The number of individual banks has dropped from a peak of 14,400 in 1980 to 9,064 today, and the big are getting bigger.

Last month came news of the acquisition of BankOne by JP Morgan-Chase & Co., a deal one local business writer described as "almost a compelling enough story to make us forget that tens of thousands of jobs and many billions of investment dollars are at stake."

This merger might be great news for the company that wants its Chicago, Zurich and London offices to have the same bank. But for a local business concerned about its own economic health and that of its customers, there could be less to celebrate. The impact on a community in terms of lost jobs and the ability of individuals and companies doing business with those people can be dramatic.

For bank customers, the big deals can sometimes mean a difficult period of adjusting to new locations, new people and new account requirements and rules that were not part of the original pre-merger arrangement. More obviously, a change in banking relationships can mean a change in the quality of service.

Some corporate treasurers have expressed concern that companies could conceivably see their banking fees rise as the number of possible lenders or underwriters declines.

Technological developments and other market forces are reshaping much of America's financial services industry. But how do these changes affect your organization?

If banks close because of mergers and people lose their jobs, will they still be your customers? If you do business with a bank that is acquired, and decisions are now made by someone in another state, will that affect your operations?

The public interest is definitively intertwined with the health of the financial community.

The decisions that drive the financial services industry must be evaluated on the basis of what is best for consumers and the overall financial environment. A strong economy is impossible without a vibrant, competitive financial services industry.

The question is whether these big deals help or hurt the competitive and economic viability of our communities and cities. Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or