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6 banking changes you'll see in 2011

Fewer banks on the horizon
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Fewer banks on the horizon

Although troubled banks will continue to go under this year, it will be at a slower rate, experts say.

The year 2010 was the worst of the recession for bank failures, with 157 compared to 140 in 2009. Most of the troubled banking institutions have worked their way out of the industry by now.

"We're also seeing a healing of the financial markets," Leggett says. "Banks that were experiencing difficulty have been able to raise capital, whereas in 2009 they weren't able to do that."

Surviving banks are going to be bigger because of consolidations and mergers. The 7,000 banks that exist today could be reduced to 4,000 in three to five years, Hunt says.

The Troubled Asset Relief Program, the government program for providing federal assistance to financial institutions, also could put a squeeze on smaller banks. Although most large banks have repaid federal bailout money, some smaller institutions are struggling to do so. That might determine whether they'll still be in business in a year or if they'll be bought, Hunt says.

"It's very tough to be acquired when you still have debt to the government," he says.


 

 

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