NEWSRELEASE
For Release: March 31, 2005
Contact: John McDowell, (202) 205-6941
john.mcdowell@sba.gov
SBA Number: 05-13 ADVO
Press Kit
Changes In Banking Affect Small Business Lending
Consolidation And Innovation Are Driving Changes
WASHINGTON, D.C. - Substantial financial deregulation and financial innovation in recent years have changed banking. The resulting consolidation of banking and improvements in technology has had important effects on small business lending.
According to a study released today by the Office of Advocacy of the U.S. Small Business Administration (SBA), the way in which bank holding companies (BHCs) grow, through either outright merger of non-merged acquisition, has a direct affect on its small business lending practices.
The study’s findings suggest:
·
In general, larger BHCs tend to do less small business lending, as a percentage of total business loans.·
The organizational form of a BHC relates to small business lending. When BHCs acquire other banks -- but do not merge them -- small business lending is little affected. In contrast, if bank portfolios are merged and integrated into larger banks, their small business lending declines.“Financial innovation and deregulation are changing the services banks offer to their small business customers,” said Thomas M. Sullivan, Chief Counsel for Advocacy. “Many of the changes have been positive and have opened up capital markets to more firms. Others are changing the relationship between what were once local banks and their customers. This study reports on one aspect of those changes and provides sound insight into the evolution of small business lending by banks.”
KeyPoint Consulting LLC wrote the report, The Effects of Mergers and Acquisitions on Small Business Lending by Large Banks, with funding from the Office of Advocacy. It focuses on non-credit card lending at the 50 largest BHCs, which represent an ever-larger share of U.S. banking assets. The authors used annual data from 1997 to 2002, which includes both the 2001 recession and the beginning of the recovery in 2002.
The Office of Advocacy, the “small business watchdog” of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues. For a copy of the report and Research Summary, visit
www.sba.gov/advo.###
Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC, support the Chief Counsel’s efforts. For more information on the Office of Advocacy, visit
www.sba.gov/advo, or call (202) 205-6533.