FINANCE
What are Regional Banks? How are they different from National Banks?
New York Community Bancorp’s surprise major loss has led to the fall in stock price of many other regional banks, but what are they?
Regional bank stocks took the brunt of the damage from a poor financial report from New York Community Bancorp. The bank reported a surprise loss of $252 million last quarter including $552 million in loan losses.
Shares in the regional bank collapsed 38% in one day. Much of the losses were a result of acquiring $40 billion in assets from Signature Bank.
What is the main difference between national and regional banks?
Regional banks are financial institutions that primarily operate in a specific geographic area or region. These banks originally had a more focused and localised approach to their services, though this has changed in recent history as their portfolio has expanded. The Federal Reserve defines these banks as having $10 billion to $100 billion in assets. New York Community Bancorp has now passed that $100 billion threshold, meaning more capital has to be protected in case of future losses.
Examples of regional banks in the US include aforementioned New York Community Bancorp, PNC Financial Services Group, headquartered in Pittsburgh, Pennsylvania, and KeyBank, based in Cleveland, Ohio.
On the other hand, national banks are financial institutions that operate on a larger scale, having assets over that $100 billion threshold. These banks are subject to more stringent regulations due to their systemic importance. These regulations are designed to ensure financial stability and protect the broader economy. Well-known examples of national banks in the US include JPMorgan Chase, Bank of America, and Wells Fargo. The key difference lies in the size of the assets.
National banks are subject to additional regulatory scrutiny from entities such as the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC). while regional banks may fall under the jurisdiction of state banking authorities.