In June 2026, the Federal Financial Institutions Examination Council (FFIEC) and its member agencies issued a joint statement reaffirming strong support for de novo (new) depository institution formation. The statement acknowledges the steady decline in the number of banks while the overall system has grown in assets, and commits to streamlining application processes to foster competition, innovation, and community access.
This comes against a backdrop of significant consolidation: In 1996, there were approximately 9,530 FDIC-insured commercial banks; by end-2025, that number had fallen to ~3,806 (a ~60% decline). Including savings institutions, total FDIC-insured depositories dropped from roughly 11,500 to 4,336.
Key Drivers and the Non-Bank Shift
Mergers remain the dominant force, driven by scale for technology, compliance, and efficiency (often delivering 20-30% cost synergies). Additional pressures include post-GFC regulatory burdens, compressed margins, and a sharp post-crisis drop in new charters (explaining much of the decline in smaller banks).
Meanwhile, non-banks ("shadow banks"/NBFIs) have expanded rapidly, now originating roughly 50-65%+ of U.S. mortgages (with servicing share also surging) and gaining ground in private credit (~$1.5-2T+ AUM) and fintech lending. Globally, NBFIs grew faster than banks in 2024, reaching ~51% of financial assets. Banks often fund or partner with them, increasing interconnections.
Persistent Regulatory Gaps in Shadow Banking
Gaps include lighter prudential standards (capital/liquidity/leverage) for non-bank mortgage servicers and private credit funds; major data and transparency shortfalls (especially private credit); limited systemic oversight tools; and resolution challenges. FSOC’s 2024 mortgage servicing report and FSB’s 2025 NBFI monitoring highlight liquidity risks, interconnections, and the need for enhanced standards, planning, and data improvements.
Outlook: Too Little, Too Late?
The FFIEC initiative raises an important question: Is this too little, too late given the decades-long structural shrinkage of the traditional banking charter base? While it signals regulatory awareness and could help restore some diversity if implementation succeeds, powerful forces—high barriers to entry, ongoing compliance costs, and non-bank competition—suggest any reversal will be gradual at best.
Traditional banking is evolving in a hybrid ecosystem—not obsolete, but adapting through consolidation for scale while facing competition in lending channels. For compliance, fair lending, and CRA professionals, this means greater complexity across bank-NBFI interactions and a premium on proactive, data-driven risk management.
Success will depend on institutions that combine regulatory resilience with modern analytics. The coming years will test whether policy nudges like de novo support can meaningfully counterbalance the momentum of consolidation and shadow banking growth.
