Everything You Need to Know about Banks and the Banking System

Banks have evolved in many ways over the years. They are no longer just a place where consumers store their money. Banks today provide several additional services to their customers including many types of loans: mortgages, home equity loan products, auto loans, student loans, and personal lines of credit. Banks are also among the largest credit issuers in the country and provide other products and services including tools for investing, saving and retirement. For many of us our primary bank and the associated bank accounts, serve as the epicenter of our financial lives. Therefore it is critical to be knowledgeable about what services your bank offers, how much it costs and how it stacks up relative to the competition. Our research efforts has been centered on providing unbiased, objective information about banks in the United States and North America and especially local banks where information might be less readily available. All of this information is updated multiple times a year and we are always open to feedback!

Table of Contents

A Brief Overview of How Banks Work

chart shows how banks work and make money

This is admittedly a very simplistic example but it helps at least explain some important elements of how traditional banks operation. The diagram above shows how a typical bank functions. Keep in mind the direction of the arrows indicates which way the funds are flowing. So in this example, the bank first collects $100 in deposits from Customer A. Then, in order to incentivize Customer A to keep their $100 deposited at the bank, the bank pays Customer A interest on their deposits. And so the bank now has the deposited $100 as capital that they can lend out as mortgages or other loans. In this example the bank lends money to customer C in the form of a commercial loan. This is the critical point: the business model of banks centers on being able to attract deposits to build up a capital base and then lend that capital to other customers.

Statistics About Banks in the United States

  • There are over 5,000 banks operating in the U.S. and of this number over 4,800 are insured and regulated by the Federal Deposit Insurance Corporation
  • Because of the fragmented nature of banks in the country, there has consistently been mergers among banks with 187 being approved in 2021
  • The FDIC-insured banks had approximately $24 trillion of assets, $11 trillion of loans and $20 trillion of deposits as of the end of 2021
  • 54% of the deposits at insured banks were insured by the FDIC as of December 2021
  • The FDIC’s deposit insurance is provided by the Deposit Insurance Fund which had a balance of $123 billion as of the end of 2021
  • The banks operating in the United States have approximately 83,000 branches across the country with the following states having the most branches:
    • Texas – 6,334
    • California – 6,267
    • Florida – 4,544
    • New York – 4,443
    • Illinois – 3,912
    • Pennsylvania – 3,732
    • Ohio – 3,278
    • New Jersey – 2,600
    • Michigan – 2,239
    • Missouri – 2,172
  • Banks in the United States collectively employ more than 2 million people
  • The three largest banks in the country (Chase Bank, Bank of America and Wells Fargo) have $7.6 trillion in total assets which is over 30% share
  • There are 143 Minority Depository Institutions as of the end of 2021
  • There have been 122 bank failures over the past 10 years and 16 over the past 5 years. No federally insured banks failed in 2021

The Role of the FDIC

The FDIC plays an essential role in the banking system in the United States and in protecting consumers from potential losses related to bank failures. The institution was created in 1933 upon the signing of the 1933 Banking Act by President Franklin D. Roosevelt. The act provided the FDIC with the authority to provide banks with deposit insurance and also to regulate and supervise state non-member banks. Originally the deposit insurance limit was set at just $2,500 in 1934 but as been increased almost every decade since to keep up with inflation:

banks-fdic-insurance-deposit-limits-history

Today the FDIC insures $9.5 trillion of bank deposits at over 4,800 banks in the United States and in addition to this supervises and examines more than 3,200 banks and oversees the Deposit Insurance Fund (DIF). The DIF is the vehicle through which the institution protects bank depositor accounts and finances failed and failing banks.

The Largest Banks in the United States

Although the United States banking system is highly fragmented over time a handful of banks have grown to command a sizeable share of assets, loans and deposits within the country. We’ve written about the most important banks and the site has a lot of important about several of these banks and their products. As of December 2021, these are the 25 largest banks in the United States as ranked by the Federal Reserve Board. In addition, the banks on this list that are also considered to be systemically important banks by the Financial Stability Board have an asterisk added to their name.

  1. JPMorgan Chase Bank*
  2. Bank of America*
  3. Wells Fargo*
  4. Citibank (aka as Citigroup)*
  5. U.S. Bank
  6. PNC Bank
  7. Truist Bank
  8. Goldman Sachs*
  9. TD Bank*
  10. Capital One
  11. Bank of NY Mellon*
  12. State Street Bank*
  13. Fifth Third Bank
  14. Silicon Valley Bank
  15. Morgan Stanley*
  16. Citizens Bank
  17. HSBC
  18. Keybank
  19. Northern Trust
  20. First Republic Bank
  21. Huntington Bank
  22. Ally Bank
  23. BMO Harris Bank
  24. Regions Bank
  25. Morgan Stanley Private Bank

Minority Depository Institutions

Minority Depository Institutions (MDIs) are federally insured institutions that were created with the stated objective of promoting economic development in minority and lower income communities in the United States. When it comes to the issue of access to financial institutions, these are traditionally groups and communities that have been under served. There were a total of 143 MDIs as of December 2021. Visit our MDIs page to learn more about these institutions and to view our directory. You can also read our post on the largest black-owned banks.

Other Bank-Related and Personal Finance Topics

Across the site we publish news, research and analysis on topics centered on banking products and personal finance, including covering: mortgage rates, reverse mortgages, first-time home buyer tips, overdraft fees, cashier’s checks, zelle payments, zelle availability at banks, credit scores, credit bureaus, ATM fees, bank account fees, free checking accounts, and much more. You can also view our comprehensive list of banks and directory of routing numbers in the United States.

Our Bank Directory