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Think Local, Act Local -- save 50 percent!

A better business model for retail banking

Author: Peter A. Soraparu

Publishing date: January 2013

We are all sick and tired of hearing about banks that were supposedly 'too-big-to-fail'. The truth is they were too big to change, too big to innovate, too big to notice what was happening to real people and, in the end, too big to do anything but fail.

People are crying out for a better way. In this new Lafferty Group report, Peter Soraparu — a man immersed in the minutiae of US community banking for the last 30 years — provides a better business model for retail banking and guides us through a variety of lessons that can be learned from US community banks.

In the US, small banks are generally the pride of their communities. They are not merely called 'community banks' as part of some nefarious corporate social responsibility whitewash; they are banks based at the very heart of their localities. These are not credit unions (which are thriving mutuals) or savings and loan associations (which, like mutual building societies in countries such as Australia, South Africa, Ireland and the UK, have largely disappeared), but shareholder-owned, commercial and mainly retail banks.

As this report illustrates, over 70 percent of all small business loans are arranged by community banks. They are the lender of first resort for the true engines of growth in the economy — the exact opposite of the type of reckless casino banking which caused our current crisis.

We need to move away from a world where bankers are playing with our money for their own gain. Richard Abbey, a writer once described as 'the Thoreau of the American West' once said "When the biggest, richest, glassiest buildings in town are the banks, you know that town's in trouble."

Community banks don't have such problems; they are run by the people of the town, for the people of the town. They are not all 'mom and pop' operations by any means, and some have hundreds of branches, but it is the ethos that matters. They are there to serve, not to siphon off.
This approach is something we can all learn from.

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