Regulation is stifling creation of new banks: Our view

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But bank regulators worried about the potential for crisis appear to have their eyes fixed firmly on the rear-view mirror rather than the road ahead. They seem intent on throwing up roadblocks for new banks, not undertaking prudent regulation of a free market.

That has been bad news for people who want to start new banks in Central Pennsylvania, and anywhere else for that matter. And it also is bad news for consumers and businesses in those communities.

Small, local banks are among the chief engines of a local economy, taking deposits and putting the money back into local companies that want to grow and create jobs.

Don’t get us wrong: Large regional and national banks do a lot for local communities, as well. But it is the smaller institutions that have a closer feel for their hometowns, and it is why thousands of small banks continue to operate today alongside the giants.

Not every small bank survives, of course. Some fail in the aftermath of a recession – whether in the 1930s or the 2000s – while others are gobbled up by larger entities. In some cases, displaced executives see a need and decide to start their own bank.

It is a longstanding creative cycle that has been disrupted now for a decade by regulators who seem overly fearful of letting new banks into the marketplace.

Very few new banks have opened since 2008 – among them is Bank of Bird-in-Hand in Lancaster County. But it has not been for lack of trying. The latest local effort, which is described in this issue, is led by Central Pennsylvania banking veteran Andrew Samuel.

We wish him the best of luck. But we can’t help thinking of others who have been tripped up on the same path. They include another local banking stalwart, George Groves, and a Lancaster County group that, ironically, tried unsuccessfully to purchase the bank that Samuel’s group is now targeting: Stonebridge Bank in West Chester.

Economic-development experts like to remind us about the importance of entrepreneurship. We embrace startups in other sectors, especially technology. We wish regulators would do the same in banking.