Never once had an issue accessing my accounts at my bank....online or in person. Their web server was running as fast as it does any other day of the
week, hinting at no server "attacks". When any server comes under attack, even low level attacks...performance is is noticeable to those who know what
a server attack looks like from the outside view. As I said, small banks ARE safer than "big banks".
How many people run the IT department at a small bank, and what are their credentials? I would stack the resumes of a New York-based big bank against
a small town bank any day of the week.
The difference is in size and scope. Smaller banks are relatively unknown, but more vulnerable because they don't have the IT staff and brainpower to
thwart a highly sophisticated cyber attack. Banks like Chase, Wells, Citi, etc. all have MIT grads running their IT departments. They have the best
So, if the measure is simply IT staff knowledge and know-how, big banks win hands down.
But there are more risks than just cyber attacks. Most of the banks that failed during this past recession were the smaller community banks. Yes, we
had some bigger banks collapse as well. Indeed. But, in terms of sheer numbers, the smaller banks collapsed a lot faster and in much greater numbers
than the bigger banks.
Also, as I mentioned, in terms of product diversification, small banks lose that bet as well. The fortunes of small banks are tied to the whims of
the local community and a specific localized geography. Bigger banks are not tied to a single local geography. Big banks have diversified income
streams, and a wide geography to serve. Areas in economic decline are balanced by stronger economic growth areas.
By comparison, if a local economy goes south, the community bank usually goes right with it.
Also, just because you did not have any problems using their online banking does not mean that the community bank has never been under attack. In
fact, you would never know most of the time because you cannot possibly log in every minute of every hour of the day to know when the online banking
was slowing down due to a cyber attack.
What we do know from public sources is that small banks, and small companies are not immune to cyber attacks. And, in most cases, when an attack
occurs, the bank is usually very cautious about what they tell the public. As in any corporation, you don't know what is going on behind the scenes
behind closed doors unless you work at the bank in question.
In terms of sheer capital, the smaller banks are lobbying the American Banking Association to advocate on their behalf to stop the Basel III capital
standards from coming into effect. This means that small community banks are admitting that they are under-capitalized. Some of the biggest banks in
this country are already Basel III compliant, which means they have already met the strict capital regulations soon to come into effect.
In short, the bigger national and regional banks have the shock absorbers to handle the recession better than the smaller community banks, if only by
capital standards alone.
Lastly, one of the main reasons why small banks are riskier is because they are notorious for giving away freebies to their customers - free checking
accounts, free online banking, waiving loan fees, etc. It's a great situation for the customer of the bank who doesn't pay any fees, but not so much
for the shareholders.
As a result, these smaller banks don't make much money for their shareholders. This is why the bigger banks who do make money and are highly
profitable because they do charge fees are able to so easily able to buy out these competitor smaller banks. Smaller banks are notorious for giving
away these freebies to the detriment of their shareholders and employees.
So, if you are with a small community bank that pays high rates on CD's (certificates of deposits), it means that they are under-capitalized and
trying to shore up loan losses.
If you are with a small community bank, and they give away all their products and services for free, they won't be in business for very long.
If you are with a small community bank, and they only have one location, if the local economy goes south, so will the bank.
edit on 10-5-2013 by CookieMonster09 because: (no reason given)