BankInsecure.com

June 17, 2025

Yes, in many ways, a large bank’s sheer size can indeed present a different, and in some aspects, higher, set of consumer risks compared to smaller community banks or credit unions.

Here’s why size can be a factor in increased consumer risk:

1. Complexity and Exposure to Systemic Risk:
   • Large banks often engage in a vast array of complex financial activities, including global trading, investment banking, and extensive commercial real estate lending on a grand scale. This complexity means they are more interconnected with the broader global financial system.
   • While their size might imply “too big to fail” (and thus government intervention if needed), it also means that if a large bank does face significant financial distress, the ripple effects can be far more widespread, impacting financial markets and the economy on a larger scale. This systemic risk, while not directly threatening insured deposits, can lead to indirect risks for consumers through broader economic instability.
2. Less Personalized Service and Bureaucracy:
   • The massive scale of large banks often leads to highly standardized, bureaucratic processes. For individual consumers, this can translate into a less personalized banking experience. Issues might take longer to resolve, customer service can feel less attentive, and there’s less flexibility for unique financial situations. You might feel more like an account number than a valued client.
3. Higher Operating Costs and Shareholder Profit Motive:
   • As for-profit corporations, large banks are driven by maximizing returns for their shareholders. This can sometimes lead to higher fees for services (e.g., overdrafts, monthly maintenance) and potentially less competitive interest rates on savings accounts or loans, as they seek to increase revenue. Their operational costs, due to size and complexity, can also be higher and passed on to consumers in various ways.
4. Larger Target for Cyberattacks:
   • While all financial institutions are targets, the sheer volume of customer data and extensive digital infrastructure of very large banks can make them a more attractive target for sophisticated cybercriminals. A data breach at a large bank can impact millions of consumers, leading to greater risk of identity theft and significant personal inconvenience.
5. Indirect Impact of Regulatory Fines and Misconduct:
   • Large banks frequently incur substantial regulatory fines due to non-compliance, money laundering, or other forms of misconduct. While these fines don’t directly come from consumer deposits, they can indicate underlying operational issues and may lead to changes in bank policies or services that indirectly affect consumers.

It’s crucial to remember that consumer deposits in all federally insured banks (FDIC) and credit unions (NCUA) are protected up to at least $250,000 per depositor, per institution, per ownership category. So, for the vast majority of consumers, the risk of directly losing their insured funds due to a bank’s failure is minimal. The “consumer risks” related to size are more about broader economic impacts, quality of service, cost, and the potential for data security incidents.