This article in today’s Boston Globe details how Bank of America has told some municipal clients to take their banking business elsewhere. In Massachusetts, cities and institutions that got the boot include Fitchburg, with some $11 million on deposit, Worcester, Fall River, and Blue Hills Regional Technical School in Canton. Profits on municipal accounts are lower than those that BOA can draw from larger clients, and post-crash banking regulatory changes have reduced those profits further, according to one analyst quoted in the story.
Bank of America is giving these clients only 90 days to find a new banker and close and transfer accounts, which a Fall River city official described as a hardship.
The silver lining? Money is being moved to local institutions. Blue Hills Tech, for instance, now uses the Bank of Canton. “It allowed us to establish a relationship with a more local entity who was more than happy to have our business,’’ according to school superintendent James Quaglia.
It’s a good thing to see local institutions and municipalities keeping their money closer to home. In fact, it’s likely that when these city accounts were established, they started with local banks that were absorbed by larger and larger institutions over the years, before finally getting sucked up by BOA.
A state or regional public bank can help keep smaller community banks and credit unions profitable. In fact, North Dakota, the only state with its own bank, also has the nation’s most robust community banking sector.