When people invest, invariably because we are all bias, we look at the institutions we pay bills to for it turns many of them are very good dividend stocks to own. For example you pay an electric bill, your utility company has been paying dividends for years; you own a cellphone and which company pays a dividend – the teleco and the list goes on. Eventually you will look at the bank for most banks are profitable companies. You may deal with a large bank and a more regional bank for a number of reasons.i

If you own a regional bank, one of the possibilities of owning a regional bank is it maybe taken over by a larger bank eager to gain market share in the region. However according to an article by Tatiana Bautzer and Saeed Azhar of Reuters, the likelihood of a takeover of a bank is next year or 2024. The reason the bank regulators have introduced new capital requirements.

After 2008 when all banks around the world received bailouts both directly and indirectly from the governments, new standards were agreed to by the Basel Committee on Banking Supervision. Global regulators agreed to give banks a transition period to meet the new standards and the set the beginning of 2025 as the target for full implementation.

Federal Reserve Vice Chair Michael Barr, noted the federal reserve will be increasing the capital requirements because of the banking crisis which happened earlier this year. Although bank analysts do not believe the largest banks have anywhere near the stresses of loan and deposit relationships. For example one of the banks which failed loaned their money out at low interest rates for 10 years and needed to pay deposits at higher rates than the loans they gave. The mismatch was not good.

If banks have to be sold, they will be as deals with banks in either receivership or under stress rose to $23.2 billion in the 1st quarter, but deals with banks that are non-stressed was the lowest seen over the first year and half, the number was $3.9 billion.

Once the new capital requirements come out, it will be easier for regional banks to merge and for them less expensive as larger institutions have an easier time of meeting the capital requirements.

Linking to dividend paying stocks, whatever bank you deal with you hope it has a long history and even longer future. We pick a bank for many reasons including convivence to our home or work, but the reality is the internal operations of the bank depends on meeting and surpassing banking regulations which change over the years. Unless you work for a bank, you may not know or understand what the regulations allow the bank not to do, but if the bank Tallows you to meet your regular banking needs, you do not need to. Regulations in every industry help determine a level of profitability and governments try to balance – profitability and security for the consumer on a regular basis.

There are more questions than answers, till the next time – to raising questions.