The banking industry continues to globalize and evolve rapidly. Giant national and global bank holding companies continue to grow, both through acquisitions and through the opening of new facilities and business units. New business opportunities are opening up globally for major banks, especially in such booming markets as China and India. U.S. and European banks particularly are taking ownership in Chinese banks. Elsewhere, Spanish banks are acquiring banking firms in South America, Mexico, Puerto Rico and the United States (particularly in Hispanic markets within the U.S.). German and Italian banks are merging to form European banking giants. Globalization of the banking industry is being fueled by four factors: 1) the availability of global electronic networks for distribution of funds and real-time management information; 2) the easing of local rules on ownership by foreign entities; 3) the opportunity to serve the needs of multinational corporations; and 4) the increasing attractiveness, from a banker’s point of view, of business assets and household wealth in emerging economies.

As of mid 2007, the American banking system consisted of 8,615 FDIC-insured commercial banks and savings associations owning about 86,000 offices. Deposits in FDIC-insured organizations totaled $8.04 trillion in June 2007, while assets totaled $12.26 trillion. In addition, as 2007 began, there were 8,362 credit unions with assets totaling $719 billion. U.S. employment at banks, savings associations and credit unions reached about 1.838 million in September 2007. An additional 1.064 million were employed in other credit-related activities, such as mortgages and credit card operations. Meanwhile, as of 2007, U.S. consumers enjoyed the use of 415,321 ATMs around the nation, including 236,732 at non-bank locations.

In the U.S., banking enjoys a state of deregulation not seen in decades. As a result, vast, national banking institutions have grown rapidly by acquiring regional banking firms, entering new fields, increasing assets and expanding globally. The number of branch banks has expanded as firms open not only traditional branches but also branches in alternative locations such as supermarkets and Wal-Mart stores. Meanwhile, hundreds of thousands of ATMs across America are becoming more sophisticated and multi-task capable, making them virtual branches. Also, consumers and businesses are becoming much more reliant on online management of their bank accounts as the number of homes and businesses enjoying broadband access to the Internet has reached true mass-market scope. Over 80 million U.S. homes and businesses now have broadband, and banks are evolving their online services to take advantage of this infrastructure.

At the same time, startup banks are being chartered at a rapid clip, and many small local banking companies are growing by providing personalized service. Also, banks of all types are competing fiercely to gain the prized accounts of the very rich. “Private Banking” offices providing individualized services, such as investment management and estate planning, to big depositors are now commonplace.

Non-bank companies remain a serious competitive threat to traditional banks. Retailers, automobile manufacturers, stock brokers, insurance companies and other business sectors are offering a growing array of bank-like services, from loans and mortgages, to credit cards, to money market accounts with checking account-like features.

The credit card industry is evolving as well. A truly revolutionary wave of “smart” cellular phones that act like debit cards and manage financial accounts is sweeping Asia and slowly taking root in Europe and the Uz

In Europe, the major bank holding companies are following the lead of their U.S.-based peers, making major acquisitions and cross-border investments while relying more and more on technology to make operations efficient. European Union regulations have led to the cleaning up of balance sheets at Europe’s banks and the implementation of better accounting practices. At the same time, the EU is attempting to change regulations to make banking across the region as seamless and consistent as possible.

Meanwhile, around the world, some major bank companies are using special units to provide services that conform to the tenets of Islam in order to take advantage of the rapidly growing Muslim population and the growing income of oil-producing Muslim nations and Muslim-owned businesses. (The Islamic concept of “Sharia” strictly limits the use of interest charges. Instead, many business deals must be structured on lease, rent or other alternative contracts in order to be acceptable.) Many Muslim-owned banks are competing fiercely while enjoying soaring growth.

In our research published during 2005, 2006 and early 2007, Plunkett Research consistently warned of the high debt levels carried by American consumers and of the pending difficulties in the mortgage market due to lax lending practices and adjustable interest rate loans. As of late 2007 a high level of defaults and foreclosures had clearly come home to roost, creating significant turmoil in banking and credit markets both in the U.S. and abroad.

As of August 2007, American households owed more than $2.47 trillion in consumer debt, such as auto loans and credit card debt, up from $1.99 trillion at the end of 2002. This equals growth of 24.1% over five years.

Growth in residential mortgages has been even faster. At the end of 2002, total mortgages outstanding in the U.S. for single-family homes and properties of up to four residential units totaled $6.4 trillion. By mid 2007, that amount had ballooned to $10.7 trillion, according to the Federal Reserve. This is an unprecedented growth rate totaling 67.1% over five years.

These soaring debt levels are due to several factors. Among them are aggressive lending practices (including lending to individuals with sub-par credit histories), low initial interest rates, consumers’ willingness to borrow against home equities, soaring home-ownership rates (with attendant high rates of mortgage debt), home prices that increased rapidly over several consecutive years, and aggressive offers of low- to no-interest-rate automobile loans that have driven new car sales.

As 2006 came to an end, housing sales and prices were generally much weaker than in 2005. Recent months saw an acceleration of that trend. Up until early 2007, mortgage lenders had been pushing a long list of innovative products designed to make it easier to borrow while lowering monthly payment and credit rating requirements. Some of these mortgage variations were bound to lure consumers into self-destructive borrowing and buying as they paid too much for properties while diving deeply into debt. These products ranged from zero-down mortgages to 40-year, fixed-rate loans to “option” loans that allow the borrower to defer a large part of each month’s payment. Many home owners now find themselves vastly overleveraged as a result of such mortgages. Banks, investment houses and investors of all types will be writing off some $300 billion in mortgages during 2007 and 2008 as a result. The residential mortgage and construction markets are in a deep slump and will remain so for some time to come.

For 2008, America is preparing for slower economic growth. High energy costs, rising health care costs and a depressed dollar may lead to problems with inflation. Consumers have largely overused their home equities for borrowing purposes. Corporations in many sectors will see slowing revenue growth and perhaps lesser profits.

Internet Research Tip- U.S. Banking:

For an easy-to-use synopsis of U.S. banking statistics, go to the FDIC (Federal Deposit Insurance Corporation) website: www.fdic.gov. There, go to the Industry Analysis tab and on to Statistics at a Glance. A date selector will enable you to look at historic as well as current numbers.