The Richmond Federal Reserve writes: The financial crisis of 2007 – 08 was a major shock to the U.S. banking sector. From 2007 through 2013, the number of independent commercial banks shrank by 14 percent – more than 800 institutions. Most of this decrease was due to the dwindling number of community banks. While some of this decline was caused by failure, most of it was driven by an unprecedented collapse in new bank entry.  Why Fewer Banks?