American utilities have always placed a great deal of emphasis on the economic development of their service territories, including partnerships with local banks.
During earlier decades, prior to the formation of the global financial giants, utilities typically raised capital from sources close to home. However, the U.S. banking industry has consolidated over the past several decades.
This has resulted in the transfer of much utility commercial bank financing to global banking giants. They have typically headquartered hundreds, if not thousands, of miles away from those utility service territories.
Regional and local banks have a large share of the 9.5 trillion dollar U.S. bank deposit base. An overwhelming amount of their capital is drawn from local depositors. Our research has shown regional and local market shares ranging from roughly half, in a few cases, to a hundred percent in several states with no global bank presence.
That stands in sharp contrast to the global banks that finance a significant share of their capital needs from the overnight wholesale loan markets overseas.
Some innovative American utilities have been complementing their global commercial banking facilities with fully competitive regional and local bank syndicates.