A popular game in banking circles these days is guessing how many banks will be left a few years from now when the financial crisis is, presumably, behind us.

Some experts are predicting that the total will fall to about 6,500, from about 8,200, within the next three or four years as weaker banks fail or are gobbled up at fire sale prices.

Others see a more dramatic drop, to 5,000 or so banks, as consolidation among healthy banks accelerates and more and more bankers look to sell out rather than deal with the anticipated new regulatory burdens, including stricter capital requirements.

There's little debate that the industry needs to shrink, but lately I've started to wonder if there are enough buyers out there willing and able to swallow 1,500 to 3,000 banks.

Sure, banks are failing left and right, and as long as the FDIC agrees to share in the losses plenty of them will find buyers. But already some bankers are starting to grumble that FDIC-assisted transactions - essentially the only deals getting done these days - are not worth the trouble and have stopped bidding on failed banks. A dearth of potential bidders could make it harder for the FDIC to unload these failures - and could force the agency to broker more deals with nonbanks.

Many would-be acquirers aren't much interested in buying troubled banks either, because they don't want the asset-quality problems and the accounting headaches that come with them.

One banker told me recently that he won't do any deal that might lower his bank's five-star BauerFinancial rating and jeopardize its standing with municipal and commercial depositors. Surely other bankers feel the same way.

The M&A climate should improve when the economy recovers, of course, but some bankers expect that new banks will just move in and replace some, though certainly not all, of those that were bought out.

Regulators won't come out and say it, but they have pretty much stopped approving new charters. Westamerica Bank CEO David Payne thinks that's a good thing and his concern is that once market conditions improve, we'll return to the days when regulators are approving dozens of new charter applications a year.

"We don't learn our lessons," Payne lamented at a recent investor conference. "Five years from now [regulators] will be issuing new charters and we'll have too many banks chasing too few good deals, and well have the seeds of our next [down] cycle."

So soon? Let's hope regulators' memories aren't that short.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.