American Bankers Association – Definition

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American Bankers Association Definition

The American Bankers Association refers to a professional association that comprises of banks and other financial institutions in the United States. The association was founded in 1875 with its headquarters at the U.S. capital. The association represents the banking industry. It strives to promote the profitability and strength of the banking industry through training, educating, informing, and supporting its members.

A Little More on What is the American Bankers Association 

Generally, the ABA brings together different banks and financial institutions. The members include companies, savings associations, money center banks, and trust companies. One major function of ABA is that it advocates for its members. It also financially supports candidates for the United States House of Representatives as well as the Senate. Banks and financial institutions who are members of ABA employ over 2 million people and hold 95% of the assets in the banking industry.

ABA’s Product and Services

ABA is considered to be the largest banking association group in the entire United States. It offers a number of products and services in various fields such as:

  • Staff training
  • Capital management
  • Insurance
  • Asset management
  • Consulting
  • Risk and compliance

The History of the American Bankers Association

The American Bankers Association’s origin can be traced back to 1873 when James Howestein, the St. Louis Missouri banker, happened to be in a tight financial situation. Howestein had to rely on the intelligence and help from partner bankers through frequent correspondence to free himself from the dilemma. It is at that time that he realized how valuable the bankers’ fraternal organization could be.

Howestein later convened a group consisting of 17 bankers in New York City in 1875, where they planned their first convention that is now known as the American Bankers Association. The association had its official opening on July 20, 1875, in New York City, Saratoga Springs. It started with 349 bankers representing 31 states, including the District of Columbia. The first constitution required the association to:

  • Promote the overall usefulness and welfare of banks and other financial institutions
  • Ensure uniformity of action
  • Ensure that questions are properly put into consideration in relation to financial and commercial usages. This includes laws and customs which are seen to have an effect on the entire nation’s banking interests. All these are meant to protect banks against loss that they are likely to incur through crime.

Among the earliest activities of ABA include the establishment of the American Institute of banking in 1903. Its creation was for the purpose of providing a path to careers in the banking sector without academic training in law and finance. What ABA basically did was to provide professional education through tests and certification via the local chapters.

ABA has continued to grow, especially with the emergence of the Federal Reserve System (FRS). The FRS required national banks to be part of a Federal Reserve Bank, providing the option to state-chartered banks. In 1925 during the commemoration of the ABA’s 50th anniversary, the association organized an Educational Foundation with bankers and state association where they contributed $40,000. The fund was to provide scholarships to deserving candidates to study finance, banking, and economics.

In November 1999, ABA experienced a major achievement when the Gramm-Leach-Billey Act was passed. The reason for Congress passing the act is that the bankers were in dire need of new competitive tools that could enable them to serve their customers better.

In 2007, there was an attempt to terminate the ABA. For this reason, ABA decided to merge with America’s Community Bankers. The merging resulted in the formation of the largest trade association ever in the financial industry, representing 95% of the assets in the banking industry.

ABA’s Principle Activities

The American Banking Association has performed a number of activities, and they include the following:

  • Lobbying state and federal governments in favor of American banks and bankers
  • Establishing industry best practices and standards
  • Education provision and the distribution of banking products and services to its members
  • Building industry consensus on key issues, including legal support and public affairs to its member banks
  • Sponsoring activities related to professional development for its members

The ABA operates the largest banking education provider known as the American Institute for Banking (AIB). The AIB offer teaching services to over 100,000 students every year. It also sponsors about 24 residential schools, which consist of 3,700 students. It covers specialist areas in banking as well as the Stonier Graduate School of Banking.

The Membership

The members of ABA include institutions such as the charters and banks of all sizes. These financial institutions represent more than 95% of the assets in the financial industry, amounting to $13.5 trillion.  Examples of these institutions include the following:

  • Community, regional, and Money-center banks
  • Holding companies
  • Savings associations
  • Savings Banks

Reference for “American Bankers Association – ABA”

https://www.aba.com/

https://en.wikipedia.org/wiki/American_Bankers_Association

https://www.investopedia.com › Personal Finance › Banking

https://www.americanbanker.com/american-bankers-association

https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId…

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