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What is the American Bankers Association (ABA)?

2016-11-29T16:30:09+00:00

The term 'American Bankers Association (ABA)' is included in the Banking edition of the Financial Dictionary. Get yours now on amazon in ebook or paperback format. Read more here...

The American Bankers Association, or ABA, is a trade association of the U.S. banks large and small conveniently located in Washington, D.C. This powerful lobbying organization hails back to 1875 when it was established by several bankers.

Today, the ABA has grown to represent banks of all stripes and sizes and encompasses more than 95% of all bank assets in the nation. This means that money center banks, regional banks, community thrift banks, mutual savings banks, savings and loans associations, trust companies, and large commercial banks all count the ABA as their voice before the federal government. The typical sized member bank boasts around $250 million in assets.

This trade and industry group proves to be the biggest banking trade association by far within the U.S. today. It is also known as the biggest financial trade group anywhere in the United States. The American Bankers Association thrives and prospers because of its impressive range of both services and products it delivers to member institutions. This includes help in such diverse industry segments as insurance, staff training and education, asset management, capital management, consulting, and risk-compliance endeavors.

Probably the most famous creation of the American Bankers Association remains the all important nine digit routing numbers which designate all banks everywhere within the U.S. These routing numbers are pictured on every single check and are also necessary identification for wire transfer transactions. The ABA can truthfully boast that it created this system over a hundred years ago, way back in 1910.

Today’s American Bankers Association keeps extremely busy lobbying with Congress for its banking members and their common interests. The group has concentrated its efforts in the last several years on banning the so-called unfair tax exempt status enjoyed by credit unions. Credit unions originally catered to selective and tiny targeted memberships, as with a particular company’s own employees. This did not threaten commercial banks and other similar financial institutions.

More recently though, to bank’s undying enmity and impotency in the face of this real and rising threat, credit unions found the means to vastly expand their roles of membership and possible pools of customers. It is no exaggeration to state that numerous credit unions can boast over $1 billion in assets nowadays. This makes them as big as some of the larger and even too big to fail banks.

The ABA strenuously maintains that such credit unions have morphed into a structure and operations which are so similar to the traditional commercial banks that they no longer deserve this special favor of tax exempt status. 

It was actually the infamous Panic of 1873 that gave rise to the initial founding of the American Bankers Association. A banker James Howenstein of St. Louis, Missouri, one day discovered that he was up against a proverbial wall in his bank. He only possessed several hundred dollars in cash against his millions of deposits he needed to return back to panicking depositors.

By falling back on assistance and knowledge willingly provided by his peers in the banking business via rapid and frequent correspondence, Mr. Howenstein escaped from his business-threatening dilemma to survive. He then knew that he had been saved by this informal network and fraternal organization of fellow bankers and wanted to expand on this successful construct.

To this effect, Mr. Hownestein convened his first meeting of 17 different bankers on May 24, 1875 in New York City. Together they made plans for an initial American Bankers Association convention that did successfully take place on July 20, 1875 in Saratoga Springs, New York. Fully 349 different bankers who hailed from 31 states as well as the nation’s capital attended.

Chief among the first endeavors of the ABA proved to be setting up the American Institute of Banking. They founded this in 1903 in order to offer certificates and examinations as professional banking education in their local branch chapters. This AIB offered interested participants a different way to pursue a banking career than by going to university for a degree in law and finance.

The term 'American Bankers Association (ABA)' is included in the Banking edition of the Financial Dictionary. You can get your copy on amazon in Kindle or Paperback version. See more details here.