The American Bankers Association (ABA) is a trade association representing U.S. banks, both large and small, headquartered in Washington, D.C. Established in 1875 by a group of forward-thinking bankers, the ABA has evolved into a powerful lobbying entity that represents a wide array of financial institutions, accounting for over 95% of all bank assets in the nation.
Its membership includes money center banks, regional banks, community thrift banks, mutual savings banks, savings and loans associations, trust companies, and large commercial banks. These varied institutions rely on the ABA to be their collective voice in dealings with the federal government. The average member bank has about $250 million in assets, making the ABA the largest banking trade association in the U.S. and the largest financial trade group nationwide.
The ABA provides a vast range of services and products to its member institutions, such as insurance, staff training and education, asset management, capital management, consulting, and risk compliance. Perhaps the ABA’s most well-known contribution to the banking industry is the creation of the nine-digit routing numbers that identify all banks within the United States, a system established in 1910 and essential for check processing and wire transfers.
In recent years, the ABA has been actively engaged in lobbying Congress on behalf of its banking members and their shared interests on issues like the tax-exempt status of credit unions. Initially, credit unions catered to small, specific memberships, such as the employees of a particular company, and did not pose a threat to commercial banks and similar financial institutions. However, in recent times, credit unions have found ways to significantly expand their membership bases and potential customer pools, much to the frustration of traditional banks.
It is not uncommon for some credit unions to now boast assets exceeding $1 billion, putting them on par with some of the larger, even “too big to fail” banks. The ABA ardently maintains that these credit unions have evolved to such an extent in structure and operations that they now closely resemble traditional commercial banks and should no longer be granted the special privilege of tax-exempt status.
The ABA’s origins trace back to the Panic of 1873, which highlighted the need for a formal network of support among bankers. James Howenstein of St. Louis, Missouri, faced a crisis with limited cash reserves to cover millions in deposits that panicked customers were demanding. Through assistance from his banking peers, he navigated the crisis and was inspired to formalize this cooperative network. On May 24, 1875, Howenstein convened a meeting of 17 bankers in New York City, leading to the first ABA convention on July 20, 1875, in Saratoga Springs, New York, attended by 349 bankers from 31 states and the District of Columbia.
One of the ABA’s early significant initiatives was the establishment of the American Institute of Banking (AIB) in 1903. This institution was created to offer professional banking education through certificates and examinations administered by local branch chapters. The AIB provided an alternative pathway for individuals to pursue a career in banking, distinct from the traditional route of obtaining a university degree in law and finance.
