Policy
Overview
The financial industry is an important component of the North Carolina economy for a number of reasons. Historically, the state’s liberal banking laws put its banks in a favorable position to expand when intra-state banking was legalized by the U.S. Supreme Court. Aggressive competition between the antecedents of Wells Fargo and Bank of America also allowed both organizations to grow through consolidations and mergers and assume a leading position in the US banking industry. As the 21st century has progressed, a number of financial organizations—Fidelity, Credit Suisse, Royal Bank of Canada/PNC— have targeted North Carolina for regional headquarters, taking advantage of the state’s generous Job Development Investment Grant program as well as the strong university system that also figured prominently into Bank of America’s and Wells Fargo’s ascension.
State-Level Policies
State-wide Banking
The single most important reason for North Carolina's strategic competitive advantage in the banks and finance industry is its historically liberal banking legislation. As detailed in the History, North Carolina was one of the few states that legalized state-wide banking, while unit bank states barred the opening of multiple branches in a single state. As inter-state banking was gradually legalized beginning in the 1980s, banks in North Carolina were already more efficient and better able to aggressively acquire struggling banks in other states during the industry's intense consolidation trend.
Corporate Incentives
For every dollar in its state budget, North Carolina spends 3¢ on incentive programs for businesses each year (1). The annual total of at least $660 million per year can be broken down into the following categories:
- $395 million for sales tax refunds, exemptions or other sales tax discounts;
- $202 million in corporate income tax credit, rebate or reduction;
- $32.8 million in property tax abatement (1).
The banks and finance industry was not one of the leading recipients of government assistance, at least compared to the manufacturing and industrial industries. Major employers such as Bank of America, Wells Fargo, PNC Financial Services Group, BB&T, and Fifth Third Bank have not received subsidy awards from the government of North Carolina, according to a database that contains data on more than 249,000 subsidy awards in the US (2).
However, a slew of firms with smaller in-state presences have benefitted from subsidies from the North Carolina government. The most commonly used corporate incentive for banks and financial institutions is the state’s Job Development Investment Grant (JDIG). Generally speaking, the JDIG, which was created in 2002, provides assistance to private enterprises that demonstrate interest in creating new jobs in North Carolina. The allotted grant depends on withheld taxes paid by new employees. In other cases, the One North Carolina Fund is sometimes used to provide banks and financial sector with assistance, although the JDIG is the dominant mechanism.
In 2006, Fidelity Investments received more than $87 million from the North Carolina state government to create as many as 2,000 new jobs with a new regional headquarters in Research Triangle Park (1; 2). The award came in four forms:
- $72.8 million JDIG grant;
- $4.6 million in training funds;
- $3.8 million in sales tax refunds;
- $2 million One North Carolina Fund disbursement million for sales tax refunds (1; 2).
In 2004 and 2006, Credit Suisse received a total of $28.6 million from the NC in JDIG grants to build a research center in RTP (1; 2). Other recent assistance provided to the financial industry includes a $12.6 million JDIG grant to Deutsche Bank in 2006, an $11.5 million JDIG grant to Zenta Mortgage Services in 2009, and a $9.3 million JDIG grant to the American Institute of Certified Public Accountants in 2005 (1).
References
- NY Times. (2012). “United States of Subsidies: North Carolina” Retrieved February 21, 2014 from www.nytimes.com/interactive/2012/12/01/us/government-incentives.html#NC
- Good Jobs First. Subsidy Tracker. Retrieved February 21, 2014 from www.goodjobsfirst.org/subsidy-tracker
