Nearly half the bank branches in San Ysidro have closed in the last two years, mirroring a trend along the entire Mexican border that’s creating headaches for small businesses and forcing some residents to go without bank accounts.

Bank officials say branch closures along the border are the result of a recent federal crackdown on drug-related money-laundering and an inevitable reduction in brick-and-mortar locations as more banking gets conducted online.

No one disputes that those are factors, but some question whether the banks are using such things as excuses for closing less lucrative branches in relatively low-income border areas.

Whatever the cause, politicians and community leaders say the closures are stifling business along the border, where cash remains crucial to commerce, and threatening long-term prosperity by leaving a trail of empty storefronts and making loans harder to secure.


“Where are small businesses going to get loans to grow, to expand or even to open,” said San Diego City Councilman David Alvarez, whose district includes San Ysidro. “The backbone of San Ysidro has always been small businesses, but what happens if they have to go to check-cashing places and take out loans at much higher rates?”

In addition, many small businesses need banks to get change, to get cash for supplies and to make nightly deposits for security purposes.

“This has made it very difficult for small and medium-sized businesses, particularly those that buy and sell products and services from one side of the border to the other,” said Russell Jones, vice chairman of a national business organization called the Border Trade Alliance.

Similar concerns are being expressed along the entire border since the closure trend began in 2013, Jones said.


As of Oct. 1, 80 percent of bank branches had closed in Calexico, 29 percent had closed in Nogales, Ariz., and in Texas 13 percent had closed in El Paso and 17 percent in Laredo.

In San Ysidro, six of the community’s 13 branches have closed.

“It’s a growing crisis and it’s a trend that we want to see stopped,” Jones said.

But stopping the trend will be elusive without government help, he said.


Jones and a small group of politicians have recently begun advocating for softer money-laundering penalties for banks, incentives for banks to open branches near the border, looser regulations on start-up community banks and other legislation that could slow or reverse the trend.

Alvarez supports those efforts and said he plans to include the problem on a list of priority issues the City Council gives each December to its federal lobbyist for the coming year.

He said the branch closures are hitting residents nearly as hard as businesses because lower-income border towns typically have fewer residents doing their banking online.

“There’s still a huge digital divide in a community like San Ysidro,” he said.


Alvarez said the closure of branches could prompt many people to stash their money in mattresses or other dangerous places.

“This is going to make things worse for the many folks who are already underbanked,” he said. “The last thing you want to do is make people more uneasy about our financial institutions, but that’s what these closures are doing.”

Jason Wells, chief executive of the San Ysidro Chamber of Commerce, attended a roundtable in Washington, D.C., in October featuring banking industry officials, business leaders from along the entire border and three U.S. Congressmen: Juan Vargas of San Diego and Henry Cuellar and Will Hurd from Texas.

He said the gist of the roundtable was that a $1.9 billion fine levied on HSBC Bank in 2012 for allowing money-laundering had created a knee-jerk reaction by many banks to close branches near the border, where more money-laundering typically takes place.


“If you’re a bank and your headquarters is in Ohio, you look at a map and you say the border area is the problem so we can close that one down and the customers can go to Chula Vista,” Wells said. “That may look easy from Ohio, but it obviously has some very real effects in San Ysidro.”

Wells said banking industry officials have been somewhat evasive other than mentioning the money-laundering penalties, which the federal government has sharply increased.

“No bank corporate officer wants to tell you ‘we’re closing branches,” so we’ve gotten excuses like ‘it’s just part of our North American strategy,’ which is to me bogus,” Wells said. “We’ve never had million-dollar home loans or $50,000 car loans at border branches, so nothing has changed.”

The banking industry was represented at the Texas roundtable by two officials from the American Bankers Association. Blair Bernstein, the association’s spokeswoman, did not return phone calls this week.


Calls to Congressman Vargas also weren’t returned.

While some customers can shift their accounts to the branches that remain open in their border community, many get blocked in such efforts by banks unwilling to take on customers who deal frequently with large sums of cash. Such concerns have also prompted some branches that remain open to close certain accounts against the wishes of individual merchants.

When large banks close branches in other communities, private community banks such as Torrey Pines Bank or Bank of Coronado often step into the void and gather up abandoned accounts.

That isn’t an option in this case.


“Most communities along borders like San Ysidro don’t have community banks — we’re at the mercy of the national chains,” Wells said.

And new federal regulations adopted since the banking industry nearly collapsed in 2008 make it much harder to launch community banks, said Jones, noting that only a handful have opened nationwide under the new rules.