Banking was highly controversial in 19th-century Illinois. Modernizers stressed the need for adequate venture capital and money supplies, but traditionalist farmers feared they would be impoverished by an artificial "money monster." Efforts to create a state bank floundered in confusion, while the dubious character of most private banknotes inspired the state to ban private banks altogether. The major breakthrough came during the Civil War, when federal laws encouraged the establishment of strong national banks in all the larger cities, and Chicago quickly became the financial center of the Midwest. Apart from the 1920s and early 1930s, when numerous neighborhood and small-town banks folded, the banking system has flourished. The Bureau of Banks and Trust Companies at the Office of Banks and Real Estate regulates state chartered banks and trust companies.
Illinois had the greatest number of banks in the nation in 2002. There were 791 insured banks in Illinois, 502 of them state-chartered, an unusually large number attributable to regulations restricting branch banking. From 1870 until the 1970, even the largest banks were allowed only one office. Branching without limitation was available in 1993. As of September 2002, insured banks held $535.7 billion in assets. By 1995, the Resolution Trust Corporation (RTC) had assisted 49 Illinois institutions out of insolvency, at a cost of $1.5 billion.
As of the end of 2002, Illinois' largest banks were experiencing an increase in profitability, as median annualized return on assets (ROA) ratio (the measure of earnings in relation to all resources) rose due to lower funding costs. Net interest margins (NIMs) (the difference between the lower rates offered to savers and the higher rates charged on loans) for Illinois' community banks (less than $1 billion in assets) increased.