'Shark Tank' investor Kevin O'Leary says the demise of regional banks has begun after the US set a bad precedent in protecting 'incompetent' SVB management

• "Shark Tank" investor Kevin O'Leary said the start of the demise of regional banks is underway.
• Eventually, the banking sector will become an "oligopoly" of very large institutions.

The viability of regional banks looks shaky despite the federal government's intervention to protect uninsured depositors at collapsing lenders, said "Shark Tank" investor Kevin O'Leary.

A day after the Senate Banking Committee held its first hearing about the failures of Silicon Valley Bank and Signature Bank earlier this month, the O'Leary Ventures chairman suggested on CNN that banks will see major consolidation.

"I say this is the beginning of the demise of small banks, for sure. And that we're going to end up with an oligopoly of very large institutions with an imputed concept that they're backed by the federal government. Not guaranteed, imputed," he said, adding that he was not advocating to see the end of regional banks.

O'Leary also said customers at regional banks can conduct transactions online, making it unnecessary for those lenders to operate brick-and-mortar locations.

And if a community still wants such banks, then the risk should be localized instead of being borne nationwide, he added.

"However, if you really want to have a regional bank and you feel as a governor or senator of your state, then you should own the risk," he said. "Would you personally guarantee the bank in New Jersey or New York? Would you personally go on the hook because you want to have a regional bank in these states?"

Regulators protected depositors at SVB and Signature Bank beyond the FDIC's insurance limit of $250,000 for each account to prevent a wider run on banks.

Two weeks ago, O'Leary said the Biden administration essentially nationalized banks, indirectly putting taxpayers on the hook with the federal protection of depositors beyond FDIC limits.

On Wednesday, O'Leary envisioned what consumers with more than $250,000 in a small banks thought while watching lawmakers call out "incompetent" bank executives.

"I have come to the conclusion, as many others have that are discussing this, that I do not want to pay for every idiot banker's mistake. It's not on me as a taxpayer and there are many idiot bankers," he said.