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Do bank mergers affect Federal Reserve check volume?

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  • Joanna Stavins
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    Abstract

    The recent decline in the Federal Reserve’s check volumes has received a lot of attention. Although switching to electronic payments methods and electronic check-processing has been credited for much of that decline, some of it could be caused by changes following bank mergers involving Federal Reserve customer banks. This paper evaluates the effect of bank mergers on Federal Reserve check-processing volumes. ; Using inflow-outflow and regression methods, we find that mergers between two or more Reserve Bank customers have resulted in volume losses, especially during the first quarter following the merger. On average, the estimated cumulative loss of volume during the first five post-merger quarters was 2.6 million checks. While the overall number of checks in the United States has declined during the past few years, the Federal Reserve has lost additional check-processing volume because of bank mergers.

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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 04-7.

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    Date of creation: 2004
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    Handle: RePEc:fip:fedbpp:04-7

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    Keywords: Bank mergers ; Check collection systems;

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    1. Rhoades, Stephen A., 1998. "The efficiency effects of bank mergers: An overview of case studies of nine mergers," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 273-291, March.
    2. Allen N. Berger & Rebecca S. Demsetz & Philip E. Strahan, 1998. "The consolidation of the financial services industry: causes, consequences, and implications for the future," Finance and Economics Discussion Series 1998-46, Board of Governors of the Federal Reserve System (U.S.).
    3. Katerina Simons & Joanna Stavins, 1998. "Has antitrust policy in banking become obsolete?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 13-26.
    4. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.).
    5. Allen N. Berger & Seth D. Bonime & Lawrence G. Goldberg & Lawrence J. White, 1999. "The Dymanics of Market Entry: The Effects of Mergers and Acquisitions on De Novo Entry and Small Business Lending in the Banking Industry," Working Papers 99-13, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. Paul S. Calem & Leonard I. Nakamura, 1995. "Branch banking and the geography of bank pricing," Finance and Economics Discussion Series 95-25, Board of Governors of the Federal Reserve System (U.S.).
    7. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-52, December.
    8. Allen N. Berger & Seth D. Bonime & Lawrence G. Goldberg & Lawrence J. White, 1999. "The dynamics of market entry: the effects of mergers and acquisitions on do novo entry and small business lending in the banking industry," Finance and Economics Discussion Series 1999-41, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:
    1. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, vol. 36(2), pages 87-110, December.
    2. Sujit Chakravorti & Jeffery W. Gunther & Robert R. Moore, 2005. "Universal access, cost recovery, and payment services," Working Paper Series WP-05-21, Federal Reserve Bank of Chicago.

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