Advanced Search
MyIDEAS: Login

Bank mergers and banking structure in the United States, 1980-98

Contents:

Author Info

  • Stephen A. Rhoades
Registered author(s):

    Abstract

    The U.S. banking industry experienced a sustained and unprecedented merger movement from 1980 to 1998. During that period, approximately 8,000 bank mergers occurred, involving about $2.4 trillion in acquired assets. The 1990s, especially 1994-98, was a period of numerous large bank mergers, including several that were among the largest in U.S. banking history. This study describes various aspects of that bank merger activity and some of the changes in U.S. banking structure and performance that took place during 1980-98. With respect to bank merger activity, the study examines the number and asset size of the acquiring and acquired banks, by year and state; the identities and sizes of the parties involved in large mergers; the types of mergers (horizontal and market extension), markets (urban and rural), and corporate form of the acquirers (independent banks and bank holding companies); and the number of mergers and related assets approved by each federal bank regulator. With respect to U.S. banking structure and performance, the study examines the change in the number of banks and offices, the number of automated teller machines (ATMs) and ATM transactions, nationwide and local market banking concentration, and bank profits and stock prices. The study found that there was a very large decline in the number of banks and banking organizations from 1980 to 1998. Merger activity remained at a high level throughout most of the period. Nevertheless, the number of banking offices continued to grow despite the large decline in the number of banks and the burgeoning of ATMs. Concentration of U.S. bank deposits among the largest banks increased greatly, especially from 1994 to 1998, when a number of exceptionally large mergers occurred. Concentration increased substantially in many local banking markets, especially in large metropolitan areas, where concentration tended to be relatively low. Initial statistical tests indicate that bank mergers and a decline in the number of banks have played a role in increasing local market concentration. At the same time, the study suggests that "switching costs"--that is, the costs customers incur to change banks--are an increasingly important characteristic of retail banking. Because bank competition within local market areas directly affects retail customers, any trends toward increasing concentration and higher switching costs suggest that antitrust laws may become a constraint on more mergers than in the past. These tendencies suggest that divestitures will likely become a public policy remedy that will be used with increasing frequency.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.federalreserve.gov/pubs/staffstudies/174/default.htm
    Download Restriction: no

    File URL: http://www.federalreserve.gov/pubs/staffstudies/174/ss174.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Staff Studies with number 174.

    as in new window
    Length:
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:fip:fedgss:174

    Contact details of provider:
    Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
    Web page: http://www.federalreserve.gov/
    More information through EDIRC

    Order Information:
    Email:

    Related research

    Keywords: Bank mergers ; Banking structure;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Steven Pilloff, 1999. "Multimarket Contact in Banking," Review of Industrial Organization, Springer, vol. 14(2), pages 163-182, March.
    2. Robert Tannenwald, 1994. "The geographic boundaries of New England's middle-lending markets," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 45-64.
    3. Myron L. Kwast & Martha Starr-McCluer & John D. Wolken, 1997. "Market definition and the analysis of antitrust in banking," Finance and Economics Discussion Series 1997-52, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Martin Goetz, 2011. "Bank Organization, Market Structure and Risk Taking: Theory and Evidence from U.S. Commercial Banks," NFI Working Papers 2011-WP-11, Indiana State University, Scott College of Business, Networks Financial Institute.
    2. J.W.B. Bos & J. Kolari & R. van Lamoen, 2009. "Competition and innovation: evidence from financial services," Working Papers 09-16, Utrecht School of Economics.
    3. Hakimi, Abdelaziz & Hamdi, Helmi & Djlassi, Mouldi, 2013. "Testing the concentration-performance relationship in the Tunisian banking sector," MPRA Paper 55927, University Library of Munich, Germany, revised 2013.
    4. Robert Pollin & James Heintz, 2013. "Study of U.S. Financial System," FESSUD studies fstudy10, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    5. Alicia GarcĂ­a-Herrero & Josep M. Vilarrubia, 2007. "The Laffer Curve of Macroeconomic Volatility and Growth: Can it be Explained by the Different Nature of Crises?," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 43-60, January-J.
    6. Jason Allen & Walter Engert & Ying Liu, 2007. "A Comparison of Canadian and US Universal Banks: Efficiency, Productivity, and the Role of Technology," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 61-96, January-J.
    7. Ahmad Bello, Dogarawa, 2006. "Challenges of Bank Consolidation to the Central Bank of Nigeria: A Descriptive Analysis," MPRA Paper 23198, University Library of Munich, Germany.
    8. Prudence Serju, 2007. "Estimating Potential Output for Jamaica: a Structural VAR Approach," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 1-22, January-J.
    9. Prosper F. Bangwayo-Skeete & Ryan W. Skeete, 2007. "Regional Integration and Elasticities of Export Demand in Barbados," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 23-41, January-J.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedgss:174. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.