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Have acquisitions of failed banks increased the concentration of U.S. banking markets?

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  • David C. Wheelock

Abstract

During 2007-10, failures eliminated 318 U.S. commercial banks and savings institutions, about 4 percent of the total number of banks operating at the end of 2006. The assets and deposits of many failed banks were acquired by institutions that already had offices in markets served by the failed banks. This article investigates the impact of in-market acquisitions of failed banks on the concentration of local U.S. banking markets. Most banks that failed during 2007-10 were small, and their acquisitions generally had little impact on market concentration. Acquisitions of larger banks that failed, such as the acquisition of Washington Mutual Bank by JPMorgan Chase Bank, also had only limited impact on the concentration of most banking markets. Among large metropolitan statistical area markets, the Houston and New York City banking markets were most affected by the acquisition of Washington Mutual, but these markets remained relatively unconcentrated after the acquisition. Hence, the article finds that except for a few rural banking markets, acquisitions of failed banks by in-market competitors generally had only a small impact on market concentration.

Suggested Citation

  • David C. Wheelock, 2011. "Have acquisitions of failed banks increased the concentration of U.S. banking markets?," Review, Federal Reserve Bank of St. Louis, issue May, pages 155-168.
  • Handle: RePEc:fip:fedlrv:y:2011:i:may:p:155-168:n:v.93no.3
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    File URL: https://files.stlouisfed.org/files/htdocs/publications/review/11/05/155-168Wheelock.pdf
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    1. Craig P. Aubuchon & David C. Wheelock, 2010. "The geographic distribution and characteristics of U.S. bank failures, 2007-2010: do bank failures still reflect local economic conditions?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 395-415.
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    1. repec:eee:jaecon:v:64:y:2017:i:1:p:56-77 is not listed on IDEAS

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    Keywords

    Bank failures ; Bank mergers ; Banking market;

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