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Where Are All the New Banks? The Role of Regulatory Burden in New Bank Formation

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  • Robert M. Adams

    (Federal Reserve Board)

  • Jacob Gramlich

    (Federal Reserve Board)

Abstract

New bank formation in the U.S. has declined dramatically since the financial crisis, from over 130 new banks per year to less than 1. Many have suggested that this is due to newly-instituted regulation, but the current weak economy and low interest rates (which both depress banking profits) could also have played a role. We estimate a model of bank entry decisions on data from 1976 to 2013 which indicates that at least 75 % of the decline in new bank formation would have occurred without any regulatory change. The standalone effect of regulation is more difficult to quantify.

Suggested Citation

  • Robert M. Adams & Jacob Gramlich, 2016. "Where Are All the New Banks? The Role of Regulatory Burden in New Bank Formation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(2), pages 181-208, March.
    • Handle: RePEc:kap:revind:v:48:y:2016:i:2:d:10.1007_s11151-015-9499-3
    DOI: 10.1007/s11151-015-9499-3
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    References listed on IDEAS

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    Cited by:

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    2. Ogawa, Toshiaki, 2022. "Welfare implications of bank capital requirements under dynamic default decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 138(C).
    3. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.
    4. Toshiaki Ogawa, 2020. "Welfare Implications of Bank Capital Requirements under Dynamic Default Decisions," IMES Discussion Paper Series 20-E-03, Institute for Monetary and Economic Studies, Bank of Japan.

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