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

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.Bank failures ; Bank mergers ; Banking market

Regulation and bank failures: new evidence from the agricultural collapse of the 1920's

This article examines the contribution of government policies to the high number of bank failures in the United States during the l920s. I consider the state of Kansas, which had a system of voluntary deposit insurance and where branch banking was strictly prohibited, and find that bank failure rates were highest in counties suffering the greatest agricultural distress and where deposit insurance system membership was the highest. The evidence for Kansas illustrates how prohibitions on branch banking caused unit banks to be especially susceptible to local economic shocks, and suggests that, despite regulations to limit risktaking, deposit insurance caused more bank failures than would have occurred otherwise.Deposit insurance ; Bank failures ; Banks and banking - History ; Branch banks

Another window: the term auction facility

Monetary policy ; Federal funds rate

Government policy and banking instability: "overbanking" in the 1920s

Excess capacity, or “overbanking,” was cited by contemporaries as leading cause of bank failure during the 1920s. Many states that had high numbers of banks per capita in 1920 had high bank failure rates subsequently. This article finds that the number of banks per capita was highest in states that provided deposit insurance, set low minimum capital requirements, and restricted branching. Banks per capita declined the most over the 1920s in states where branching expanded, and in those suffering high failure rates because of falling incomes or instability caused by deposit insurance. Deposit insurance and the relative dominance of agriculture also explain the composition of state banking systems between state and federally chartered institutions.Bank failures ; Deposit insurance

Replacement windows: new credit programs at the discount window

Discount window

Why no business loan growth?

Commercial loans

When will business lending pick up?

The recent declines in tightening of lending standards suggest that business lending may be poised for a rebound.Bank loans ; Commercial loans

Seasonal accommodation and the financial crises of the Great Depression: did the Fed "furnish an elastic currency?"

Depressions ; Federal Reserve System - History ; Seasonal variations (Economics) ; Financial crises

Monetary policy in the Great Depression: what the Fed did and why

Federal Reserve System - History ; Monetary policy

Banking industry consolidation and market structure: impact of the financial crisis and recession

The number of U.S. commercial banks and savings institutions declined by 12 percent between December 31, 2006, and December 31, 2010, continuing a consolidation trend begun in the mid-1980s. Banking industry consolidation has been marked by sharply higher shares of deposits held by the largest banks—the 10 largest banks now hold nearly 50 percent of total U.S. deposits. How­ever, antitrust policy is predicated on the assumption that banking markets are local in nature, and enforcement has focused on preventing bank mergers from increasing the concentration of local banking markets. The author finds little change over time in the average concentration of local banking markets or the average number of dominant banks in them, even during the recent financial crisis and recession when numerous bank failures and several large bank mergers occurred. Concentration did not increase substantially, on average, in markets where mergers occurred among banks when both the acquiring and acquired banks had existing local offices, though rural markets generally saw larger increases in concentration from such mergers than did urban markets. Although the structures of local banking markets, on average, have changed little since the mid-1980s, deposit concentration has continued to increase at the level of U.S. Census regions. As technology evolves and the costs of obtaining banking services from distant providers fall further, local market characteristics may become less relevant for analysis of competition in banking. ; Link to accompanying data file: http://research.stlouisfed.org/publications/review/11/11/1111dwd.xlsxBanking structure ; Financial crises ; Recessions