Is Texas overbanked?

Abstract

Texans taking to the roads are almost guaranteed to come across three things: a place to eat, a place to buy gas and a place to bank. Seemingly ubiquitous in the modern Texas landscape, banks are both a source and a sign of the state's robust economy. In small towns and large cities, community banks compete for business with each other, with savings banks and credit unions and with the largest commercial banks in the world. ; Banks competing to offer the best service at the best price is essential to the health of local economies. With too little competition, monopoly characteristics can creep into banking markets, driving up costs for consumers. On the other hand, too many banks in a market may mean some institutions don't have enough business to support their overhead, making them less efficient. ; So where do Texas banks and banking markets fall on this spectrum? A good way to answer that question is to compare the availability of banking services in Texas with availability in other parts of the country. ; Bankers sometimes worry Texas is overbanked. The concept is somewhat subjective, so finding a conclusive empirical answer can be problematic. However, data show that Texas ranks among the relatively less banked states, based on several measures, although it generally has greater banking services availability than California, a similarly sized state. The same conclusion holds when Texas metropolitan areas are compared with like-sized regions in other states.Banks and banking - Texas ; Competition