EFFECTS OF BANKING STRUCTURE ON THE ALLOCATION OF CREDIT TO NONMETROPOLITAN COMMUNITIES

Abstract

Recent and proposed legislative changes encourage increases in multioffice banking activity. In this manuscript, the allocation of credit to nonmetropolitan communities in a branch banking state (Arizona) is compared to that in a unit banking-holding company state (Colorado). Rapidly growing nonmetropolitan areas have experienced increased lending activity under statewide branching relative to unit banking. Rural communities, which experienced slow or negative growth, had lower loan-to-deposit rations under branch banking than might have existed under unit banking. Therefore, conversion to branch banking may result in a reallocation of loanable funds within nonmetropolitan areas.Financial Economics,