Investigating the Banking Consolidation Trend

Abstract

Lately, the U.S. commercial banking industry has been consolidating. Although some firms have left the industry, many more have simply combined with other firms, resulting in fewer, bigger banks. Many legislators, regulators, bankers, and economists have roundly applauded this consolidation trend. In their view, consolidation is a laudable market response to industry changes that will bring significant benefits such as greater efficiency and a lower rate of bank failures. They also see consolidation as an effective way to shift resources out of banking, an industry they think is plagued with excess capacity.