Consolidation In The U.S. Banking Industry Since Riegle-Neal

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Joseph N. Heiney


Banking, Consolidation, Branches


The Riegle-Neal Banking and Branching Efficiency Act of 1994 eliminated previous restrictions on interstate banking and branching in the U.S. banking industry. It was expected that this deregulation would accelerate the consolidation already underway among U.S. banks. Previous research examined the initial impact of Riegle-Neal on the number of banking institutions and branches by analyzing data from immediately before the act was passed in 1994 to immediately after it became fully effective in 1997. That research found an increase in the rate of consolidation among U.S. banks, with an increase in the number of mergers, an increase in the number of newly chartered banks, a decrease in the number of bank failures, and an increase in the number of new bank branches. This paper considers whether these immediate effects of Riegle-Neal have persisted into the longer term or have moderated in the years since the act became fully effective. The analysis of data since 1998 presented here indicates that the initial effects of the act have moderated. The rate at which the number of banking institutions is decreasing has slowed. The rate of merger and acquisition activity has decreased. Bank failures are very low. There has been a slow down in the increase of new bank branches.


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