1980s to the Present
Objectives: The number of institutions in the U.S. banking industry has decreased from around 14,000 in the 1980s to fewer than 7,000 presently. Any change in the number of banks must be due to the formation of new banks, mergers among existing banks, and the failure of existing banks. Over the years from the mid-1980s to the present the causes underlying the continuing consolidation in the U.S. banking industry have changed from bank failures, to mergers, and back to failures in the recent financial crisis. These trends have also reflected at various points the effects of banking legislation such as the Riegle-Neal Act of 1994. This paper will examine the changing nature of the causes of the on-going consolidation in the U.S. banking industry from the mid-1980s to the present.
Data/Methods: The study will use data available from the Federal Deposit Insurance Corporation (FDIC) on the number of banking institutions, the number of newly formed banks, the number of mergers and acquisitions, and the number of failures each year from the mid-1980s to the present. Analysis of these data will reveal the underlying causes of the change in the number of banks in the U.S. banking industry for this period of time.
Results/Expected Results: It is clear that the primary reason for the initial decrease in the number of banks in the U.S. beginning in the mid-1980s was the increased number of bank failures during the banking crisis of that period. When that banking crisis was resolved the number of banks continued to decline through the 1990s primarily due to mergers and acquisitions, accelerated by the interstate banking activity made possible by the passage of the Riegle-Neal Act in 1994. As the impact of Riegle-Neal on merger activity wound down, the recent financial crisis and the recession of 2008-2009 resulted in a return to a significant number of bank failures which now constitute the primary reason for the continuing decrease in the number of banking institutions in the U.S.