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Working Paper
Consolidation and merger activity in the United States banking industry from 2000 through 2010
This study investigates trends in consolidation and merger activity in the United States banking industry from 2000 through 2010. Over this period, the U.S. banking industry has consistently experienced over 150 mergers annually, with the largest banking organizations holding an increasing share of banking assets. While the industry has undergone considerable consolidation at the national level, local banking markets have not experienced significant increases in concentration. The dynamics of consolidation raise concerns about competition, output, efficiency, and financial stability. This ...
Discussion Paper
The Effects of the COVID-19 Shutdown on the Consumer Credit Card Market: Revolvers versus Transactors
The consumer credit card market has experienced dramatic, unprecedented changes in the wake of the COVID-19 shutdown of the U.S. economy. Revolving credit in the G.19 Consumer Credit statistical release fell by an annualized rate of 32 percent in the second quarter of 2020.
Working Paper
Scale economies, scope economies, and technical change in Federal Reserve payment processing
In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. The payments industry has also undergone changes in cost structure with the introduction of new technology. Unfortunately, data on the private provision of payment processing services are not available. However, the Federal Reserve provides similar services and collects data on its own provision of payments processing, offering an opportunity to gain insights into the cost structure of payments ...
Working Paper
Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending
Has information technology improved small businesses' access to credit by hardening the information used in loan underwriting and reducing the importance of proximity to lenders? Previous research, pointing to increasing average lending distances, suggests that it has. But this conclusion can obscure differences across loans and lenders. Using over 20 years of Community Reinvestment Act data on small business lending, we find that while average distances have increased substantially, distances at individual banks remain unchanged. Instead, average distance has increased because a small group ...
Working Paper
The effects of past entry, market consolidation, and expansion by incumbents on the probability of entry
The threat of entry is an important factor in the evaluation of the potential competitive effects of proposed mergers and acquisitions. In the evaluation of proposed bank mergers, a high probability of entry, or strong potential competition, is often found to mitigate the potential anticompetitive effect of a proposed horizontal merger. Because the probability of entry is not directly observed for each local market, variables such as per capita income, population growth and past entry are typically used to predict the probability of future entry. This study extends previous research on the ...
Working Paper
Where Are All the New Banks? The Role of Regulatory Burden in New Charter Creation
New bank formation in the U.S. has declined dramatically since the financial crisis, from well over 100 new banks per year to less than 1. Many have suggested that this is due to newly-instituted regulation, but the current weak economy and low interest rates (which both depress banking profits) could also have played a role. We estimate a model of bank entry decisions on data from 1976 to 2013 which indicates that at least 75% of the decline in new bank formation would have occurred without any regulatory change. The standalone effect of regulation is more difficult to quantify.