December 11, 2006

Richmond Fed's Economic Quarterly Examines Changes in the Size Dynamics of U.S. Banks

Richmond, VA

Changes in the Size Distribution of U.S. Banks: 1960—2005 by Hubert P. Janicki and Edward Simpson Prescott

Banks are viewed as pillars of local communities, but recently the banking industry has experienced significant consolidation, with many community banks being acquired by larger institutions. Are we headed toward a day when there will be just a few huge banks operating throughout the country? Hubert P. Janicki and Edward S. Prescott examine changes in the size distribution of U.S. banks from the period 1960 to 2005, and find that although the ten largest banks increased their share of the banking industry’s assets from 21 to almost 60 percent during this period, many small and mid-size banks continue to exist and thrive. Janicki and Prescott present the key facts that a theory of bank size distribution should explain and argue that such a theory could be useful in helping us understand future consolidation in the banking industry.

You can find the full text of this article and others in the latest issue of Economic Quarterly at the Bank's Web site.

Also in this issue:

  • Bond Price Premiums by Alexander L. Wolman
  • Stark Optimal Fiscal Policies and Sovereign Lending by Pierre-Daniel G. Sarte
  • Not Your Father’s Credit Union by John R. Walter

The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For free copies or more information, contact the Federal Reserve Bank of Richmond’s Public Affairs office at 804.697.7982.

The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.


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