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Economic Quarterly

Summer 1998

The Bank Merger Wave: Causes and Consequences

J. Alfred Broaddus, Jr.

Since 1981, banking industry consolidation has been striking, including recent megamergers that will change the face of the industry. Without the elimination of in-state and interstate branching restrictions, the merger wave would have been impossible, but the underlying force behind the wave appears to be the extraordinary advance in communications and data processing technology. While technological advance is typically thought to be good for consumers, the banking merger trend has been greeted with fears of diminished service, higher fees, and decreased credit availability. Bank customer relationships may indeed be disrupted in some cases during the current transition. Over time, however, increased competition in banking markets supported by the new technology should benefit the vast majority of the bank customers.

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