Can one bank size fit all?

摘要

After changing little between 1960 and 1980, the number of commercial banking organizations in the United States fell by twenty-five percent between 1980 and 1992. Deregulation, technological change, regional and national economic shocks, and increased competition from nonbank financial institutions dramatically changed markets for all banks. But changes in geographic restrictions in particular, removed barriers between previously separated banking markets and drew even the most isolated banking communities into broader, more competitive markets.;Can banks of all sizes survive these changes? Tests for convergence in bank-size distributions suggest whether relaxation of entry barriers created opportunities for large banks but eliminated them for small banks. If small banks cannot compete, then the bank-size distribution will shift to the right as the industry converges toward a larger optimal bank size. If small banks can remain competitive, then the new equilibrium market structure will likely diverge as small banks remain small and large banks take advantage of their new opportunities.;I use nonparametric tests to investigate consolidation in commercial banking. I use distribution-free quartile tests to compare bank-size distributions within each state over time, across states, and across regions. In order to estimate the number and size-distribution of banks that will survive consolidation, I construct Markov transition matrices. The transition matrices track movements within bank-size distributions.;In spite of a disproportionate shrinkage in the number of small banks in 45 states, an estimate of the transition matrix suggests that small banks are here to stay. The 1960-1992 transition matrix shows that half of the roughly 3,700 banks with less than