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

Market Wire, December, 2006

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: http://www.richmondfed.org/publications/economic_research/economic_quarterly/

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 Federal Reserve Bank of Richmond is one of 12 District Reserve Banks that together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Richmond Fed serves the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

Contacts: John Weinberg Director of Research Federal Reserve Bank of Richmond 804.697.8205 Kay Haynes Managing Editor Federal Reserve Bank of Richmond "Economic Quarterly" Email Contact 804.697.8606