Integration Among US Banks

60 Pages Posted: 27 Sep 2019 Last revised: 13 Jun 2022

See all articles by Abhinav Anand

Abhinav Anand

IIM Bangalore

John Cotter

University College Dublin

Multiple version iconThere are 3 versions of this paper

Date Written: June 13, 2022


We define ‘integration’ for 2287 US banks from 1993–2019 as the explanatory power of common banking factors in explaining stock returns. Integration has risen steadily, and shows significantly high peaks during financial crises. This is worrisome, since a negative shock to common factors depresses sector-wide returns more intensely when the sector is tightly integrated. The Dodd-Frank Act has improved capital adequacy but has not arrested rising levels of integration. Further, banks’ current integration predicts their instability up to 4 quarters in advance; and during crises, past integration levels explain a healthy (6–7%) variation in US banks’ volatilities.

Keywords: Bank integration; Banking crises; Systemically important banks; Bank risk; Principal component regressions

JEL Classification: G10, G21, G28, C32, C33, C38, C58

Suggested Citation

Anand, Abhinav and Cotter, John, Integration Among US Banks (June 13, 2022). IIM Bangalore Research Paper No. 597/2019, Available at SSRN: or

Abhinav Anand (Contact Author)

IIM Bangalore ( email )

Bannerghatta Road
Bangalore, 560 076

John Cotter

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

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