Consolidation in the U.S. Banking Industry: Is the "Long, Strange Trip" About to End?

Abstract

Because this paper is part of a collective review of the U.S. banking industry's past and an anticipation of its future, many aspects of the industry's transformation are discussed in companion papers.2 Our focus, therefore, is primarily on industry structure: how it has already changed and how it might evolve in the future. Accordingly, we begin with an updated review of the structural changes that occurred in the industry over the two decades 1984-2003. This should give us a better understanding of the scope of the decline that has taken place. We then review the causes of this decline and the literature on how the decline has affected such things as asset concentration, banking competition, efficiency, profitability, shareholder value, and the availability and pricing of banking services. After this analysis of the past, we offer some projections of future banking industry structure.