Deregulation, regional economics and the spatial restructuring of the United States commercial banking industry

Until recently, the United States maintained the most detailed, disjointed, and multifaceted system of legal controls on its financial system. During the past few decades though, the U.S. banking industry has experienced a wave of deregulations. Culminated through the Riegle-Neal Interstate Banking and Branching Act, it has been suggested that the interstate banking revolution, represents one of the most important aspects of industry restructuring. Structural and competitive implications to the U.S. commercial banking system could be significant. Constituents of the Federal Reserve suggest commercial banks are seeking to compete outside traditional market boundaries in wider regional, national and global markets. Encouraged by the deregulatory process and enticed by the opportunity for greater market presence and increased profits, employing mergers and acquisitions as the primary growth strategy, acquisitive institutions continued to consolidate throughout the nineties. Consequently, a preliminary objective in this research has been the examination of the spatial restructuring of the commercial banking industry, following more recent geographic deregulation, with a preliminary focus on the associated wave of mergers and acquisitions. The results suggest that while recent deregulation has been a national phenomenon, the dynamic geography of mergers and acquisitions has been spatially selective. Regional and state-level concentrations of 'activity' exist. But, why do mergers and acquisitions have a tendency to occur in some regions and not others? In examining the spatial distribution of mergers and acquisitions, our findings also suggest that regional economic and regulatory conditions are important considerations in this spatially selective process. Although it is certain that deregulatory conditions and macroeconomic events are fundamental in influencing the spatial distribution of consolidation, a study of the nature presented here, which emphasizes the importance of regional economic variables, reinforces the value of geography as a complimentary approach to understanding the complexity of banking and related activities.