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Interstate Banking

INTERSTATE BANKING IN THE UNITED STATES

This research explores the issue of interstate banking in the United States. Until the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 becomes effective in 1997, de jure interstate banking in the United States will continue to be illegal as it has been for decades (Clinton, 1994, pp. 1896-1899).

Opponents argue that interstate banking will lead to increased concentration in the commercial banking industry in any jurisdiction where the practice is permitted (Petersen & Rajan, 1995, pp. 407-443). Such a development did occur in Canada. That country enacted federal legislation just after the end of the Second World War that permitted the conduct of inter-provincial commercial banking. In the five decades since that time, six very large banking institutions have grown to dominate the commercial banking industry in Canada. Smaller local banks continue to exist; however, they play a very small roleĀ·even at the local levelĀ·in Canadian commercial banking. The choices available to the banking consumer in Canada were reduced, and control of the banking market in a very real sense passed from the consumer to the service providers.

A fear among opponents to interstate banking in the United States is that the commercial banking industry in the United States could easily develop along the Canadian pattern. In fact, however, prohibitions at the federal level against interstate banking have not precluded concentration in commercial banking, where economic incentives existed for such concentration (Petersen & Rajan, 1995, pp. 407-443).

The widespread use of the holding company concept in commercial banking in the United States has afforded the industry the capability and the opportunity to attain de facto interstate commercial banking regardless of the de jure structure of the industry (Petersen & Rajan, 1995, pp. 407-443). In the ...

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Interstate Banking. (1969, December 31). In LotsofEssays.com. Retrieved 05:00, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1696161.html