Interstate Banking

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 role·even at the local level·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 h

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a corporate raider bent on stripping the assets of acquired banks. Rather, concentration in this industry is sought as a means of developing growth in both market share, and in profitability. Profits, thus, will continue to be reinvested in the community, for otherwise growth will not occur. In fact, the greater financial resources of larger commercial banking institutions more often than not means increased availability of loanable funds for smaller communities (Bentsen, 1993, pp. 69-71). It has also been argued that statewide branch banking and interstate branch banking will bring outsiders into a community, and that these outsiders will neither understand nor have the interests of the community at heart. In fact, it would be quite stupid of a major bank to attempt to enter a market with a strategy that relied on the use of bank managers who neither understood nor cared about the community in which the bank was to be located. Such a strategy would doom the market entry to failure, which is the last thing that the bank would want. To be honest, however, there have been instances in which agricultural loans have been called, in accordance with a policy dictated by bank headquarters, where the argument has been that local b
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Some common words found in the essay are:
Petersen Rajan, Maryland Virginia, Efficiency Act, World War, Pacific/Rainier National, Fair Lending, American Banker, Security Pacific, America We're, interstate banking, Lloyd Bentsen, commercial banking, banking system, bentsen 1993, concentration commercial banking, petersen rajan, holding company, rajan 1995, banking united, concentration commercial, petersen rajan 1995, commercial banking industry, 1995 pp 407-443, american banker, bentsen 1993 pp,
Approximate Word count = 1726
Approximate Pages = 7 (250 words per page)

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