Are mergers responsible for the surge in new bank charters?
Author InfoWilliam R. Keeton Abstract After stagnating for many years, the rate of new bank formation increased sharply in the second half of the 1990s. The financial press attributes this development to the high volume of bank mergers, which are said to have encouraged new entry by reducing service to some bank customers. It is commonly asserted, for example, that many new banks serve small businesses whose banks were taken over by larger banks uninterested in making small business loans. Most banking experts agree that such an increase in new banks in response to mergers would be healthy, helping maintain competition in local banking markets and offset reductions in service.> The view that mergers encourage new bank formation has recently come into question. Examining data on new bank charters and mergers in the 1990s, a study released early last year concluded that mergers have actually discouraged new bank formation. Shortly thereafter, another study came to the opposite conclusion
