Good News on Twelfth District Banking Market Concentration

As the banking industry has consolidated in recent years, the number of banking organizations in the U.S. and in the Twelfth Federal Reserve District has declined dramatically.This consolidation trend raises public policy issues because of its implications for concentration and therefore competition in local banking markets. Specifically, mergers between banks in the same local market increase local banking market concentration, which, in some instances, can weaken competition.To some degree, market forces work to keep a local banking market from remaining highly concentrated for too long: other banks tend to move into concentrated markets to seize the potential pricing advantages, and as they do, concentration declines. In addition, antitrust enforcement, carried out in part by the Federal Reserve, helps limit increases in concentration in local markets due to mergers.