A comparative analysis of the US and EU retail banking markets - Wsbi

Graph 6: Share of US banking industry assets by size group, 1984 and 2003
1984 2003
42%
8%
30%
14%
6%
2%
8%
4%
13%
73%
■ Less than $100
■ $100 million to $500 million
■ $500 million to $1 billion
■ $1 billion to $10 billion
■ Greater than $10 billion
Source: “The declining number of US banking organisations: Will the trend continue”, FDIC study, February 2004.
80%
70%
60%
50%
40%
30%
20%
10%
0%
Graph 7 below shows the evolution of asset
concentration in the US at the level of the number of
institutions for various years between 1980 and
1998. A table from a different source (table H in the
table annex) provides asset concentrations for the
year 2003. Looking at the asset concentration of the
top ten credit institutions by size of assets reveals
that they went from holding 18.6% in 1980 to
36.7% of the industry’s assets in 1998 (the numbers
associated with graph 7 can be seen in table G in the
table annex). Table H in the table annex reveals that
the US’s top ten credit institutions by asset size held
46.8% of the industry’s assets in 2003. The top 5
credit institutions by size of assets held 37.6% of the
industry’s assets in 2003, while they held 28.6% of
domestic deposits.
Graph 7: Evolution of the concentration
in the US, 1980-1998 (percent of assets)
1980 1985 1990 1995 1998
■ Top 10
■ Top 25
■ Top 50
■ Top 100
As pointed out above, the decline of the number of
credit institutions in the US, as well as the parallel
increase in the sector’s concentration, occurred
mainly due to M&A activity. The nature of banking
consolidation in the US has been both intra-state
(within individual states) and inter-state (between
states). The Riegle-Neal Act (see regulatory and
supervisory comparison chapter of study for more
detail on that) is said in particular to have brought
about a jump in the number of inter-state mergers,
which represented less than five percent of total
mergers before the Act, while they represented thirty
percent on average in the 1997-2002 period 241 .
Note however that the majority of bank M&As in the
US are still intra-state.
Inter-state expansion has primarily occurred via interstate
branching rather than inter-state mergers, as
there are still few bank holding companies and/or
independent depository institutions with offices in
two or more states in the US (so-called multi-state
organisations). By 2004 there were 552 multi-state
organisations, representing less than 3% of total US
credit institutions 242 . In fact, no US institution has
major retail operations in all regions of the US 243 .
The picture is somewhat different if one looks at the
number of inter-state branches (of multi-state credit
institutions), as these numbered 28,615 branches 244
in 2004, representing 29% of all branches in the US.
This reveals that multi-state credit institutions hold a
much high number of branches per credit institution
than single-state credit institutions.
Source: “Bank Mergers and Banking Structure in the US,
1980-98”, Stephen A. Rhoades, August 2000 - NIC database,
Federal Reserve Board.
241 Walter N. (ed), “US vs EU banking market: the more integrated, the more profitable”, November 2003, Deutsche Bank Research.
242 National bank and thrift office data book, Summary of deposits, FDIC, June 2004.
243 Walter N. (ed), “US vs EU banking market: the more integrated, the more profitable”, November 2003, Deutsche Bank Research.
244 This is the number of inter-state branches operated by commercial and savings banks insured by the FDIC.
85