Where Are All the New Banks? The Role of Regulatory Burden in New Bank Formation

Where Are All the New Banks? The Role of Regulatory Burden in New Bank Formation New bank formation in the U.S. has declined dramatically since the financial crisis, from over 130 new banks per year to less than 1. Many have suggested that this is due to newly-instituted regulation, but the current weak economy and low interest rates (which both depress banking profits) could also have played a role. We estimate a model of bank entry decisions on data from 1976 to 2013 which indicates that at least 75 % of the decline in new bank formation would have occurred without any regulatory change. The standalone effect of regulation is more difficult to quantify. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Where Are All the New Banks? The Role of Regulatory Burden in New Bank Formation

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York (outside the USA)
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-015-9499-3
Publisher site
See Article on Publisher Site

Abstract

New bank formation in the U.S. has declined dramatically since the financial crisis, from over 130 new banks per year to less than 1. Many have suggested that this is due to newly-instituted regulation, but the current weak economy and low interest rates (which both depress banking profits) could also have played a role. We estimate a model of bank entry decisions on data from 1976 to 2013 which indicates that at least 75 % of the decline in new bank formation would have occurred without any regulatory change. The standalone effect of regulation is more difficult to quantify.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Feb 5, 2016

References

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