The Benefits of Branching Deregulation
Year: 1997
Type: preprint
Abstract: When the Riegle-Neal Interstate Banking and Branching Efficiency Act went into effect in June 1997, it marked the final stage of a quarter-century-long effort to relax geographic restrictions on banks. This article examines an earlier stage of the deregulatory process-the actions taken by the states between 1978 and 1992 to remove the barriers to intrastate branching and interstate banking-to determine how the lifting of geographic restrictions affect the efficiency of the banking industry. The analysis reveals that banks' loan losses and operating costs fell sharply following the state initiatives, and that the cost declines were largely passed along to bank borrowers in the form of lower loan rates. The authors argue that these efficiency gains arose because better performing banks were able to expand their market share once geographic restraints were erased.
Source: SSRN Electronic Journal
Authors: Jith Jayaratne, Philip E. Strahan
Institutions: Boston College, National Bureau of Economic Research
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2159495017