The U.S. commercial banking industry has undergone substantial change during the past one hundred years. This is true both in terms of commercial banks' geographical presence, the financial products and services offered, as well as organizational structures.

Since the 1980s, we have also seen a dramatic change in the number of commercial banks. The figures below provide graphical evidence on these changes based on historical bank data from the Federal Deposit Insurance Corporation.

Figure 1 shows the sources of changes in the number of commercial banks: newly established ("chartered") banks, mergers between existing institutions, and failures of existing institutions.

Figure 2 shows the total number of commercial banks.

   

Question - 1

Using the evidence provided in Figures 1 and 2, briefly describe the trends in the U.S. banking industry structure between 1985 and 2020.

Question- 2

Antitrust authorities worry that firms in concentrated industries "exploit" the consumers of their products and services due to a lack of competitive pressure. Is this graphical evidence on the U.S. banking industry consistent with this concern? What more detailed information might buttress your argument?

800 700 600 500 400 300 200 100 0 1985 Figure 1: Changes in number of commercial banks 1990 1995 New charters 2000 2005 Mergers ...... 2010 Failures 2015 O 2020