The Impact of Regulation on Consolidation and Competition in the Banking Industry From 1980 to 2019

Abstract

The impact of regulation on consolidation and competition in the United States banking industry has been a topic of continued interest. However, there has been a lack of research on this topic after 2010. This study continued the examination of regulation impact by identifying specific pieces of legislation using regression analysis and examining those acts in relation to bank failures, unassisted mergers, and assisted mergers through the period of 1980 to 2019. As a proxy for consolidation, the study analyzed the movement of assets from 2019’s ten largest banks using a fold change equation. Our findings show that there are at least three significant acts of banking legislation from 1980 to 2019, each of which appear to have had a negative impact on the number of individual banks. We examined the implications of these findings when compared to the identified factors and ultimately discuss how regulation impacted the relationship between consolidation and competition.