DP14516 Two Centuries of U.S. Banking Concentration: 1820-2019

Author(s): Caroline Fohlin, Matthew Jaremski
Publication Date: March 2020
Keyword(s): bank concentration, Too Big To Fail
JEL(s): E44, G20, N11
Programme Areas: Financial Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14516

Concentration plays a key role in banking efficiency and stability, yet the literature lacks any long-run analysis of U.S. banking industry structure. This paper uses newly-collected archival data to provide the first study of banking concentration from the early years of the republic through 2019. While concentration was declining or stable before the mid-1920s, statistical tests identify a structural break thereafter, as concentration started steadily rising as a result of growth at the nation's largest five banks, particularly those located in New York City. A second structural break in the mid-1990s further accelerated the upward trend in concentration before slowing down during the Great Recession.