Interstate Banking:

Experiences in Three Western States

GGD-95-35: Published: Dec 30, 1994. Publicly Released: Dec 30, 1994.

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Pursuant to a congressional request, GAO reviewed three states' experiences with interstate banking deregulation.

GAO found that: (1) geographic banking deregulation has not resulted in significant consolidation in the banking industry; (2) the banking industry in the three states reviewed is already highly concentrated; (3) the large banks' experiences with geographic deregulation have been mixed; (4) although smaller banks continue to play an important role and frequently are among the most profitable banks, some small banks' market share has declined; (5) although the standardization of loan criteria may restrict small businesses' access to credit, depersonalize the loan officer-borrower relationship, and make it difficult for loan officers to analyze relevant credit information, large banks believe that geographic deregulation has enabled them to become more efficient and serve more small businesses; (6) some banking industry officials attribute credit difficulties in the three states to the decline in the number of small banks and the increased emphasis on consumer lending; (7) although small banks do not have a large presence in some inner cities and rural markets, industry officials view these banks as strong providers of credit; and (8) antitrust enforcement of the banking industry is needed to better meet the needs of small businesses and ensure that any adverse impacts of consolidation on the small business sector is minimized.

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