TABLE OF CONTENTS Overview by Mark J. Flannery
University of Florida
The four chapters in this section shed light on various aspects of the U.S. regulatory system. The first two discuss the causes and consequences of recent changes in the structure of the U.S. banking industry. The second two address banks capital decisions and regulatory efforts to control risk through minimum capital requirements.
In Chapter 10, Jones and Critchfield review the path of consolidation within the U.S. banking system over the period 1984 2003. They argue that technical changes and globalization had set the stage for substantial consolidation within the industry by the late 1970s. Yet binding restrictive regulations remained in force. It was not until the thrift crisis created an incentive to encourage previously forbidden merger combinations that the forces of technical change and globalization were permitted to operate. The 1980s consolidation, therefore, was driven largely by the bank and thrift industries failing health. By the 1990s, legislation had removed most statutory obstacles to bank mergers, and the consolidation continued, propelled now by healthy industry participants seeking strategic allies and lower operating costs. Jones and Critchfield point out that the number of community banks (assets less than $1 billion) fell most sharply, although many...
