BankingMarketsandtheUseofFinancialServicesbySmall.pdfVIP

Banking Markets and the Use of Financial Services by Small and Medium-Sized Businesses This article was prepared by Gregory E. Elliehausen and John D. Wolken of the Board’s Division of Research and Statistics. A longstanding and contentious problem in the antitrust analysis of proposed bank mergers has been the definition of the geographic area and services that constitute a particular market for financial services. The issues involved can be illustrated by two questions that arise in the following example. A commercial bank wants to acquire another located in the same metropolitan area. If one considers only the banks in that area, the acquisition would apparently reduce competition for banking services in that locality. The first question is, Does the presence of commercial banks outside the area mitigate the anticompetitive effects? The second is, Would the anticompetitive effects be lessened if nonbank institutions in the area offered some (but not all) of the services offered by the two banks? Any definition of a banking market implies answers to these questions regarding the geographic extent of that market and the scope of services to be included. Although buttressed by recent general empirical evidence and market surveys conducted in specific cases, the definition of banking markets has generally relied on Supreme Court decisions from the 1960s and early 1970s. Given the deregulation and financial NOTE. This article summarizes Gregory E. Elliehausen and John D. Wolken. Banking Markers and fhe Use of Financial S:rvices by Small and Medium-Sized Businesses, Staff Studies 160 (Board of Governors of the Federal Reserve System, 1990). which is the first report of the results from the 1988-89 National Survey of Small Business Finances. An announcement of the availability for public use of the data file from the survey will appear in the January 1991 issue of the Federal Reserve Bulletin. innovations of recent years, the definition de- rived from those decisions ma