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Banking and Economic Research

Wednesday, December 28, 2011

A Look at the Impact of the Financial Crisis and Recession on Banking Consolidation and Market Structure

Consolidations have long concerned community bankers, but the financial crisis and Great Recession made them even more wary of mergers and acquisitions.

Between Dec. 31, 2006, and Dec. 31, 2010, the number of U.S. commercial banks and savings institutions declined by 12 percent, continuing a consolidation trend begun in the mid-1980s. Banking industry consolidation has been marked by sharply higher shares of deposits held by the largest banks—the 10 largest banks now hold nearly 50 percent of total U.S. deposits.

To understand better how and why this is happening, bankers should read “The Impact of the Financial Crisis and Recession on Banking Consolidation and Market Structure” in the November/December Review. Dave Wheelock, vice president and deputy director of research at the St. Louis Fed, extends prior research on the structure of U.S. banking markets by investigating changes in deposit concentration at both the local and regional levels. He also examines the effects on local market concentration of mergers of banks operating in the same markets.

Is Shadow Banking Really Banking?

The term “shadow banking” describes a large segment of financial intermediation that is routed outside the balance sheets of regulated commercial banks and other depository institutions. Shadow banks are defined as financial intermediaries that conduct functions of banking without access to central bank liquidity or public sector credit guarantees.

The size of the shadow banking sector was close to $20 trillion at its peak and shrank to about $15 trillion in 2010, making it at least as big as, if not bigger than, the traditional banking system. Read more in The Regional Economist’s primer, “Is Shadow Banking Really Banking?”, which draws parallels between the shadow banking sector and the traditional banking sector.

The Gender Wage Gap May Be Much Smaller Than Most Think

The gap between earnings of male and female workers has declined significantly over the past 30 years, according to Bureau of Labor Statistics—but do the statistics tell the whole story?

The bureau reports that in 1979, median weekly earnings of full-time female workers were 63.5 percent of male workers’ earnings, implying a gap of 36.5 percent. The earnings gap dropped to 30 percent in 1989 and to 23.7 percent in 1999. In the second quarter of 2011, the gap reached a low of 16.5 percent.

Despite the accuracy of these numbers, many researchers believe that the mere comparison of median weekly earnings of male and female workers presents an incomplete picture. Find out more with St. Louis Fed economist Natalia Kolesnikova and research associate Yang Liu, who investigate how “The Gender Wage Gap May Be Much Smaller Than Most Think” in the October 2011 Regional Economist.