The Expanding Geographic Reach of Retail Banking Markets

In the view of most policymakers and economists,competition in retail banking takes place in localmarkets covering a relatively small geographic area.Banks are thought to design their services and settheir loan and deposit rates in response to the supply anddemand conditions prevailing in a particular city, county,or metropolitan area. In keeping with this view, studies ofthe competitiveness of banking markets generally focus ondevelopments at the local level: for example, researchersand regulatory agencies assessing the effects of bank mergerson competition will examine the degree to whichdeposits in a given metropolitan area are concentrated in afew large banks.[...]