Do Interstate Mergers by Large Banks Consolidate Local Deposit Markets?: An Analysis of the US Deposit Market After IBBEA (1994–2006)

This paper investigates the dynamic effects of interstate bank mergers by large banks on local MSAlevel market concentration in the United States following the Riegle-Neal Act (IBBEA) of 1994. Using a staggered event study difference-in-differences model as well as the Sun and Abraham (2020) estimator, we analyze deposit and bank merger data from 1994 to 2006 to derive estimates of the causal effect of interstate market-extension mergers by large banks. Our results reveal that there is likely no causal effect of interstate bank mergers by large banks on local structural market competition. However, the study finds strong suggestive evidence that overall market competition may increase immediately following the interstate merger event due to consumer exit and weak suggestive evidence that consolidation among dominant deposit market players may increase following the merger. These results largely validate the current approach in banking antitrust enforcement of the Department of Justice that focuses on a static approach to market concentration while providing additional insights in terms of top-heavy concentrations that may follow after interstate mergers.