Economies of Scale and Holding Company Affiliation in Banking: Reply

The structure of our commercial banking system, while shaped to an extent by market forces, is in large part due to the complex of federal and state regulations governing banking firms. Among these are statutes making the applications of FDIC-insured banks for merger and for holding company affiliation subject to approval by a federal regulatory agency. These statutes, the Bank Merger Act of 1960 and the Bank Holding Company Act of 1956, amended in 1966 and 1970, direct the agencies to consider the firms' prospects for financial viability, the convenience and needs of the community to be served, and the probable effect of the merger or holding company affiliation upon competition in affected banking markets. Approval is to be withheld for combinations whose effect may be to substantially lessen competition, unless it is clear that the public interest would nevertheless be served.