Banking in the United States

Abstract The past 20 years have witnessed a transformation of the US banking industry, as well as a near total disaster. Mergers and acquisitions halved the population of commercial banks and the largest banks increased in size tenfold. The regulatory framework established during the Great Depression was dismantled, new technologies revolutionized how banks produce and distribute financial services, and dramatic increases in competition pressured banks to operate more efficiently. A strategic dichotomy has emerged, with small “community” banks providing person-to-person retail and small business banking services, and large commercial banks providing high-volume retail banking services in domestic markets and corporate and investment banking services world-wide. These changes have brought great efficiencies to the banking industry and its customers, but also introduced new instabilities. A decade of high profits was followed by large investment losses and government bailouts during the financial crisis of 2008–09. A partial re-regulation of the industry has followed