ABSTRACT
This chapter focuses on competition in retail commercial banking, the provision of basic financial services to households and small businesses by depository institutions chartered to operate as commercial banks. It seeks to use empirical evidence and some of the basic concepts of industrial organization to put the changes into perspective and examines some of the implications for competition analysis and public policy in the industry. A key feature of any industry is the geographic scope of the market(s). If firms compete in a national market, it means that they compete more or less directly with all other firms in their industry throughout the country. Empirical evidence indicates that local market areas are generally the appropriate focus for analysis of the competitive effects of bank mergers. The retail banking industry is clearly undergoing a major transition, as is suggested by the dramatic decrease in the number of banks and the very large increase in nationwide banking concentration.
