Dean F. Amel

Strategic groups in banking

The strategic groups hypothesis is tested using cluster analysis in -16 selected banking markets and based on portfolio composition in 1978, 1981, and 1984. The results indicate that approximately six strategic groups exist in banking and are stable over time. Strategy choices are similar across markets. Implications of the results are (1) intraindustry profit differences may be due to strategic groups rather than efficiency differences, (2) markets may generally be defined too broadly, (3) investigations for collusion need to focus on homogeneous groups in an industry rather than the whole industry, and (4) there is no simple strategy choice for banks between retail and wholesale banking.

Establishing banking market definitions through estimation of residual deposit supply equations

Abstract We employ a procedure suggested by the Department of Justices Merger Guidelines (but never before applied to banking) to determine whether nonbank financial institutions should be included as participants in defining the product market relevant to antitrust analyses of proposed bank mergers. We estimate bank “residual supply” relationships indicating the responsiveness of small-scale deposit funds supplied by consumers to the level of interest rates offered for such deposits. Estimated elasticities of residual deposit supply are quite small, implying that only commercial banks should be included as participants in the “antitrust market” relevant to proposed bank mergers.

The Effects of Local Banking Market Structure on the Bank-Lending Channel of Monetary Policy

We study the relationship between banking competition and the transmission of monetary policy through the bank lending channel. Using business small loan origination data provided from the Community Reinvestment Act from 1996-2002 in our analysis, we are able to reaffirm the existence of the bank lending channel of monetary transmission. Moreover, we find that the impact of monetary policy on loan originations is weaker in more concentrated markets.

Do Firms Differ Much

With firm profitability data for a cross-section of geographic markets, it is possible to determine the relative importance of firm and market effects on profitability. Analysis of variance from a panel of multibank holding companies in Texas suggests that firm effects are more important than market effects in determining profitability and that the magnitudes of the effects vary over time. Copyright 1991 by Blackwell Publishing Ltd.

The Effects of Past Entry, Market Consolidation, and Expansion by Incumbents on the Probability of Entry

We extend previous research on the determinants of entry into local banking markets. In addition to the variables that have been considered by past research, we consider the correlation of entry with past entry and strategic barriers to entry such as changes in incumbent branching, the presence of small incumbent firms, and market concentration. The analysis defines entry more broadly than has past research by including branch expansion by existing firms. We find significant negative relationships between entry and strategic barriers to entry. Sensitivity analyses find that large changes in the explanatory variables are needed to cause substantial changes in the probability of entry into markets.

Dynamics of market concentration in U.S. banking, 1966-1986

Abstract This paper estimates the speed at which local banking market concentration adjusts to its long-run equilibrium level. Long-run market concentration is estimated as a function of the attractiveness of entry and regulatory barriers to entry into the market. The speed of adjustment is allowed to vary across markets and depends on the deviation of market from normal profits. The empirical results from panels of data over 5, 10, 15 and 20 years show that concentration levels in local banking markets adjust slowly over time. Markets with unusually high or low profits show significantly more rapid adjustment than other markets over shorter time periods, but the differences are small in magnitude. Legal barriers to entry significantly impede market adjustment over longer time periods.

Community Bank Performance: How Important are Managers?

Community banks have long played an important role in the U.S. economy, providing loans and other financial services to households and small businesses within their local markets. In recent years, technological and legal developments, as well as changes in the business strategies of larger banks and non-bank financial service providers, have purportedly made it more difficult for community banks to attract and retain customers, and hence to survive. Indeed, the number of community banks and the shares of bank branches, deposits, banking assets, and small business loans that are held by community banks in the U.S. have all declined substantially over the past two decades. Nonetheless, many community banks have successfully adapted to their changing environment and have continued to thrive. This paper uses data from 1992 through 2011 to examine the relationships between community bank profitability and various characteristics of the banks and the local markets in which they operate. We divide these characteristics into two categories—those that are exogenous to the control of bank managers and those that reflect the decisions or actions of bank management. We find that variables from both categories significantly influence bank profitability. Statistical tests indicate that variables within managers’ control account for between 70 and 97 % of the total explanatory power of regression equations that explain variations in performance across community banks, which suggests that managers are extremely important to community bank performance. Copyright Springer Science+Business Media New York (outside the USA) 2016

The Impact of the Small Business Lending Fund on Community Bank Lending to Small Businesses

Following the financial crisis, total outstanding loans to businesses by commercial banks dropped off substantially. Large loans outstanding began to rebound by the third quarter of 2010 and essentially returned to their previous growth trajectory while small loans outstanding continued to decline. Furthermore, much of the drop in small business loans outstanding was evident at community banks. To address this perceived lack of supply of credit to small businesses, the Small Business Lending Fund (SBLF) was created as part of the 2010 Small Business Jobs Act. The fund was intended to provide community banks with low-cost funding that they could then lend to their small business customers. As of December 31, 2013, the U.S. Department of the Treasury reports that SBLF participants had increased their small business lending by

The Impact of the Small Business Lending Fund on Community Bank Lending to Small Businesses: The Impact of the Small Business Lending Fund

12.5 billion over their baseline numbers. The current paper uses Call Report data from community banks and thrift institutions to look at the impact of receiving funds from SBLF on their small business lending. The analysis controls for economic and demographic conditions, market structure and competition. Simple regression estimates indicate that participants in the SBLF program increased their small business lending by about 10 percent more than their non-participating counterparts, in line with numbers reported by Treasury. However, estimates that control for the ongoing growth path in small business lending indicate no statistically significant impact of SBLF participation on small business lending.

Determinants of Entry and Profits in Local Banking Markets

Following the financial crisis, total outstanding loans to businesses by commercial banks dropped off substantially. Large loans outstanding began to rebound by the third quarter of 2010 and essentially returned to their previous growth trajectory while small loans outstanding continued to decline. Furthermore, much of the drop in small business loans outstanding was evident at community banks. To address this perceived lack of supply of credit to small businesses, the Small Business Lending Fund (SBLF) was created as part of the 2010 Small Business Jobs Act. The fund was intended to provide community banks with low‐cost funding that they could then lend to their small business customers. As of 31 December, 2013, the US Department of the Treasury reports that SBLF participants had increased their small business lending by