Kaufman is Professor of Economics and Finance at Loyola University of Chicago; Mote is Economic Adviser and Vice President, Federal Reserve Bank of Chicago; and Rosenblum is Vice President and Associate Director of Research, Federal Reserve Bank of Chicago. This paper is an abbreviated version of a larger study on the same subject entitled “Consequences of Deregulation for Commercial Banking,” Staff Memoranda 84-3, Federal Reserve Bank of Chicago, 1984. The views expressed are the authors' and do not necessarily represent the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.
Consequences of Deregulation for Commercial Banking
Article first published online: 30 APR 2012
1984 The American Finance Association
The Journal of Finance
Volume 39, Issue 3, pages 789–803, July 1984
How to Cite
KAUFMAN, G. G., MOTE, L. R. and ROSENBLUM, H. (1984), Consequences of Deregulation for Commercial Banking. The Journal of Finance, 39: 789–803. doi: 10.1111/j.1540-6261.1984.tb03671.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
In recent years, many of the restrictions on banking activities adopted following the banking collapse of the 1930s have been eroded by improvements in technology and high interest rates, which led to increasing direct competition from unregulated institutions. Beginning in the 1970s, the regulatory agencies, state legislatures, and the Congress have moved to liberalize these restrictions. Based on research on economies of scale and scope, the experience of the conglomerate merger movement of the 1950s and 1960s, the observed effects of changes in state laws governing branches and holding companies, foreign experience, and experience in other industries that underwent deregulation, banking deregulation is likely to lead to reductions in the number of banks and increases in their efficiency, geographic scope, and product diversification. Such an outcome is consistent with the survival of a large number and variety of financial institutions and need not endanger the safety of the banking system.